NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Nature of Operations:
Actuant Corporation (“Actuant” or the “Company”) is a global manufacturer of a broad range of industrial products and systems, organized into
two
reportable segments. The Industrial Tools & Services segment is primarily engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools and in providing joint integrity services and tool rental to the industrial, maintenance, infrastructure, oil & gas, energy and other markets. The Engineered Components & Systems segment provides highly engineered components for on-highway, off-highway, agriculture, energy, medical, construction and other vertical markets.
Consolidation and Presentation:
The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. The results of companies acquired or disposed of during the year are included in the consolidated financial statements from the effective date of acquisition or until the date of divestiture. All intercompany balances, transactions and profits have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to current year presentation, as discussed in the New Accounting Pronouncements section.
As part of our ongoing assessment of segment reporting, during the fourth quarter of fiscal 2018, the Company’s financial reporting segments were modified to reflect changes in the operating structure of the Company, with the combination of our tools and services businesses and all OEM-related businesses into two operating segments: Industrial Tools & Services and Engineered Components & Systems. All prior period disclosures have been adjusted to reflect the two reportable segments.
Cash Equivalents:
The Company considers all highly liquid investments with original maturities of 90 days or less to be cash equivalents.
Inventories:
Inventories are comprised of material, direct labor and manufacturing overhead, and are stated at the lower of cost or market. Inventory cost is determined using the last-in, first-out (“LIFO”) method for a portion of the U.S. owned inventory (
16.8%
and
18.0%
of total inventories in
2018
and
2017
, respectively). The first-in, first-out or average cost methods are used for all other inventories. If the LIFO method were not used, inventory balances would be higher than reported amounts in the consolidated balance sheets by
$6.0 million
and
$3.9 million
at August 31,
2018
and
2017
, respectively.
The nature of the Company’s products is such that they generally have a very short production cycle. Consequently, the amount of work-in-process at any point in time is minimal. In addition, many parts or components are ultimately either sold individually or assembled with other parts making a distinction between raw materials and finished goods impractical to determine. Other locations maintain and manage their inventories using a job cost system where the distinction of categories of inventory by state of completion is also not available. As a result of these factors, it is neither practical nor cost effective to segregate the amounts of raw materials, work-in-process or finished goods inventories at the respective balance sheet dates, as segregation would only be possible as the result of physical inventories which are taken at dates different from the balance sheet dates.
Property, Plant and Equipment:
Property, plant and equipment are stated at cost. Plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets, ranging from
ten
to
forty
years for buildings and improvements and
two
to
fifteen
years for machinery and equipment. Equipment includes assets (joint integrity tools) which are rented to customers of our Industrial Tools & Services segment businesses. Leasehold improvements are amortized over the life of the related asset or the term of the lease, whichever is shorter. Depreciation expense was $
20 million
,
$23 million
and
$25 million
for the years ended August 31, 2018, 2017 and 2016, respectively.
Goodwill and Other Intangible Assets:
Other intangible assets with definite lives, consisting primarily of purchased customer relationships, patents, trademarks and non-compete agreements, are amortized over periods from one to twenty-five years. Goodwill and other intangible assets with indefinite lives are not subject to amortization, but are subject to annual impairment testing.
The Company’s goodwill is tested for impairment annually, during the fourth quarter, or more frequently if events or changes in circumstances indicate that goodwill might be impaired. The Company performs impairment reviews for its reporting units using a fair value method based on management’s judgments and assumptions. In estimating the fair value, the Company utilizes a discounted cash flow model, which is dependent on a number of assumptions including estimated future revenues and expenses, weighted average cost of capital, capital expenditures and other variables. The estimated fair value of the reporting unit is compared to the carrying amount of the reporting unit, including goodwill. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recorded and should not exceed the total amount of the goodwill allocated to the reporting unit. Indefinite lived intangible assets are also subject to an annual impairment test. On an annual
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired, the fair value of the indefinite lived intangible assets are evaluated by the Company to determine if an impairment charge is required. A considerable amount of management judgment is required in performing impairment tests, principally in determining the fair value of each reporting unit and the indefinite lived intangible assets.
Product Warranty Costs
: The Company generally offers its customers a warranty on products sold, although warranty periods may vary by product type and application. The reserve for future warranty claims, which is recorded within the "Other current liabilities" line on the Consolidated Balance Sheets, is based on historical claim rates and current warranty cost experience. The following is a rollforward of the changes in product warranty reserves for fiscal years
2018
and
2017
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
Beginning balance
|
|
$
|
6,616
|
|
|
$
|
5,592
|
|
|
Provision for warranties
|
|
5,522
|
|
|
5,608
|
|
|
Warranty payments and costs incurred
|
|
(7,263
|
)
|
|
(4,714
|
)
|
|
Acquisitions/divestitures
|
|
(376
|
)
|
|
—
|
|
|
Impact of changes in foreign currency rates
|
|
(82
|
)
|
|
130
|
|
|
Ending balance
|
|
$
|
4,417
|
|
|
$
|
6,616
|
|
Revenue Recognition:
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability of the sales price is reasonably assured. For product sales, delivery does not occur until the passage of title and risk of loss have transferred to the customer (generally when products are shipped). Revenue from services and rental contracts are recognized when the services are provided or ratably over the contract term. Revenue for highly custom product sales with a project duration greater than three months and exceeding a value of approximately
$0.5 million
is generally recognized under the percentage-of-completion method utilizing efforts expended or cost-to-cost input measures. Revenues for long-term contracts that do not meet these criteria are recognized under the completed contract method once delivery has occurred and passage of title and risk of loss have transferred to the customer. Unearned revenue related to long-term customer contracts, which is recorded within the "Other current liabilities" line on the Consolidated Balance Sheets, was
$16.5 million
and
$10.1 million
at August 31, 2018 and 2017, respectively. Customer sales are recorded net of allowances for returns and discounts, which are recognized as a deduction from sales at the time of sale. The Company commits to one-time or on-going trade discounts and promotions with customers that require the Company to estimate and accrue the ultimate costs of such programs. The Company generally does not require collateral or other security for receivables and provides for an allowance for doubtful accounts based on historical experience and a review of its existing receivables. Accounts receivable are stated net of an allowance for doubtful accounts of
$5.4 million
and
$11.2 million
at August 31,
2018
and
2017
, respectively.
Shipping and Handling Costs:
The Company records costs associated with shipping its products in cost of products sold.
Research and Development Costs:
Research and development costs consist primarily of an allocation of overall engineering and development resources and are expensed as incurred. Such costs incurred in the development of new products or significant improvements to existing products were
$25.9 million
,
$21.9 million
and
$18.3 million
in fiscal
2018
,
2017
and
2016
, respectively. The Company also incurs significant costs in connection with fulfilling custom orders and developing solutions for unique customer needs which are not included in these research and development expense totals.
Other Income/Expense:
Other income and expense primarily consists of net foreign currency exchange transaction gains of
$0.4 million
in fiscal
2018
and losses of
$3.1 million
and
$1.3 million
in fiscal
2017
and
2016
, respectively.
Financing Costs:
Financing costs represent interest expense, financing fees and amortization of debt issuance costs, net of interest income. Interest income was
$1.2 million
,
$1.2 million
and
$1.7 million
for fiscal
2018
,
2017
and
2016
, respectively.
Income Taxes:
The provision for income taxes includes federal, state, local and non-U.S. taxes on income. Tax credits, primarily for non-U.S. earnings, are recognized as a reduction of the provision for income taxes in the year in which they are available for U.S. tax purposes. Deferred taxes are provided on temporary differences between assets and liabilities for financial and tax reporting purposes as measured by enacted tax rates expected to apply when temporary differences are settled or realized. Future tax benefits are recognized to the extent that realization of those benefits is considered to be more likely than not. A valuation allowance is established for deferred tax assets for which realization is not more likely than not of being realized. Prior to tax reform and through August 31, 2018, the Company has not provided for any residual U.S. income taxes on
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
unremitted earning of non-U.S. subsidiaries, as such, earnings are intended to be indefinitely reinvested. The Company is currently reviewing the impact of tax reform on the policy for unremitted earnings and considers our position to be a provisional estimate. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense.
Foreign Currency Translation:
The financial statements of the Company’s foreign operations are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and an appropriate weighted average exchange rate for each applicable period for revenues and expenses. Translation adjustments are reflected in the consolidated balance sheets and consolidated statements of shareholders' equity caption “Accumulated Other Comprehensive Loss.”
Accumulated Other Comprehensive Loss:
The following is a summary of the components included within accumulated other comprehensive loss (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
|
2018
|
|
2017
|
|
Foreign currency translation adjustments
|
|
$
|
158,497
|
|
|
$
|
207,804
|
|
|
Pension and other postretirement benefit plans, net
|
|
15,748
|
|
|
19,457
|
|
|
Accumulated other comprehensive loss
|
|
$
|
174,245
|
|
|
$
|
227,261
|
|
Use of Estimates:
The Company has recorded reserves for customer rebates, returns and discounts, doubtful accounts, inventory, incurred but not reported medical claims, environmental matters, warranty claims, workers compensation claims, product and non-product litigation and incentive compensation. These reserves require the use of estimates and judgment. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The Company believes that such estimates are made with consistent and appropriate assumptions. Actual results may differ from these estimates.
New Accounting Pronouncements
In March 2016, the FASB issued ASU 2016-09,
Stock Compensation: Improvements to Employee Share-Based Payment Accounting,
which simplified several aspects of accounting for share-based payment transactions. The guidance required, among other items, that all excess tax deficiencies or benefits be recorded as income tax expense or benefit in the consolidated statement of operations and not in additional paid-in capital (shareholder's equity). This guidance was adopted on September 1, 2017 and the impact of adopting this guidance had the following effects:
|
|
|
|
•
|
for the year-ended
August 31, 2018
, we recorded
$1.5 million
in excess tax deficiency as an increase to our income tax expense. This requirement was applied prospectively;
|
|
|
|
|
•
|
excess tax benefits are now presented as operating activities in the statement of cash flows, rather than as financing activities. The Company chose to apply this requirement retrospectively, and as a result, reclassified approximately
$0.6 million
of excess tax benefits during the year-ended
August 31, 2017
from financing activities to operating activities in the consolidated statement of cash flows;
|
|
|
|
|
•
|
our computation of diluted earnings per share now excludes the excess tax benefits or deficiencies from the assumed proceeds available to repurchase shares. This requirement was applied prospectively.
|
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers
. Under ASU 2014-09 and subsequent updates included in ASU 2016-10, ASU 2016-12, ASU 2017-13 and ASU 2017-14, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. It also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This guidance is effective for fiscal years beginning on or after December 15, 2017 (fiscal 2019 for the Company). The Company has completed its assessment of its various revenue streams to identify performance obligations under these ASUs and the key aspects of the standard that impact the Company’s revenue recognition process. Based upon our assessment, the impact to allocation of contract revenue between various products and services and the timing of when those revenues are recognized is not materially significant. In conjunction with the evaluation, the Company has identified and implemented changes to its current accounting policies, business processes, systems and controls as necessary to support the new guidance. The guidance will be adopted by the Company beginning September 1, 2018 using the modified retrospective approach. As such, we will recognize the cumulative effect of the adoption, which is not material, as an adjustment to the opening balance of retained earnings.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
In March 2017, the FASB issued ASU 2017-07,
Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,
which changes how employers that sponsor defined benefit pension or other postretirement benefit plans present the net periodic benefit cost in the income statement. The new guidance requires the service cost component of net periodic benefit cost to be presented in the same income statement line items as other employee compensation costs arising from services rendered during the period. Other components of the net periodic benefit cost are to be stated separately from service cost and outside of operating income. This guidance is effective for fiscal years beginning after December 15, 2017 (fiscal 2019 for the Company) and interim periods within those annual periods. The amendment is to be applied retrospectively. Due to a majority of the Company's defined benefit pension or other postretirement benefit plans being frozen and the net periodic benefit pension cost not being significant, the adoption of this guidance will not have a material impact on the financial statements of the Company.
In August 2016, the FASB issued ASU 2016‑15,
Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments
, to address how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This guidance is effective for fiscal years beginning after December 15, 2017 (fiscal 2019 for the Company), including interim periods within those fiscal years. This update will require adoption on a retrospective basis unless it is impracticable to apply. The Company does not believe that this guidance will have a material impact on its presentation of the statement of cash flows.
In February 2016, the FASB issued ASU 2016-02,
Leases
(and subsequently ASU 2018-01)
,
to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset. This guidance is effective for fiscal years beginning after December 15, 2018 (fiscal 2020 for the Company), including interim periods within those fiscal years. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented under a modified retrospective approach using a cumulative effect adjustment in the year of adoption. The Company is currently gathering, documenting and analyzing lease agreements subject to this ASU and anticipates material additions to the balance sheet (upon adoption) of right-of-use assets, offset by the associated liabilities, due to our routine use of operating leases over time.
In February 2018, the FASB issued ASU 2018-02,
Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,
which allows companies to reclassify stranded income tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings in their consolidated financial statements. This guidance is effective for fiscal years beginning after December 15, 2018 (fiscal 2020 for the Company), including interim periods within those fiscal years. The Company is currently evaluating the impact of this new standard and whether we will elect to reclassify the stranded income taxes.
Note 2. Director & Officer Transition Charges
During the year-ended
August 31, 2017
, the Company recorded separation and transition charges of
$7.8 million
in connection with the retirement of one director of the Company's Board of Directors and the transition of the Executive Vice President/Chief Financial Officer. The charges were mainly comprised of compensation expense for accelerated equity vesting, severance, outplacement, legal, signing bonus and relocation costs.
Note 3. 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. Total restructuring charges for these activities were
$12.8 million
and
$7.2 million
for the year-ended August 31, 2018 and 2017, respectively, and impacted all segments. Approximately
$0.9 million
of the restructuring charges recognized for the year-ended August 31, 2018 were reported in the Consolidated Statements of Operations in “Cost of products sold,” with the balance of the charges reported in “Restructuring charges.” Liabilities for severance will generally be paid during the next twelve months, while future lease payments related to facilities vacated as a result of restructuring will be paid over the underlying remaining lease terms.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The following rollforwards summarize restructuring reserve activity by segment (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2018
|
|
|
|
Industrial Tools & Services
|
|
Engineered Components & Systems
|
|
Corporate
|
|
Total
|
|
Balance as of August 31, 2017
|
|
$
|
1,499
|
|
|
$
|
4,108
|
|
|
$
|
30
|
|
|
$
|
5,637
|
|
|
Restructuring charges
|
|
4,286
|
|
|
3,713
|
|
|
4,845
|
|
|
12,844
|
|
|
Cash payments
|
|
(3,375
|
)
|
|
(4,652
|
)
|
|
(2,357
|
)
|
|
(10,384
|
)
|
|
Other non-cash uses of reserve
(1)
|
|
(635
|
)
|
|
(1,412
|
)
|
|
(2,103
|
)
|
|
(4,150
|
)
|
|
Impact of changes in foreign currency rates
|
|
(88
|
)
|
|
(165
|
)
|
|
—
|
|
|
(253
|
)
|
|
Balance as of August 31, 2018
|
|
$
|
1,687
|
|
|
$
|
1,592
|
|
|
$
|
415
|
|
|
$
|
3,694
|
|
(1)
Majority of non-cash uses of reserve represents accelerated equity vesting with employee severance agreements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2017
|
|
|
|
Industrial Tools & Services
|
|
Engineered Components & Systems
|
|
Corporate
|
|
Total
|
|
Balance as of August 31, 2016
|
|
$
|
1,626
|
|
|
$
|
4,601
|
|
|
$
|
46
|
|
|
$
|
6,273
|
|
|
Restructuring charges
|
|
2,652
|
|
|
4,465
|
|
|
111
|
|
|
7,228
|
|
|
Cash payments
|
|
(2,568
|
)
|
|
(4,858
|
)
|
|
(83
|
)
|
|
(7,509
|
)
|
|
Other non-cash uses of reserve
|
|
(198
|
)
|
|
(285
|
)
|
|
(44
|
)
|
|
(527
|
)
|
|
Impact of changes in foreign currency rates
|
|
(13
|
)
|
|
185
|
|
|
—
|
|
|
172
|
|
|
Balance as of August 31, 2017
|
|
$
|
1,499
|
|
|
$
|
4,108
|
|
|
$
|
30
|
|
|
$
|
5,637
|
|
Note 4. Acquisitions
The Company completed four business acquisitions during the last three years. These acquisitions resulted in the recognition of goodwill in the Company’s consolidated financial statements because their purchase prices reflected the future earnings and cash flow potential of the acquired companies, as well as the complementary strategic fit and resulting synergies. The Company makes an initial allocation of the purchase price, at the date of acquisition, based upon the fair value of the acquired assets and assumed liabilities. The Company obtains this information during due diligence and through other sources. If additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the date of acquisition), the Company will refine its estimates of fair value and adjust the purchase price allocation as appropriate.
Fiscal 2018 Acquisitions:
The Company acquired the stock and certain assets of Mirage Machines, Ltd. ("Mirage") on
December 1, 2017
for a purchase price of
$17.4 million
, net of cash acquired. This Industrial Tools & Service segment tuck-in acquisition is a provider of industrial and energy maintenance tools. The preliminary purchase price allocation resulted in
$9.9 million
of goodwill (which is not deductible for tax purposes) and
$4.1 million
of intangible assets, including
$2.3 million
of indefinite lived tradenames and
$1.8 million
of amortizable customer relationships.
The Company acquired the stock and certain assets of Equalizer International, Limited ("Equalizer") on
May 11, 2018
for a purchase price of
$5.8 million
, net of cash acquired. This Industrial Tools & Services segment tuck-in is a provider of industrial and energy maintenance tools, expanding our pipe and flange alignment offerings. The preliminary purchase price allocation resulted in
$2.6 million
of goodwill (a portion of which is not deductible for tax purposes) and
$1.9 million
of intangible assets, including
$0.8 million
of indefinite lived tradenames and
$1.1 million
of amortizable customer relationships.
The Company incurred acquisition transaction costs of
$1.1 million
and
$0.7 million
for the year ended
August 31,
2018 and 2017, respectively (included in "Selling, administrative and engineering expenses" in the Consolidated Statement of Operations) related to these two acquisitions.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Net sales in fiscal
2018
for these two acquisitions were
$8.2 million
. Because the net sales and earnings impact of both acquisitions are not material to the year-ended
August 31, 2018
,
2017
and
2016
, the Company has not included the pro forma operating result disclosures otherwise required for acquisitions. The following table summarizes the combined estimated fair value of the assets acquired and the liabilities assumed for Mirage and Equalizer (in thousands):
|
|
|
|
|
|
|
|
|
Total
|
|
Accounts receivable, net
|
$
|
2,324
|
|
|
Inventories, net
|
4,388
|
|
|
Other current assets
|
263
|
|
|
Property, plant & equipment
|
2,064
|
|
|
Goodwill
|
12,441
|
|
|
Other intangibles
|
6,049
|
|
|
Trade accounts payable
|
(2,090
|
)
|
|
Accrued compensation and benefits
|
(175
|
)
|
|
Income taxes payable
|
(779
|
)
|
|
Other current liabilities
|
(239
|
)
|
|
Deferred income taxes
|
(1,028
|
)
|
|
Cash paid for business acquisition
|
$
|
23,218
|
|
Fiscal 2016 Acquisitions:
The Company acquired the stock of Larzep, S.A. ("Larzep") on
February 17, 2016
for a purchase price of
$15.9 million
, net of cash acquired. This Industrial Tools & Services segment tuck-in acquisition is headquartered in Mallabia, Spain and is a supplier of hydraulic tools and solutions. The purchase price allocation resulted in
$9.7 million
of goodwill (which is not deductible for tax purposes) and
$4.8 million
of intangible assets, including
$3.6 million
of amortizable customer relationships and
$1.2 million
of indefinite-lived tradenames.
The Company also acquired the assets of the Middle East, Caspian and the North African business of FourQuest Energy Inc. ("Pipeline and Process Services") for
$65.5 million
on
March 30, 2016
. This Industrial Tools & Services segment tuck-in acquisition was funded with existing cash and expands the geographic presence and service offerings of the segment, including pipeline pre-commissioning, engineering, chemical cleaning and leak testing. The purchase price resulted in
$37.4 million
of goodwill (which is not deductible for tax purposes) and
$8.7 million
of intangible assets, including
$8.0 million
of amortizable customer relationships and
$0.7 million
of amortizable non-compete agreements. During fiscal 2017, goodwill related to this acquisition increased by
$1.1 million
as a result of adjustments to reflect the fair value of acquired accounts receivable and accounts payable.
Net sales in fiscal 2018, 2017 and 2016 for these two acquired businesses were
$44.7 million
,
$32.8 million
and
$19.1 million
, respectively. The Company incurred acquisition transaction costs of
$2.1 million
in fiscal 2016 (included in "Selling, administrative and engineering expenses" in the Consolidated Statement of Operations), related to these two acquisitions.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The following unaudited pro forma operating results give effect to these two acquisitions as though the transactions and related financing activities had occurred on September 1, 2015 (in thousands, except per share amounts).
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
Net Sales
|
|
|
As reported
|
$
|
1,149,410
|
|
|
Pro Forma
|
1,175,304
|
|
|
Net Loss
|
|
|
As reported
|
$
|
(105,174
|
)
|
|
Pro Forma
|
(100,927
|
)
|
|
Basic loss per share
|
|
|
As reported
|
$
|
(1.78
|
)
|
|
Pro Forma
|
(1.71
|
)
|
|
Diluted loss per share
|
|
|
As reported
|
$
|
(1.78
|
)
|
|
Pro Forma
|
(1.71
|
)
|
Note 5. Divestiture Activities
At August 31, 2018, the Cortland Fibron business (Engineered Components & Systems segment) met the criteria for assets held for sale treatment. The Cortland Fibron business provides customized umbilical and tether solutions to the global oil & gas market. Since the Cortland Fibron business was classified as held for sale, the related assets and liabilities of the business to be sold are classified as assets/liabilities held for sale in the consolidated balance sheet as of August 31, 2018 and approximated the estimated fair value, less cost to sell. As a result, the Company recognized impairment and divestiture charges in fiscal 2018 of
$46.3 million
, comprised of a: (i)
$10.5 million
charge representing the excess of the net book value of assets held for sale to the anticipated proceeds; (ii) non-cash impairment charge of
$35.3 million
related to the recognition in earnings of the cumulative effect of foreign currency rate changes since acquisition and (iii)
$0.5 million
of other divestiture charges. These charges generated an income tax benefit of
$1.4 million
in fiscal 2018.
During fiscal
2017
, the Company committed on a plan to sell the Viking business (Engineered Components & Systems segment) resulting in the Company's exit from the offshore mooring market. As a result, the Company recognized impairment and divestiture charges in fiscal 2017 of
$117.0 million
, comprised of a: (i)
$16.1 million
charge representing the excess of the net book value of assets held for sale to the anticipated proceeds; (ii) non-cash impairment charge of
$69.0 million
related to the recognition in earnings of the cumulative effect of foreign currency rate changes since acquisition; (iii)
$28.6 million
cash charge related to the operating lease buyout of certain rental assets and (iv)
$3.3 million
of other divestiture charges. The write down of net assets generated an income tax benefit of
$8.1 million
in fiscal 2017. On
December 1, 2017
, the Company completed the sale of the Viking business for net cash proceeds of
$8.8 million
, which resulted in an after-tax impairment and divestiture charge of
$12.4 million
in fiscal 2018, comprised of real estate lease exit charges of
$3.0 million
related to retained facilities that became vacant as a result of the Viking divestiture and approximately
$9.4 million
of associated discrete income tax expense.
The following is a summary of the assets and liabilities held for sale (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cortland Fibron
|
|
Viking
|
|
|
|
August 31, 2018
|
|
August 31, 2017
|
|
Accounts receivable, net
|
|
$
|
2,924
|
|
|
$
|
2,426
|
|
|
Inventories, net
|
|
2,597
|
|
|
190
|
|
|
Other current assets
|
|
3,267
|
|
|
1,927
|
|
|
Property, plant & equipment, net
|
|
2,186
|
|
|
7,534
|
|
|
Goodwill and other intangible assets, net
|
|
12,464
|
|
|
—
|
|
|
Other long-term assets
|
|
135
|
|
|
9,758
|
|
|
Assets held for sale
|
|
$
|
23,573
|
|
|
$
|
21,835
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
3,915
|
|
|
$
|
1,883
|
|
|
Accrued compensation and benefits
|
|
1,414
|
|
|
—
|
|
|
Lease buyout accrual
|
|
—
|
|
|
28,644
|
|
|
Reserve for cumulative translation adjustment
|
|
35,346
|
|
|
68,919
|
|
|
Other current liabilities
|
|
1,269
|
|
|
1,637
|
|
|
Deferred income taxes
|
|
2,281
|
|
|
—
|
|
|
Liabilities held for sale
|
|
$
|
44,225
|
|
|
$
|
101,083
|
|
The historic results of the Cortland Fibron and Viking businesses are not material to the consolidated financial results of the Company and are included in continuing operations. These two businesses had net sales of
$23.9 million
,
$34.4 million
and
$58.0 million
for the year-ended August 31, 2018, 2017 and 2016, respectively. The Company's anticipated sale of Cortland Fibron and the Viking divestiture will substantially reduce our exposure to upstream oil & gas.
On
August 25, 2016
, the Company completed the divestiture of its Sanlo business (Engineered Components & Systems segment) for
$9.7 million
in cash, net of transaction costs. This divestiture resulted in a
$5.1 million
pre-tax loss, but a
$1.6 million
gain, net of tax. The results of the Sanlo business (which had net sales of
$10.8 million
in fiscal 2016) are not material to the consolidated financial results and are included in continuing operations.
Note 6. Goodwill, Intangible Assets and Long-Lived Assets
Changes in the gross carrying value of intangible assets and goodwill result from changes in foreign currency exchange rates, business acquisitions, divestitures and impairment charges. The changes in the carrying amount of goodwill for the years ended
August 31, 2018
and
2017
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Tools & Services
|
|
Engineered Components & Systems
|
|
Total
|
|
Balance as of August 31, 2016
|
|
$
|
235,457
|
|
|
$
|
283,819
|
|
|
$
|
519,276
|
|
|
Purchase accounting adjustments
|
|
1,085
|
|
|
—
|
|
|
1,085
|
|
|
Impact of changes in foreign currency rates
|
|
2,165
|
|
|
7,555
|
|
|
9,720
|
|
|
Balance as of August 31, 2017
|
|
238,707
|
|
|
291,374
|
|
|
530,081
|
|
|
Business acquisitions
|
|
12,441
|
|
|
—
|
|
|
12,441
|
|
|
Impairment charge
|
|
—
|
|
|
(21,227
|
)
|
|
(21,227
|
)
|
|
Impact of changes in foreign currency rates
|
|
(2,443
|
)
|
|
(4,940
|
)
|
|
(7,383
|
)
|
|
Reclassification of assets held for sale
|
|
—
|
|
|
(1,500
|
)
|
|
(1,500
|
)
|
|
Balance as of August 31, 2018
|
|
$
|
248,705
|
|
|
$
|
263,707
|
|
|
$
|
512,412
|
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The gross carrying amount and accumulated amortization of the Company’s intangible assets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Amortization Period (Year)
|
|
August 31, 2018
|
|
August 31, 2017
|
|
|
|
Gross
|
|
Accumulated Amortization
|
|
Net Book Value
|
|
Gross
|
|
Accumulated Amortization
|
|
Net Book Value
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
15
|
|
$
|
230,601
|
|
|
$
|
147,451
|
|
|
$
|
83,150
|
|
|
$
|
263,498
|
|
|
$
|
153,003
|
|
|
$
|
110,495
|
|
|
Patents
|
|
11
|
|
30,355
|
|
|
25,327
|
|
|
5,028
|
|
|
30,401
|
|
|
24,027
|
|
|
6,374
|
|
|
Trademarks and tradenames
|
|
18
|
|
20,823
|
|
|
15,347
|
|
|
5,476
|
|
|
21,498
|
|
|
9,396
|
|
|
12,102
|
|
|
Non-compete agreements & other
|
|
3
|
|
5,946
|
|
|
5,816
|
|
|
130
|
|
|
6,672
|
|
|
6,234
|
|
|
438
|
|
|
Indefinite lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradenames
|
|
N/A
|
|
87,253
|
|
|
—
|
|
|
87,253
|
|
|
91,080
|
|
|
—
|
|
|
91,080
|
|
|
|
|
|
|
$
|
374,978
|
|
|
$
|
193,941
|
|
|
$
|
181,037
|
|
|
$
|
413,149
|
|
|
$
|
192,660
|
|
|
$
|
220,489
|
|
Amortization expense for future years is estimated to be:
$17.2 million
in fiscal year
2019
,
$16.6 million
in fiscal
2020
,
$15.7 million
in fiscal
2021
,
$13.7 million
in fiscal
2022
,
$10.6 million
in fiscal
2023
and
$20.0 million
in aggregate thereafter. The future amortization expense amounts represent estimates and may be impacted by future acquisitions, divestitures or changes in foreign currency exchange rates.
Fiscal 2018 Impairment Charge
During the fourth quarter of fiscal 2018, the Company recognized impairment charges related to the Cortland Fibron business (Engineered Components & Systems segment and a component of the Cortland reporting unit) in conjunction with meeting the classification assets of held for sale criteria. Accordingly, the Company recognized a
$10.5 million
impairment charge, representing the excess of the net book value of assets held for sale over the anticipated proceeds. See Note 5, “Divestiture Activates” for further discussion of impairment and divestiture charges not related to long-lived assets for the Cortland Fibron business.
The Precision-Hayes International business (Engineered Components & Systems segment) primarily designs, manufactures, and distributes concrete tensioning products. Changes in certain assumptions used in our annual goodwill impairment analysis, which are linked, in part, to recent market share losses, resulted in a fair value estimate of the reporting unit lower than its carrying value. As a result, during the fourth quarter of fiscal 2018, the Company recognized a
$23.7 million
impairment charge.
A summary of the fiscal 2018 impairment charge by reporting unit is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cortland
|
|
Precision-Hayes International
|
|
Total
|
|
Goodwill
|
$
|
3,770
|
|
|
$
|
17,457
|
|
|
$
|
21,227
|
|
|
Indefinite lived intangible assets
|
6,710
|
|
|
—
|
|
|
6,710
|
|
|
Amortizable intangible assets
|
—
|
|
|
5,076
|
|
|
5,076
|
|
|
Fixed assets
|
—
|
|
|
1,207
|
|
|
1,207
|
|
|
|
$
|
10,480
|
|
|
$
|
23,740
|
|
|
$
|
34,220
|
|
Fiscal 2017 Impairment Charge:
In the fourth quarter of fiscal 2017, related to the then-pending sale of the Viking business, we recognized a
$16.1 million
long-lived asset impairment, representing the excess of the net book value of assets held for sale over the anticipated proceeds. See Note 5. “Divestiture Activates” for further discussion of impairment and divestiture charges not related to long-lived assets for the Viking business.
Fiscal 2016 Impairment Charge
The prolonged unfavorable conditions in the global oil & gas markets, including additional cuts in projected capital spending by customers, reduced exploration, drilling and commissioning activities and excess capacity in the industry (given continued low oil & gas prices) were expected to have an adverse impact on the future financial results of the Cortland and
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Viking businesses. Accordingly, during fiscal 2016, the Company recognized a
$140.8 million
impairment charge (as a result of lower projected future sales and profits) related to the Cortland and Viking businesses.
In addition, the maximatecc business manufactures severe-duty electronic instrumentation including displays and clusters, machine controls and sensors. During fiscal 2016, weakness in off-highway vehicle and agricultural markets, coupled with challenging overall industrial fundamentals, reductions in OEM customer build rates and production schedules (in order to reduce inventory levels) and delays in the start of production by certain European OEMs for new or updated design models resulted in reduced sales and profitability of the maximatecc business. As a result of lower projected sales and profits, the Company recognized a
$45.7 million
impairment charge related to the goodwill and intangible assets of the maximatecc business in fiscal 2016.
A summary of the fiscal 2016 impairment charge by reporting unit is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cortland
|
|
Viking
|
|
maximatecc
|
|
Total
|
|
Goodwill
|
$
|
34,502
|
|
|
$
|
39,099
|
|
|
$
|
44,521
|
|
|
$
|
118,122
|
|
|
Indefinite lived intangible assets
|
2,211
|
|
|
13,289
|
|
|
1,153
|
|
|
16,653
|
|
|
Amortizable intangible assets
|
—
|
|
|
27,952
|
|
|
—
|
|
|
27,952
|
|
|
Fixed assets
|
—
|
|
|
23,784
|
|
|
—
|
|
|
23,784
|
|
|
|
$
|
36,713
|
|
|
$
|
104,124
|
|
|
$
|
45,674
|
|
|
$
|
186,511
|
|
Note 7. Debt
The following is a summary of the Company’s long-term indebtedness (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2018
|
|
2017
|
|
Senior Credit Facility
|
|
|
|
|
Revolver
|
$
|
—
|
|
|
$
|
—
|
|
|
Term Loan
|
247,500
|
|
|
277,500
|
|
|
|
247,500
|
|
|
277,500
|
|
|
5.625% Senior Notes
|
287,559
|
|
|
287,559
|
|
|
Total Senior Indebtedness
|
535,059
|
|
|
565,059
|
|
|
Less: current maturities of long-term debt
|
(30,000
|
)
|
|
(30,000
|
)
|
|
Debt issuance costs
|
(2,364
|
)
|
|
(3,119
|
)
|
|
Total long-term debt, less current maturities
|
$
|
502,695
|
|
|
$
|
531,940
|
|
The Company’s Senior Credit Facility matures on
May 8, 2020
, provides a
$300 million
revolver, a
$300 million
term loan and a
$450 million
expansion option, subject to certain conditions. Borrowings are subject to a pricing grid, which can result in increases or decreases to the borrowing spread, depending on the Company’s leverage ratio, ranging from a spread of
1.00%
to
2.25%
in the case of loans bearing interest at LIBOR and from
0.00%
to
1.25%
in the case of loans bearing interest at the base rate. As of
August 31, 2018
, the borrowing spread on LIBOR based borrowings was
2.00%
(aggregating to a
4.13%
variable rate borrowing cost on the outstanding term loan balance). In addition, a non-use fee is payable quarterly on the average unused credit line under the revolver ranging from
0.15%
to
0.35%
per annum. As of
August 31, 2018
, the unused credit line under the revolver was
$298.8 million
, of which
$255.7 million
was available for borrowings. Quarterly term loan principal payments of
$3.8 million
began on
June 30, 2016
, increased to
$7.5 million
per quarter on
June 30, 2017
and extend through March 31, 2020, with the remaining principal due at maturity. The Senior Credit Facility, which is secured by substantially all of the Company’s domestic personal property assets, also contains customary limits and restrictions concerning investments, sales of assets, liens on assets, dividends and other payments. The
two
financial covenants included in the Senior Credit Facility agreement are a maximum leverage ratio of
3.75
:1 and a minimum interest coverage ratio of
3.50
:1. The Company was in compliance with all financial covenants at
August 31, 2018
.
During the fourth quarter of fiscal 2018 and pursuant to the provisions of the Senior Credit Facility, the Company reduced the borrowing capacity on the revolver from the previous
$600 million
to
$300 million
. This reduction in borrowing capacity is expected to reduce the non-use fee on the average unused credit line under the revolver. The Company recorded a charge of
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
$0.8 million
, recorded in "Financing costs, net" in the Consolidated Statement of Operations, in the fourth quarter of fiscal 2018 for the write-off of deferred financing costs associated with the reduced borrowing capacity.
On
April 16, 2012
, the Company issued
$300 million
of
5.625%
Senior Notes due 2022 (the “Senior Notes”). The Senior Notes require no principal installments prior to their
June 15, 2022
maturity, require semiannual interest payments in December and June of each year and contain certain financial and non-financial covenants. The Senior Notes include a call feature that allows the Company to repurchase them anytime on or after
June 15, 2017
at stated redemption prices (ranging from
100.0%
to
102.8%
), plus accrued and unpaid interest. The Company repurchased
$0.5 million
of the Senior Notes during fiscal 2017.
The Company made cash interest payments of
$28.8 million
,
$27.1 million
and
$27.2 million
in fiscal
2018
,
2017
and
2016
, respectively.
Note 8. Fair Value Measurements
The Company assesses the inputs used to measure the fair value of financial assets and liabilities using a three-tier hierarchy. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include management’s own judgments about the assumptions market participants would use in pricing the asset or liability.
The fair value of the Company’s cash and cash equivalents, accounts receivable, accounts payable and its variable rate long-term debt approximated book value at August 31,
2018
and
2017
due to their short-term nature and the fact that the interest rates approximated year-end market rates. Foreign currency exchange contracts are recorded at fair value. The fair value of the Company's foreign currency exchange contracts was a net asset of
$0.4 million
at
August 31, 2018
and a net liability of
$0.2 million
at
August 31, 2017
. The fair value of the foreign currency exchange contracts was based on quoted inactive market prices and is therefore classified as Level 2 within the valuation hierarchy. The fair value of the Company’s outstanding
5.625%
Senior Notes was
$293.5 million
and
$295.8 million
at August 31,
2018
and
2017
, respectively. The fair value of the Senior Notes was based on quoted inactive market prices and are therefore classified as Level 2 within the valuation hierarchy.
Note 9. Derivatives
All derivatives are recognized in the balance sheet at their estimated fair value. On the date the Company enters into a derivative contract, it designates the derivative as a hedge of a recognized asset or liability (fair value hedge) or a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). The Company does not enter into derivatives for speculative purposes. Changes in the value of fair value hedges and non-designated hedges are recorded in earnings along with the gain or loss on the hedged asset or liability, while changes in the value of cash flow hedges are recorded in accumulated other comprehensive loss, until earnings are affected by the variability of cash flows.
The Company is exposed to market risk for changes in foreign currency exchange rates due to the global nature of its operations. In order to manage this risk the Company has historically hedged portions of its forecasted inventory purchases and other cash flows that are denominated in non-functional currencies (cash flow hedges). However, there were no cash flow hedges outstanding at
August 31, 2018
and
2017
.
The Company also utilizes foreign currency exchange contracts to reduce the exchange rate risk associated with recognized non-functional currency balances. The effects of changes in exchange rates are reflected concurrently in earnings for both the fair value of the foreign currency exchange contracts and the related non-functional currency asset or liability. The U.S. dollar equivalent notional value of these short duration foreign currency exchange contracts (fair value hedges or non-designated hedges) was
$17.0 million
and
$22.0 million
, at
August 31, 2018
and
2017
, respectively. The fair value of outstanding foreign currency exchange contracts was an asset of
$0.4 million
at
August 31, 2018
and a liability of
$0.2 million
at
August 31, 2017
. Net foreign currency gains (losses) (included in "Other (income) expense" in the Consolidated Statement of Operations) related to these derivative instruments are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
|
|
2018
|
|
2017
|
|
2016
|
|
Foreign currency gains (losses), net
|
$
|
1,423
|
|
|
$
|
(2,962
|
)
|
|
$
|
(1,520
|
)
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Note 10. Leases
The Company leases certain facilities, computers, equipment and vehicles under various lease agreements generally over periods of
one
to
twenty
years. Under most arrangements, the Company pays the property taxes, insurance, maintenance and expenses related to the leased property. Many of the leases include provisions that enable the Company to renew the lease based upon fair value rental rates on the date of expiration of the initial lease.
As of
August 31, 2018
, future obligations under non-cancelable operating leases were as follows:
$29.4 million
in fiscal
2019
;
$20.6 million
in fiscal
2020
;
$15.3 million
in fiscal
2021
;
$13.1 million
in fiscal
2022
;
$10.8 million
in fiscal
2023
; and
$35.0 million
in aggregate thereafter. Total rental expense under operating leases was
$34.9 million
,
$37.4 million
and
$37.6 million
in fiscal
2018
,
2017
and
2016
, respectively.
As discussed in Note 16, “Commitments and Contingencies” the Company remains contingently liable for lease payments under leases of businesses that it previously divested or spun off.
Note 11. Employee Benefit Plans
U.S. Defined Benefit Pension Plans
All of the U.S. defined benefit pension plans are frozen, and as a result, plan participants no longer earn additional benefits. The following table provides detail of changes in the projected benefit obligations, the fair value of plan assets and the funded status of the Company’s U.S. defined benefit pension plans as of the respective August 31 measurement date (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
Reconciliation of benefit obligations:
|
|
|
|
|
Benefit obligation at beginning of year
|
$
|
46,806
|
|
|
$
|
50,409
|
|
|
Interest cost
|
1,633
|
|
|
1,690
|
|
|
Actuarial gain
|
(2,330
|
)
|
|
(1,997
|
)
|
|
Benefits paid
|
(2,829
|
)
|
|
(3,296
|
)
|
|
Benefit obligation at end of year
|
$
|
43,280
|
|
|
$
|
46,806
|
|
|
Reconciliation of plan assets:
|
|
|
|
|
Fair value of plan assets at beginning of year
|
$
|
40,027
|
|
|
$
|
39,489
|
|
|
Actual return on plan assets
|
2,938
|
|
|
3,599
|
|
|
Company contributions
|
108
|
|
|
235
|
|
|
Benefits paid from plan assets
|
(2,829
|
)
|
|
(3,296
|
)
|
|
Fair value of plan assets at end of year
|
40,244
|
|
|
40,027
|
|
|
Funded status of the plans (underfunded)
|
$
|
(3,036
|
)
|
|
$
|
(6,779
|
)
|
The following table provides detail on the Company’s domestic net periodic benefit expense (income) (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended August 31,
|
|
|
2018
|
|
2017
|
|
2016
|
|
Interest cost
|
$
|
1,633
|
|
|
$
|
1,690
|
|
|
$
|
1,970
|
|
|
Expected return on assets
|
(2,668
|
)
|
|
(2,867
|
)
|
|
(2,997
|
)
|
|
Amortization of actuarial loss
|
1,127
|
|
|
1,141
|
|
|
837
|
|
|
Net periodic benefit expense (income)
|
$
|
92
|
|
|
$
|
(36
|
)
|
|
$
|
(190
|
)
|
As of August 31,
2018
and
2017
,
$13.2 million
and
$16.0 million
, respectively, of pension plan actuarial losses, which have not yet been recognized in net periodic benefit cost, were included in accumulated other comprehensive loss, net of income taxes. During fiscal
2019
,
$0.8 million
of these actuarial losses, net of tax, are expected to be recognized in net periodic benefit cost.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Weighted-average assumptions used to determine U.S. pension plan obligations as of August 31 and weighted-average assumptions used to determine net periodic benefit cost for the years ended August 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
Assumptions for benefit obligations:
|
|
|
|
|
|
|
Discount rate
|
4.05
|
%
|
|
3.60
|
%
|
|
3.45
|
%
|
|
Assumptions for net periodic benefit cost:
|
|
|
|
|
|
|
Discount rate
|
3.60
|
%
|
|
3.45
|
%
|
|
4.45
|
%
|
|
Expected return on plan assets
|
7.00
|
%
|
|
7.15
|
%
|
|
7.40
|
%
|
The Company employs a total return on investment approach for its pension plan assets whereby a mix of equity and fixed income investments are used to maximize the long-term return for plan assets, at a prudent level of risk. The investment portfolio contains a blend of equity and fixed income investments. Within the equity allocation, a blend of growth and value investments is maintained in a variety of market capitalizations and diversified between U.S. and non-U.S. stocks. Currently, the Company’s targeted asset allocation as a percentage of total plan assets is approximately half in equity securities, with the remainder invested in fixed income securities and cash. Cash balances are maintained at levels adequate to meet near-term plan expenses and benefit payments. Investment risk is measured and monitored on an ongoing basis. At
August 31, 2018
, the Company’s overall expected long-term rate of return for assets in U.S. pension plans was
5.75%
. The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories. The target return is based on historical returns adjusted to reflect the current view of the long-term investment market.
The fair value of all U.S. pension plan assets is determined based on quoted market prices and therefore all plan assets are determined based on Level 1 inputs, except for fixed income securities which are valued based on Level 2 inputs, as defined in Note 8, “Fair Value Measurements.” The U.S. pension plan investment allocations by asset category were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
|
|
|
2018
|
|
%
|
|
2017
|
|
%
|
|
Cash and cash equivalents
|
|
$
|
559
|
|
|
1.4
|
%
|
|
$
|
395
|
|
|
1.0
|
%
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
19,107
|
|
|
47.5
|
|
|
8,475
|
|
|
21.2
|
|
|
Mutual funds
|
|
814
|
|
|
2.0
|
|
|
3,139
|
|
|
7.8
|
|
|
|
|
19,921
|
|
|
49.5
|
|
|
11,614
|
|
|
29.0
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
19,764
|
|
|
49.1
|
|
|
28,018
|
|
|
70.0
|
|
|
Total plan assets
|
|
$
|
40,244
|
|
|
100.0
|
%
|
|
$
|
40,027
|
|
|
100.0
|
%
|
Projected benefit payments from plan assets to participants in the Company’s U.S. pension plans are
$3.0 million
per year for each of the next five years and
$14.6 million
in aggregate for the following five years. The Company does not anticipate making a material contribution to the U.S. pension plans in fiscal 2019.
Foreign Defined Benefit Pension Plans
The Company has ten foreign defined benefit pension plans which cover certain existing and former employees of businesses outside the U.S. Most of the participants in the foreign defined benefit pension plans are current employees and are earning additional benefits. The funded status of these plans is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
|
2018
|
|
2017
|
|
Benefit obligation
|
|
$
|
13,936
|
|
|
$
|
14,645
|
|
|
Fair value of plan assets
|
|
7,938
|
|
|
7,950
|
|
|
Funded status of plans (underfunded)
|
|
$
|
(5,998
|
)
|
|
$
|
(6,695
|
)
|
Net periodic benefit cost for these foreign plans was
$0.7 million
,
$1.0 million
and
$0.7 million
in fiscal
2018
,
2017
and
2016
, respectively. The weighted average discount rate utilized for determining the benefit obligation at August 31,
2018
and
2017
was
2.2%
and
2.3%
, respectively. The plan assets of these foreign pension plans consist primarily of participating units in
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
fixed income and equity securities and insurance contracts. The Company’s overall expected long-term rate of return on these investments is
4.4%
. During fiscal
2019
, the Company anticipates contributing
$0.3 million
to these pension plans.
Projected benefit payments from plan assets to participants in the these foreign plans are
$0.3 million
for both fiscal
2019
and fiscal
2020
,
$0.4 million
for fiscal
2021
,
$0.5 million
for fiscal
2022
,
$0.4 million
for fiscal
2023
and
$2.4 million
in aggregate for the following five years.
Other Postretirement Health Benefit Plans
The Company provides other postretirement health benefits (“OPEB”) to certain existing and former employees of domestic businesses it acquired, who were entitled to such benefits prior to acquisition. These unfunded plans had a benefit obligation of
$2.9 million
and
$3.8 million
at August 31,
2018
and
2017
, respectively. These obligations are determined utilizing assumptions consistent with those used for our U.S. pension plans and a health care cost trend rate of
7.0%
, trending downward to
5.0%
by the year 2026, and remaining level thereafter. Net periodic benefit costs for other postretirement benefits was
$0.1 million
and
$0.2 million
for the year-ended August 31,
2018
and
2017
, respectively and less than
$0.1 million
for the year-ended August 31,
2016
. Benefit payments from the plan are funded through participant contributions and Company contributions, which are projected to be
$0.2 million
in fiscal
2019
.
Defined Contribution Benefit Plans
The Company maintains a 401(k) plan for substantially all full time U.S. employees (the “401(k) Plan”). Under plan provisions, the Company can fund either cash or issue new shares of Class A common stock for its contributions. Amounts are allocated to accounts set aside for each employee’s retirement. Employees generally may contribute up to
50%
of their compensation to individual accounts within the 401(k) Plan. While contributions vary, the Company generally makes core contributions to employee accounts equal to
3%
of each employee’s eligible annual cash compensation, subject to IRS limitations. In addition, the Company matches approximately
25%
of each employee’s contribution up to
6%
of the employee’s eligible compensation. The Company also maintains a Restoration Plan that allows eligible highly compensated employees (as defined by the Internal Revenue Code) to receive a core contribution as if no IRS limits were in place. Company contributions to the Restoration Plan are made in the form of Actuant common stock and are contributed into each eligible participant’s deferred compensation plan account. Expense recognized related to the 401(k) plan totaled
$4.7 million
for both years ended
August 31, 2018
and
2017
and
$4.4 million
for the year ended August 31,
2016
.
In addition to the 401(k) plan, the Company sponsors a non-qualified supplemental executive retirement plan (“the SERP Plan”). The SERP Plan is an unfunded defined contribution plan that covers certain current and former executive employees and has an annual contribution formula based on age and years of service (with Company contributions ranging from
3%
to
6%
of eligible wages). This unfunded plan had a
$1.7 million
obligation at both
August 31, 2018
and
2017
, respectively. Expense recognized for the SERP Plan was
$0.3 million
per year for fiscal
2018
,
2017
and
2016
.
Deferred Compensation Plan
The Company maintains a deferred compensation plan to allow eligible U.S. employees to defer receipt of current cash compensation in order to provide future savings benefits. Eligibility is limited to employees that earn compensation that exceeds certain pre-defined levels. Participants have the option to invest their deferrals in a fixed income investment, in Company common stock, or a combination of the two. The fixed income portion of the plan is unfunded, and therefore all compensation deferred under the plan is held by the Company and commingled with its general assets. Liabilities of
$20.1 million
and
$20.9 million
are included in the consolidated balance sheets at August 31,
2018
and
2017
, respectively, to reflect the unfunded portion of the deferred compensation liability. The Company recorded expense in "Financing costs, net" of
$1.5 million
,
$1.6 million
and
$1.6 million
for the years ended August 31,
2018
,
2017
and
2016
, respectively, for non-funded interest on participant deferrals in the fixed income investment option. Company common stock contributions to fund the plan are held in a rabbi trust, accounted for in a manner similar to treasury stock and are recorded at cost in “Stock held in trust” within shareholders’ equity with the corresponding deferred compensation liability also recorded within shareholders’ equity. Since no investment diversification is permitted within the trust, changes in fair value of Actuant common stock are not recognized.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Note 12. Income Taxes
Income tax expense (benefit) is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended August 31,
|
|
|
2018
|
|
2017
|
|
2016
|
|
Currently payable:
|
|
|
|
|
|
|
Federal
|
$
|
919
|
|
|
$
|
(14,769
|
)
|
|
$
|
2,205
|
|
|
Foreign
|
12,532
|
|
|
15,665
|
|
|
11,838
|
|
|
State
|
120
|
|
|
(850
|
)
|
|
912
|
|
|
|
13,571
|
|
|
46
|
|
|
14,955
|
|
|
Deferred:
|
|
|
|
|
|
|
Federal
|
(7,837
|
)
|
|
603
|
|
|
(12,470
|
)
|
|
Foreign
|
3,905
|
|
|
(16,837
|
)
|
|
(23,797
|
)
|
|
State
|
(663
|
)
|
|
(290
|
)
|
|
(3,858
|
)
|
|
|
(4,595
|
)
|
|
(16,524
|
)
|
|
(40,125
|
)
|
|
Income tax expense (benefit)
|
$
|
8,976
|
|
|
$
|
(16,478
|
)
|
|
$
|
(25,170
|
)
|
Income tax expense (benefit) from continuing operations recognized in the accompanying consolidated statements of operations differs from the amounts computed by applying the federal income tax rate to (loss) earnings from continuing operations before income tax expense. A reconciliation of income taxes at the federal statutory rate to the effective tax rate is summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended August 31,
|
|
|
2018
|
|
2017
|
|
2016
|
|
Federal statutory rate
(1)
|
25.7
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
|
State income taxes, net of Federal effect
|
5.1
|
|
|
1.1
|
|
|
1.2
|
|
|
Net effects of foreign tax rate differential and credits
(2) (8)
|
26.9
|
|
|
(3.5
|
)
|
|
2.4
|
|
|
Domestic manufacturing deduction
|
3.9
|
|
|
0.6
|
|
|
0.3
|
|
|
Foreign branch currency losses
|
3.2
|
|
|
(0.3
|
)
|
|
4.9
|
|
|
Compensation adjustment
(3)
|
(11.1
|
)
|
|
—
|
|
|
—
|
|
|
Impairment and other divestiture charges
(4)
|
(125.9
|
)
|
|
(11.2
|
)
|
|
(27.0
|
)
|
|
Valuation allowance additions and releases
(5)
|
(31.7
|
)
|
|
(16.2
|
)
|
|
(0.7
|
)
|
|
Changes in liability for unrecognized tax benefits
(6)
|
51.7
|
|
|
(3.7
|
)
|
|
(0.9
|
)
|
|
U.S. tax reform, net impact
|
(3.9
|
)
|
|
—
|
|
|
—
|
|
|
Taxable liquidation of foreign subsidiaries
(7)
|
(11.7
|
)
|
|
22.1
|
|
|
—
|
|
|
Foreign non-deductible expenses
(8)
|
(18.2
|
)
|
|
(4.6
|
)
|
|
(1.7
|
)
|
|
Changes in tax rates
(8)
|
2.2
|
|
|
(2.1
|
)
|
|
0.9
|
|
|
Business divestitures
|
—
|
|
|
—
|
|
|
3.9
|
|
|
U.S. credits and adjustments
(8)
|
11.4
|
|
|
2.5
|
|
|
1.3
|
|
|
Other items
(8)
|
1.6
|
|
|
0.2
|
|
|
(0.3
|
)
|
|
Effective income tax rate
|
(70.8
|
)%
|
|
19.9
|
%
|
|
19.3
|
%
|
(1)
The Federal statutory rate is a blended rate which reflects
35%
through December 31, 2017 and the lowered rate of
21%
beginning on January 1, 2018 due to tax reform.
(2)
During fiscal 2018, the Company generated
$10.3 million
of foreign tax credits, excluding the impact of tax reform and had a higher proportion of non-U.S. earnings.
(3)
The adoption of ASU 2016-09, Compensation-Stock Compensation resulted in the recognition of excess tax expense in the Company’s provision for income taxes within the Consolidated Statement of Earnings rather than paid-in capital of
$1.5 million
for the fiscal year 2018.
(4)
Fiscal 2018, 2017 and 2016 pretax (loss) earnings include
$73.1 million
,
$117.0 million
and
$186.5 million
, respectively, in impairment and other divestiture charges related to goodwill, intangible assets, tangible assets and the cumulative effect of foreign currency rate changes of which
$45.1 million
,
$69.0 million
and
$118.5 million
, respectively, are not deductible for income tax purposes.
(5)
Incremental valuation allowances of
$18.1 million
, which excludes
$7.1 million
of valuation allowances related to foreign tax credits that are categorized with tax reform and
$15.1 million
were recorded in fiscal 2018 and 2017,
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
respectively, due to uncertainty regarding utilization of foreign operating loss carryforwards, which were partially offset by a reduction of
$12.8 million
and
$0.6 million
of valuation allowances for fiscal 2018 and 2017, respectively.
(6)
The liability for unrecognized tax benefits decreased
$6.6 million
in fiscal 2018 primarily due to settlements and lapsing of tax audit statutes.
(7)
During fiscal 2018 and 2017, the Company generated a net expense of
$1.5 million
and a net benefit of
$14.9 million
, the result of taxable liquidations of foreign subsidiaries.
(8)
Certain prior year amounts have been reclassified to conform to current year presentation.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted into law. The Act includes significant changes to the U.S. corporate income tax system which reduces the U.S. federal corporate income tax rate from
35.0%
to
21.0%
as of January 1, 2018; shifts to a modified territorial tax regime which requires companies to pay a transition tax on earnings of certain foreign subsidiaries that were previously deferred from U.S. income tax; and creates new taxes on certain foreign-sourced earnings. The decrease in the U.S. federal corporate income tax rate from
35.0%
to
21.0%
results in a blended statutory tax rate of
25.7%
for the fiscal year ending August 31, 2018. The new taxes for certain foreign-sourced earnings under the Act are effective for the Company in fiscal 2019.
Income tax effects resulting from changes in tax laws are accounted for by the Company in the period in which the law is enacted and the effects are recorded as a component of income tax expense or benefit. As a result, the Company recorded provisional income tax expense resulting from the Act totaling
$0.5 million
during the year ended August 31, 2018, which includes (i) a transition tax of
$5.3 million
on the Company’s total post-1986 earnings and profits (“E&P”) which, prior to the Act, were previously deferred from U.S. income tax, (ii) a
$11.9 million
decrease in income tax expense as a result of the re-measurement of the Company’s deferred tax assets and liabilities to the new corporate tax rate of
21.0%
and (iii)
$7.1 million
in valuation allowances recorded against foreign tax credits as future utilization is now uncertain.
The Securities and Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 to provide guidance on accounting for various effects of the Act that may be at different stages of completion. To the extent that a company’s accounting for a certain income tax effect of the Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. The final impact may differ from these provisional amounts, possibly materially, due to, among other things, issuance of additional regulatory guidance, changes in interpretations and assumptions the Company has made, and actions the Company may take as a result of the Act. In accordance with SAB 118, the financial reporting impact of the Act will be completed no later than the second quarter of fiscal 2019. As of August 31, 2018, the tax effects related to the Act are provisional and represent the Company’s best estimate. Amounts recorded are based in part on a reasonable estimate of the effects on its transition tax and existing deferred tax balances which are subject to change and modification. Provisional amounts recorded may change as a result of the following:
|
|
|
|
•
|
The amount recorded for the transition tax liability is a provisional amount and based on current estimates of total post-1986 foreign E&P and the income tax pools for all foreign subsidiaries which will continue to be refined over the coming periods. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when the Company finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalizes the amounts held in cash or other specified assets as of August 31, 2018. Further interpretations from U.S. federal and state governments and regulatory organizations may change the provisional tax liability or the accounting treatment of the provisional tax liability. It is anticipated that the amounts resulting from the transition tax will be fully offset by available foreign tax credits and will not result in future cash tax payments. In addition, there is a foreign tax credit carryforward on the balance sheet after the calculation of the transition tax liability. The Company is continuing to analyze the new provisions in order to determine future utilization of the credits and is anticipating further interpretive guidance in connection with the utilization of foreign tax credits going forward. As such, we are not yet able to reasonably estimate the future utilization of the foreign tax credits and have recorded a corresponding valuation allowance.
|
|
|
|
|
•
|
The Company is still analyzing certain aspects of the Act and refining the estimate of the expected revaluation of its deferred tax balances. This can potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. In addition, the Act provides for accelerated first year expensing of certain capital expenditures for which an estimate has been included in the estimated deferred balances for the year but will continue to be refined through the filing of the tax return. The Act also provides changes related to the limits of deduction for employee compensation. The Company is treating any future non-deductible compensation as impacting compensation expenses in the period incurred and will review further guidance and the related impact as provided through the second quarter of fiscal 2019.
|
|
|
|
|
•
|
The Act also includes a provision designed to tax global intangible low taxed income (GILTI) and benefit foreign-derived intangible income (FDII) which will be effective in fiscal 2019. Under the provision, a U.S. shareholder is
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
required to include in gross income the amount of its GILTI, which is generally the net income of its controlled foreign corporations in excess of a 10% return on depreciable tangible assets after identification of other income subject to non-deferral rules. Due to the complexity of the new GILTI tax rules and uncertainty of the application of the foreign tax credit rules in relation to GILTI and FDII, we are continuing to evaluate this provision of the Act, the application of ASC 740, and are considering available accounting policy alternatives to either record the U.S. income tax effect of future GILTI inclusions in the period in which they arise or establish deferred taxes with respect to the expected future tax liabilities associated with future GILTI inclusions. Our accounting policies depend, in part, on analyzing our global income to determine whether we expect a tax liability resulting from the application of this provision, and, if so, whether and when to record related current and deferred income taxes. Whether we intend to recognize deferred tax liabilities related to the GILTI provisions is dependent, in part, on our assessment of the Company's future operating structure. In addition, we are awaiting further interpretive guidance in connection with the computation of the GILTI tax. For these reasons, we are not yet able to reasonably estimate the effect of this provision of the Act. Therefore, we have not made any adjustments relating to potential GILTI tax in our consolidated financial statements and have not made a policy decision regarding our accounting for GILTI.
|
|
|
|
•
|
Prior to the Act, our practice and intention was to reinvest the earnings in our non-U.S. subsidiaries outside of the U.S., and no U.S. deferred income taxes or foreign withholding taxes were recorded. The transition tax noted above will result in the previously untaxed foreign earnings being included in the federal and state fiscal 2018 taxable income. We are currently analyzing our global working capital requirements and the potential tax liabilities that would be incurred if the non-U.S. subsidiaries distribute cash to the U.S. parent, which may include withholding taxes, local country taxes and potential U.S. state taxation. Furthermore, the transition tax will close a majority of the outside basis differences in our foreign corporations and any remaining temporary difference will potentially have some interaction with the GILTI tax noted above. For these reasons, we are not yet able to reasonably estimate the effect of this provision of the Act and have not recorded any withholding or state tax liabilities, any deferred taxes attributable to GILTI (as noted above) or any deferred taxes attributable to our investment in our foreign subsidiaries.
|
|
|
|
|
•
|
We are also currently analyzing certain additional provisions of the Act that come into effect in fiscal 2019 and will determine if and how these items would impact the effective tax rate in the year the income or expense occurs. These provisions include the Base Erosion Anti-Abuse Tax (BEAT), eliminating U.S. federal income taxes on dividends from foreign subsidiaries, the new provision that could limit the amount of deductible interest expense, and the limitations on the deductibility of certain executive compensation.
|
Temporary differences and carryforwards that gave rise to deferred tax assets and liabilities include the following items (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2018
|
|
2017
|
|
Deferred income tax assets:
|
|
|
|
|
Operating loss and tax credit carryforwards
|
$
|
45,947
|
|
|
$
|
41,985
|
|
|
Compensation related liabilities
|
10,450
|
|
|
17,319
|
|
|
Postretirement benefits
|
8,813
|
|
|
14,359
|
|
|
Inventory
|
2,081
|
|
|
2,958
|
|
|
Book reserves and other items
|
18,986
|
|
|
14,224
|
|
|
Total deferred income tax assets
|
86,277
|
|
|
90,845
|
|
|
Valuation allowance
|
(35,076
|
)
|
|
(22,671
|
)
|
|
Net deferred income tax assets
|
51,201
|
|
|
68,174
|
|
|
Deferred income tax liabilities:
|
|
|
|
|
Depreciation and amortization
|
(48,148
|
)
|
|
(77,548
|
)
|
|
Other items
|
(633
|
)
|
|
(1,910
|
)
|
|
Deferred income tax liabilities
|
(48,781
|
)
|
|
(79,458
|
)
|
|
Net deferred income tax asset (liability)
(1)
|
$
|
2,420
|
|
|
$
|
(11,284
|
)
|
(1)
The net deferred income tax liability is reflected on the balance sheet in two categories: an asset of
$24.3 million
and $
18.6 million
for fiscal 2018 and 2017, respectively, is included in other long-term assets and a liability of
$21.9 million
and
$29.9 million
for fiscal 2018 and 2017, respectively, is included in deferred income taxes.
The Company has
$60.8 million
of state loss carryforwards, which are available to reduce future state tax liabilities. These state net operating loss carryforwards expire at various times through 2038. The Company also has
$125.9 million
of
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
foreign loss carryforwards which are available to reduce certain future foreign tax liabilities. Approximately one-half of the foreign loss carryforwards are not subject to any expiration dates, while the other balances expire at various times through 2028. The valuation allowance represents a reserve for deferred tax assets, including loss carryforwards and foreign tax credits, for which utilization is uncertain.
Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
Beginning balance
|
$
|
31,446
|
|
|
$
|
29,174
|
|
|
$
|
29,924
|
|
|
Increases based on tax positions related to the current year
|
2,599
|
|
|
6,057
|
|
|
1,050
|
|
|
Increase for tax positions taken in a prior period
|
359
|
|
|
297
|
|
|
475
|
|
|
Decrease for tax positions taken in a prior period
|
(349
|
)
|
|
(627
|
)
|
|
—
|
|
|
Decrease due to lapse of statute of limitations
|
(9,163
|
)
|
|
(4,008
|
)
|
|
(1,027
|
)
|
|
Decrease due to settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
Changes in foreign currency exchange rates
|
(533
|
)
|
|
553
|
|
|
(1,248
|
)
|
|
Ending balance
|
$
|
24,359
|
|
|
$
|
31,446
|
|
|
$
|
29,174
|
|
Substantially all of these unrecognized tax benefits, if recognized, would impact the effective income tax rate. As of
August 31,
2018
,
2017
and
2016
, the Company recognized
$3.0 million
,
$2.9 million
and
$2.3 million
, respectively for interest and penalties related to unrecognized tax benefits. The Company recognizes interest and penalties related to underpayment of income taxes as a component of income tax expense. With few exceptions, the Company is no longer subject to U.S. federal, state and foreign income tax examinations by tax authorities in major tax jurisdictions for years prior to fiscal 2008. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits could decrease by up to
$3.4 million
throughout fiscal 2019.
The Company’s policy is to remit earnings from foreign subsidiaries only to the extent the remittance does not result in an incremental U.S. tax liability. The Company is reviewing the impact of tax reform on this policy and does not currently provide for the additional U.S. and foreign income taxes which would become payable upon remission of undistributed earnings of foreign subsidiaries. If all undistributed earnings were remitted, an additional income tax provision of
$2.2 million
would have been necessary as of
August 31, 2018
.
(Loss) earnings before income taxes, are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
|
|
2018
|
|
2017
|
|
2016
|
|
Domestic
|
$
|
(11,325
|
)
|
|
$
|
12,635
|
|
|
$
|
(19,182
|
)
|
|
Foreign
|
(1,347
|
)
|
|
(95,326
|
)
|
|
(111,162
|
)
|
|
|
$
|
(12,672
|
)
|
|
$
|
(82,691
|
)
|
|
$
|
(130,344
|
)
|
Both domestic and foreign pre-tax earnings are impacted by changes in operating earnings, acquisition and divestiture activities, restructuring charges and the related benefits, growth investments, debt levels and the impact of changes in foreign currency exchange rates. In fiscal
2018
, domestic and foreign earnings included non-cash impairment and other divestiture costs of
$23.7 million
and
$49.3 million
, respectively. In fiscal
2017
, domestic earnings included
$7.8 million
of transition costs while foreign earnings included
$117.0 million
of non-cash impairment and other divestiture charges. In fiscal
2016
, domestic earnings included a non-cash impairment charge of
$49.0 million
and a
$5.1 million
loss on the Sanlo divestiture while foreign earnings included a
$137.5 million
non-cash impairment charge. Approximately
79%
,
63%
and
53%
of pre-tax earnings (excluding impairment and other divestiture charges) were generated in foreign jurisdictions with tax rates different than the U.S. federal income tax rate during fiscal
2018
,
2017
and
2016
, respectively.
Cash paid for income taxes, net of refunds, was a net refund of
$1.5 million
during the year ended August 31,
2018
and a net payment of
$11.8 million
and
$21.4 million
during the years ended August 31,
2017
and
2016
, respectively.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Note 13. Capital Stock and Share Repurchases
The authorized common stock of the Company as of
August 31, 2018
consisted of
168,000,000
shares of Class A common stock,
$0.20
par value, of which
81,423,584
and
60,984,150
shares were issued and outstanding, respectively;
1,500,000
shares of Class B common stock,
$0.20
par value,
none
of which have been issued; and
160,000
shares of cumulative preferred stock,
$1.00
par value (“preferred stock”),
none
of which have been issued. Holders of both classes of the Company’s common stock are entitled to dividends, as the Company’s Board of Directors may declare out of funds legally available, subject to any contractual restrictions on the payment of dividends or other distributions on the common stock. If the Company were to issue any of its preferred stock, no dividends could be paid or set apart on shares of common stock, unless paid in common stock, until dividends on all of the issued and outstanding shares of preferred stock had been paid or set apart for payment and provision had been made for any mandatory sinking fund payments.
The Company's Board of Directors approved four separate authorizations (September 2011, March 2014, October 2014 and March 2015) to repurchase up to
7,000,000
shares each of the Company’s outstanding common stock. At
August 31, 2018
, cumulative shares repurchased under these authorizations totaled
20,439,434
, leaving
7,560,566
shares authorized for future buy backs.
Earnings Per Share
The following table sets forth the computation of basic and diluted loss per share (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
|
|
2018
|
|
2017
|
|
2016
|
|
Numerator:
|
|
|
|
|
|
|
Net loss
|
$
|
(21,648
|
)
|
|
$
|
(66,213
|
)
|
|
$
|
(105,174
|
)
|
|
Denominator:
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
60,441
|
|
|
59,436
|
|
|
59,010
|
|
|
Net effect of dilutive securities - stock based compensation plans
|
—
|
|
|
—
|
|
|
—
|
|
|
Weighted average common shares outstanding - diluted
|
60,441
|
|
|
59,436
|
|
|
59,010
|
|
|
|
|
|
|
|
|
|
Basic Loss Per Share:
|
$
|
(0.36
|
)
|
|
$
|
(1.11
|
)
|
|
$
|
(1.78
|
)
|
|
Diluted Loss Per Share:
|
$
|
(0.36
|
)
|
|
$
|
(1.11
|
)
|
|
$
|
(1.78
|
)
|
|
|
|
|
|
|
|
|
Anti-dilutive securities- stock based compensation plans (excluding from earnings per share calculation
) (1)
|
2,923
|
|
|
4,482
|
|
|
4,832
|
|
(1)
As a result of the impairment and divestiture charges which caused a net loss in fiscal 2018, 2017 and 2016, shares from stock based compensation plans are excluded from the calculation of diluted loss per share, as the result would be anti-dilutive.
Note 14. Stock Plans
Share based awards may be granted to key employees and directors under the Actuant Corporation 2017 Omnibus Incentive Plan (the “Plan”). At
August 31, 2018
,
4,325,000
shares of Class A common stock were authorized for issuance under the Plan plus an additional
1,800,000
shares being registered to cover shares, if any, that become issuable, pursuant to the terms of the Plan, upon the expiration, cancellation or forfeiture of existing awards under our previously registered stock plans, of which
4,408,499
shares were available for future award grants. The Plan permits the Company to grant share-based awards, including stock options, restricted stock, restricted stock units and performance shares (the "Performance Shares") to employees and directors. Options generally have a maximum term of
ten
years, an exercise price equal to
100%
of the fair market value of the Company’s common stock at the date of grant and generally vest
50%
after three years and
100%
after five years. The Company’s restricted stock grants prior to 2017 generally have similar vesting provisions as options while grants thereafter generally vests in equal installments over a three-year period. The Performance Shares include a
three
-year performance period, with vesting based
50%
on achievement of an absolute free cash flow conversion target and
50%
on the Company’s total shareholder return ("TSR") relative to the S&P 600 SmallCap Industrial index. The provisions of share-based awards may vary by individual grant with respect to vesting period, dividend and voting rights, performance conditions and forfeitures.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
A summary of restricted stock and performance shares activity during fiscal
2018
is as follows:
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted-Average Fair Value at Grant Date (Per Share)
|
|
Outstanding on August 31, 2017
|
1,290,448
|
|
|
$24.95
|
|
Granted
|
525,541
|
|
|
26.20
|
|
Forfeited
|
(197,771
|
)
|
|
25.05
|
|
Vested
|
(464,481
|
)
|
|
25.60
|
|
Outstanding on August 31, 2018
|
1,153,737
|
|
|
$25.25
|
A summary of stock option activity during fiscal
2018
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average
Exercise Price
(Per Share)
|
|
Weighted-Average
Remaining Contractual
Term
|
|
Aggregate
Intrinsic Value
|
|
Outstanding on September 1, 2017
|
|
3,191,630
|
|
|
$
|
24.40
|
|
|
|
|
|
|
Granted
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Exercised
|
|
(833,377
|
)
|
|
19.96
|
|
|
|
|
|
|
Forfeited
|
|
(119,527
|
)
|
|
23.98
|
|
|
|
|
|
|
Expired
|
|
(469,650
|
)
|
|
28.59
|
|
|
|
|
|
|
Outstanding on August 31, 2018
|
|
1,769,076
|
|
|
$
|
25.40
|
|
|
4.8
|
|
$
|
7.9
|
million
|
|
Exercisable on August 31, 2018
|
|
1,285,352
|
|
|
$
|
25.52
|
|
|
3.8
|
|
$
|
5.9
|
million
|
Intrinsic value is the difference between the market value of the stock at
August 31, 2018
and the exercise price which is aggregated for all options outstanding and exercisable. A summary of the weighted-average grant-date fair value of options, total intrinsic value of options exercised, and cash receipts from options exercised is summarized below (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
|
|
2018
|
|
2017
|
|
2016
|
|
Weighted-average fair value of options granted (per share)
|
N/A
|
|
|
$
|
11.88
|
|
|
$
|
8.63
|
|
|
Intrinsic value of options exercised
|
$
|
5,284
|
|
|
2,208
|
|
|
989
|
|
|
Cash receipts from exercise of options
|
15,140
|
|
|
7,762
|
|
|
3,564
|
|
The Company generally records compensation expense over the vesting period for restricted stock awards based on the market value of Actuant common stock on the grant date and utilized an expected forfeiture rate of
10%
,
11%
and
13%
, for fiscal years ended August 31, 2018, 2017 and 2016, respectively. The fair value of Performance Shares with market vesting conditions is determined utilizing a Monte Carlo simulation model. Stock based compensation expense is determined using a binomial pricing model for options. Assumptions used to determine the fair value of each option were based upon historical data and standard industry valuation practices and methodology. There were no options granted in fiscal 2018. The following weighted-average assumptions were used in each fiscal year 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended August 31,
|
|
|
2017
|
|
2016
|
|
Dividend yield
|
0.15
|
%
|
|
0.19
|
%
|
|
Expected volatility
|
38.12
|
%
|
|
38.06
|
%
|
|
Risk-free rate of return
|
2.42
|
%
|
|
2.06
|
%
|
|
Expected forfeiture rate
|
11
|
%
|
|
13
|
%
|
|
Expected life
|
7.4 years
|
|
|
6.1 years
|
|
As of
August 31, 2018
, there was
$19.1 million
of total unrecognized compensation cost related to share-based awards, including stock options, restricted stock, restricted stock units and performance shares, which will be recognized over a weighted average period of
2.1
years. The total fair value of share-based awards that vested during the fiscal years ended
August 31, 2018
and
2017
was
$14.3 million
and
$16.1 million
, respectively.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Note 15. Business Segment, Geographic and Customer Information
The Company is a global manufacturer of a broad range of industrial products and systems. During the fourth quarter of fiscal 2018, the Company’s financial reporting segments were modified to reflect changes in the operating structure of the Company. The Company considered these changes as part of its ongoing assessment of segment reporting, and changed its operating and reportable segments to reflect
two
reportable segments: Industrial Tools & Services and Engineered Components & Systems. All prior period amounts and disclosures have been adjusted to reflect the current reportable segments.
The Industrial Tools & Services segment is primarily engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools and in providing services and tool rental to the industrial, maintenance, infrastructure, oil & gas, energy and other markets. The Engineered Components & Systems segment provides highly engineered components for on-highway, off-highway agriculture, medical, concrete tensioning and other vertical markets. All of the aforementioned markets are supported through our various segment product lines outlined below.
The following tables summarize financial information by reportable segment and product line (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
Net Sales by Reportable Segment & Product Line:
|
|
|
|
|
|
|
|
Industrial Tools & Services Segment:
|
|
|
|
|
|
|
|
Product
|
|
$
|
439,405
|
|
|
$
|
396,381
|
|
|
$
|
400,780
|
|
|
Service & Rental
|
|
151,680
|
|
|
156,201
|
|
|
187,427
|
|
|
|
|
591,085
|
|
|
552,582
|
|
|
588,207
|
|
|
Engineered Components & Systems Segment:
|
|
|
|
|
|
|
|
On-Highway
|
|
248,083
|
|
|
215,831
|
|
|
209,575
|
|
|
Agriculture, Off-Highway and Other
|
|
215,487
|
|
|
190,604
|
|
|
187,287
|
|
|
Rope & Cable Solutions
|
|
76,011
|
|
|
65,169
|
|
|
73,813
|
|
|
Concrete Tensioning
|
|
49,198
|
|
|
52,889
|
|
|
50,491
|
|
|
Off Shore Mooring
|
|
2,747
|
|
|
18,709
|
|
|
40,037
|
|
|
|
|
591,526
|
|
|
543,202
|
|
|
561,203
|
|
|
|
|
$
|
1,182,611
|
|
|
$
|
1,095,784
|
|
|
$
|
1,149,410
|
|
|
|
|
|
|
|
|
|
|
Operating Profit (Loss):
|
|
|
|
|
|
|
|
Industrial Tools & Services
|
|
$
|
99,432
|
|
|
$
|
95,825
|
|
|
$
|
119,922
|
|
|
Engineered Components
&
Systems
(1)
|
|
(51,982
|
)
|
|
(113,030
|
)
|
|
(190,654
|
)
|
|
General Corporate
|
|
(29,252
|
)
|
|
(33,031
|
)
|
|
(29,485
|
)
|
|
|
|
$
|
18,198
|
|
|
$
|
(50,236
|
)
|
|
$
|
(100,217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
Industrial Tools & Services
|
|
$
|
15,301
|
|
|
$
|
15,025
|
|
|
$
|
15,173
|
|
|
Engineered Components & Systems
|
|
23,424
|
|
|
26,072
|
|
|
30,855
|
|
|
General Corporate
|
|
1,982
|
|
|
2,013
|
|
|
1,749
|
|
|
|
|
$
|
40,707
|
|
|
$
|
43,110
|
|
|
$
|
47,777
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures:
|
|
|
|
|
|
|
|
Industrial Tools & Services
|
|
$
|
7,799
|
|
|
$
|
8,614
|
|
|
$
|
5,502
|
|
|
Engineered Components & Systems
|
|
11,653
|
|
|
16,884
|
|
|
12,397
|
|
|
General Corporate
|
|
1,418
|
|
|
2,697
|
|
|
2,310
|
|
|
|
|
$
|
20,870
|
|
|
$
|
28,195
|
|
|
$
|
20,209
|
|
(1)
Engineered Components & Systems segment operating loss includes impairment and divestiture charges of
$73.1 million
,
$117.0 million
and
$186.6 million
in fiscal
2018
,
2017
and
2016
, respectively.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
|
2018
|
|
2017
|
|
Assets:
|
|
|
|
|
|
Industrial Tools & Services
|
|
$
|
589,932
|
|
|
$
|
599,321
|
|
|
Engineered Components & Systems
|
|
657,370
|
|
|
713,083
|
|
|
General Corporate
|
|
234,036
|
|
|
204,551
|
|
|
|
|
$
|
1,481,338
|
|
|
$
|
1,516,955
|
|
In addition to the impact of changes in foreign currency exchange rates, the comparability of segment and product line information is impacted by acquisition/divestiture activities, impairment and divestiture charges, restructuring costs and related benefits. Corporate assets, which are not allocated, principally represent cash and cash equivalents, capitalized debt issuance costs and deferred income taxes.
The following tables summarize net sales and long-lived assets (fixed assets and other long-term assets, excluding deferred tax assets and debt issuance cots) by geographic region (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
Net Sales:
|
|
|
|
|
|
|
|
United States
|
|
$
|
509,952
|
|
|
$
|
480,801
|
|
|
$
|
477,670
|
|
|
Netherlands
|
|
166,542
|
|
|
130,724
|
|
|
143,517
|
|
|
United Kingdom
|
|
87,182
|
|
|
84,106
|
|
|
115,183
|
|
|
China
|
|
64,031
|
|
|
68,373
|
|
|
47,312
|
|
|
Sweden
|
|
50,517
|
|
|
37,813
|
|
|
35,424
|
|
|
United Arab Emirates
|
|
43,707
|
|
|
39,974
|
|
|
55,906
|
|
|
France
|
|
40,351
|
|
|
39,563
|
|
|
42,780
|
|
|
Australia
|
|
28,510
|
|
|
38,924
|
|
|
62,779
|
|
|
All other
|
|
191,819
|
|
|
175,506
|
|
|
168,839
|
|
|
|
|
$
|
1,182,611
|
|
|
$
|
1,095,784
|
|
|
$
|
1,149,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
|
2018
|
|
2017
|
|
Long-lived Assets:
|
|
|
|
|
|
United States
|
|
$
|
42,563
|
|
|
$
|
36,254
|
|
|
China
|
|
14,909
|
|
|
16,332
|
|
|
Netherlands
|
|
12,200
|
|
|
9,134
|
|
|
United Arab Emirates
|
|
7,876
|
|
|
8,451
|
|
|
United Kingdom
|
|
4,076
|
|
|
5,467
|
|
|
All other
|
|
20,111
|
|
|
22,696
|
|
|
|
|
$
|
101,735
|
|
|
$
|
98,334
|
|
The Company’s largest customer accounted for less than
3%
of sales in each of the last three fiscal years. Export sales from domestic operations were approximately
7%
of total net sales in each of the periods presented. In fiscal 2018, sales of products contributed approximately
84%
of consolidated net sales, with the remaining revenue generated from engineering and technical manpower services, rental contracts and other sources. We provide certain Industrial Tools & Services segment customers both products, services and rentals; however, since our systems do not allocate costs between these sales categories, it is neither practical nor cost effective to disaggregate cost of sales separately for product sales and rental and service revenue.
Note 16. Commitments and Contingencies
The Company had outstanding letters of credit of
$23.6 million
and
$22.1 million
at August 31,
2018
and
2017
, respectively, the majority of which relate to commercial contracts and self-insured workers compensation programs.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The Company is a party to various legal proceedings that have arisen in the normal course of its business. These legal proceedings typically include product liability, environmental, labor, patent and other disputes. The Company has recorded reserves for loss contingencies based on the specific circumstances of each case. Such reserves are recorded when it is probable that a loss has been incurred and can be reasonably estimated. In the opinion of management, the resolution of these contingencies are not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.
The Company remains contingently liable for lease payments under leases of businesses that it previously divested or spun-off, in the event that such businesses are unable to fulfill their future lease payment obligations. The discounted present value of future minimum lease payments for these leases was
$11.0 million
using a weighted average discount rate of
3.24%
at
August 31, 2018
.
The Company has facilities in numerous geographic locations that are subject to a range of environmental laws and regulations. Environmental expenditures over the past three years have not been material. Management believes that such costs will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.
In March 2018, the Company filed an Initial Notice of Voluntary Self-Disclosure ("VSD") with the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) regarding transactions related to otherwise authorized sales of tools and other products by certain of its foreign subsidiaries to two Iranian distributors totaling approximately
$0.5 million
. While the Company undertook efforts to ensure that those sales were conducted entirely consistent with General License H under the Iranian Transaction and Sanctions Regulations, 31 C.F.R. Part 560, it is possible that certain limited transactions relating to the authorized sales in question fell outside the scope of General License H. The Company immediately determined to cease doing business in Iran and continues not to transact there. With the assistance of its external counsel, the Company undertook an investigation of those Iran-related transactions and, more generally, the adequacy and effectiveness of its procedures to ensure compliance with trade and export requirements. The investigation was completed in October 2018 and resulted in the filing of a final VSD with OFAC on October 26, 2018. The final VSD also included information about additional transactions by certain of the Company's Dutch subsidiaries, with a counterparty in Estonia that may have been in violation of E.O. 13685. Those transactions involved wire remittances totaling approximately
$3.2 million
for sales of products and services that may have been diverted to the Crimea region of Ukraine. OFAC is currently reviewing the Company’s disclosure to determine whether any violations of U.S. economic sanctions laws may have occurred and, if so, to determine the appropriate enforcement response. At this time, the Company cannot predict when OFAC will conclude its review of the VSD or the nature of its enforcement response.
Additionally, the Company has self-disclosed the sales to its Estonian customer to relevant authorities in the Netherlands as potentially violating applicable sanctions laws in that country and the European Union. The investigation by authorities in the Netherlands is ongoing and also may result in penalties. At this time, the Company cannot predict when the investigation will be completed or reasonably estimate what penalties, if any, will be assessed.
While there can be no assurance of the ultimate outcome of the above matters, the Company currently believes that there will be no material adverse effect on the Company's financial position, results of operations, or cash flows.
Note 17. Guarantor Subsidiaries
On April 16, 2012, Actuant Corporation (the “Parent”) issued
$300.0 million
of
5.625%
Senior Notes, of which
$287.6 million
remains outstanding as of
August 31, 2018
. All of our material domestic wholly owned subsidiaries (the “Guarantors”) fully and unconditionally guarantee the
5.625%
Senior Notes on a joint and several basis. There are no significant restrictions on the ability of the Guarantors to make distributions to the Parent.
Certain assets, liabilities and expenses have not been allocated to the Guarantors and non-Guarantors and therefore are included in the Parent column in the accompanying consolidating financial statements. These items are of a corporate or consolidated nature and include, but are not limited to, tax provisions and related assets and liabilities, certain employee benefit obligations, prepaid and accrued insurance and corporate indebtedness. Intercompany activity in the consolidating financial statements primarily includes loan activity, purchases and sales of goods or services, investments and dividends. Intercompany balances also reflect certain non-cash transactions including transfers of assets and liabilities between the Parent, Guarantor and non-Guarantor, allocation of non-cash expenses from the Parent to the Guarantors and non-Guarantors, non-cash intercompany dividends and the impact of foreign currency rate changes.
The following tables present the results of operations, financial position and cash flows of Actuant Corporation and its subsidiaries, the Guarantor and non-Guarantor entities, and the eliminations necessary to arrive at the information for the Company on a consolidated basis.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2018
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
|
Net sales
|
|
$
|
159,411
|
|
|
$
|
371,890
|
|
|
$
|
651,310
|
|
|
$
|
—
|
|
|
$
|
1,182,611
|
|
|
Cost of products sold
|
|
29,619
|
|
|
275,280
|
|
|
462,452
|
|
|
—
|
|
|
767,351
|
|
|
Gross profit
|
|
129,792
|
|
|
96,610
|
|
|
188,858
|
|
|
—
|
|
|
415,260
|
|
|
Selling, administrative and engineering expenses
|
|
81,194
|
|
|
72,688
|
|
|
137,562
|
|
|
—
|
|
|
291,444
|
|
|
Amortization of intangible assets
|
|
1,272
|
|
|
11,394
|
|
|
7,899
|
|
|
—
|
|
|
20,565
|
|
|
Restructuring charges
|
|
6,433
|
|
|
1,398
|
|
|
4,164
|
|
|
—
|
|
|
11,995
|
|
|
Impairment & divestiture charges
|
|
4,217
|
|
|
23,740
|
|
|
45,101
|
|
|
—
|
|
|
73,058
|
|
|
Operating profit (loss)
|
|
36,676
|
|
|
(12,610
|
)
|
|
(5,868
|
)
|
|
—
|
|
|
18,198
|
|
|
Financing costs (income), net
|
|
31,752
|
|
|
81
|
|
|
(342
|
)
|
|
—
|
|
|
31,491
|
|
|
Intercompany (income) expense, net
|
|
(17,042
|
)
|
|
26,596
|
|
|
(9,554
|
)
|
|
—
|
|
|
—
|
|
|
Intercompany dividends
|
|
—
|
|
|
(28,822
|
)
|
|
—
|
|
|
28,822
|
|
|
—
|
|
|
Other (income) expense, net
|
|
(1,200
|
)
|
|
57
|
|
|
522
|
|
|
—
|
|
|
(621
|
)
|
|
Earnings (loss) before income tax (benefit) expense
|
|
23,166
|
|
|
(10,522
|
)
|
|
3,506
|
|
|
(28,822
|
)
|
|
(12,672
|
)
|
|
Income tax (benefit) expense
|
|
(25,380
|
)
|
|
17,921
|
|
|
16,435
|
|
|
—
|
|
|
8,976
|
|
|
Net earnings (loss) before equity in (loss) earnings of subsidiaries
|
|
48,546
|
|
|
(28,443
|
)
|
|
(12,929
|
)
|
|
(28,822
|
)
|
|
(21,648
|
)
|
|
Equity in (loss) earnings of subsidiaries
|
|
(70,194
|
)
|
|
(15,652
|
)
|
|
2,103
|
|
|
83,743
|
|
|
—
|
|
|
Net loss
|
|
(21,648
|
)
|
|
(44,095
|
)
|
|
(10,826
|
)
|
|
54,921
|
|
|
(21,648
|
)
|
|
Comprehensive income (loss)
|
|
$
|
31,368
|
|
|
$
|
(44,095
|
)
|
|
$
|
40,800
|
|
|
$
|
3,295
|
|
|
$
|
31,368
|
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2017
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
|
Net sales
|
|
$
|
145,223
|
|
|
$
|
355,989
|
|
|
$
|
594,572
|
|
|
$
|
—
|
|
|
$
|
1,095,784
|
|
|
Cost of products sold
|
|
34,300
|
|
|
260,700
|
|
|
421,067
|
|
|
—
|
|
|
716,067
|
|
|
Gross profit
|
|
110,923
|
|
|
95,289
|
|
|
173,505
|
|
|
—
|
|
|
379,717
|
|
|
Selling, administrative and engineering expenses
|
|
74,996
|
|
|
69,826
|
|
|
132,666
|
|
|
—
|
|
|
277,488
|
|
|
Amortization of intangible assets
|
|
1,272
|
|
|
11,715
|
|
|
7,487
|
|
|
—
|
|
|
20,474
|
|
|
Director & officer transition charges
|
|
7,784
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,784
|
|
|
Restructuring charges
|
|
826
|
|
|
1,359
|
|
|
5,043
|
|
|
—
|
|
|
7,228
|
|
|
Impairment & divestiture charges
|
|
—
|
|
|
—
|
|
|
116,979
|
|
|
—
|
|
|
116,979
|
|
|
Operating profit (loss)
|
|
26,045
|
|
|
12,389
|
|
|
(88,670
|
)
|
|
—
|
|
|
(50,236
|
)
|
|
Financing costs, net
|
|
30,005
|
|
|
35
|
|
|
(337
|
)
|
|
—
|
|
|
29,703
|
|
|
Intercompany (income) expense, net
|
|
(22,941
|
)
|
|
22,066
|
|
|
875
|
|
|
—
|
|
|
—
|
|
|
Intercompany dividends
|
|
5,353
|
|
|
(59,401
|
)
|
|
(5,353
|
)
|
|
59,401
|
|
|
—
|
|
|
Other expense (income), net
|
|
2,690
|
|
|
87
|
|
|
(25
|
)
|
|
—
|
|
|
2,752
|
|
|
Earnings (loss) before income tax benefit
|
|
10,938
|
|
|
49,602
|
|
|
(83,830
|
)
|
|
(59,401
|
)
|
|
(82,691
|
)
|
|
Income tax benefit
|
|
(782
|
)
|
|
(14,574
|
)
|
|
(1,122
|
)
|
|
—
|
|
|
(16,478
|
)
|
|
Net earnings (loss) before equity in (loss) earnings of subsidiaries
|
|
11,720
|
|
|
64,176
|
|
|
(82,708
|
)
|
|
(59,401
|
)
|
|
(66,213
|
)
|
|
Equity in (loss) earnings of subsidiaries
|
|
(77,933
|
)
|
|
(81,389
|
)
|
|
3,335
|
|
|
155,987
|
|
|
—
|
|
|
Net loss
|
|
(66,213
|
)
|
|
(17,213
|
)
|
|
(79,373
|
)
|
|
96,586
|
|
|
(66,213
|
)
|
|
Comprehensive loss
|
|
$
|
(41,651
|
)
|
|
$
|
(35,121
|
)
|
|
$
|
(39,942
|
)
|
|
$
|
75,063
|
|
|
$
|
(41,651
|
)
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS AND COMPREHENSIVE LOSS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2016
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
|
Net sales
|
|
$
|
135,679
|
|
|
$
|
361,209
|
|
|
$
|
652,522
|
|
|
$
|
—
|
|
|
$
|
1,149,410
|
|
|
Cost of products sold
|
|
34,576
|
|
|
263,197
|
|
|
448,240
|
|
|
—
|
|
|
746,013
|
|
|
Gross profit
|
|
101,103
|
|
|
98,012
|
|
|
204,282
|
|
|
—
|
|
|
403,397
|
|
|
Selling, administrative and engineering expenses
|
|
69,677
|
|
|
69,382
|
|
|
135,438
|
|
|
—
|
|
|
274,497
|
|
|
Amortization of intangible assets
|
|
1,272
|
|
|
13,287
|
|
|
8,384
|
|
|
—
|
|
|
22,943
|
|
|
Loss on product line divestiture
|
|
—
|
|
|
5,092
|
|
|
—
|
|
|
—
|
|
|
5,092
|
|
|
Restructuring charges
|
|
2,426
|
|
|
3,455
|
|
|
8,690
|
|
|
—
|
|
|
14,571
|
|
|
Impairment charges
|
|
—
|
|
|
49,012
|
|
|
137,499
|
|
|
—
|
|
|
186,511
|
|
|
Operating profit (loss)
|
|
27,728
|
|
|
(42,216
|
)
|
|
(85,729
|
)
|
|
—
|
|
|
(100,217
|
)
|
|
Financing costs, net
|
|
30,123
|
|
|
—
|
|
|
(1,355
|
)
|
|
—
|
|
|
28,768
|
|
|
Intercompany (income) expense, net
|
|
(20,445
|
)
|
|
(9,999
|
)
|
|
30,444
|
|
|
—
|
|
|
—
|
|
|
Intercompany dividends
|
|
—
|
|
|
—
|
|
|
(5,338
|
)
|
|
5,338
|
|
|
—
|
|
|
Other expense, net
|
|
914
|
|
|
54
|
|
|
391
|
|
|
—
|
|
|
1,359
|
|
|
Earnings (loss) before income taxes
|
|
17,136
|
|
|
(32,271
|
)
|
|
(109,871
|
)
|
|
(5,338
|
)
|
|
(130,344
|
)
|
|
Income tax (benefit) expense
|
|
(8,729
|
)
|
|
519
|
|
|
(17,046
|
)
|
|
86
|
|
|
(25,170
|
)
|
|
Net earnings (loss) before equity in (loss) earnings of subsidiaries
|
|
25,865
|
|
|
(32,790
|
)
|
|
(92,825
|
)
|
|
(5,424
|
)
|
|
(105,174
|
)
|
|
Equity in (loss) earnings of subsidiaries
|
|
(131,037
|
)
|
|
(83,747
|
)
|
|
3,024
|
|
|
211,760
|
|
|
—
|
|
|
Net loss
|
|
(105,174
|
)
|
|
(116,537
|
)
|
|
(89,801
|
)
|
|
206,336
|
|
|
(105,174
|
)
|
|
Comprehensive loss
|
|
$
|
(143,357
|
)
|
|
$
|
(157,344
|
)
|
|
$
|
(83,802
|
)
|
|
$
|
241,146
|
|
|
$
|
(143,357
|
)
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31, 2018
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
67,649
|
|
|
$
|
—
|
|
|
$
|
182,841
|
|
|
$
|
—
|
|
|
$
|
250,490
|
|
|
Accounts receivable, net
|
|
19,969
|
|
|
54,822
|
|
|
112,958
|
|
|
—
|
|
|
187,749
|
|
|
Inventories, net
|
|
22,570
|
|
|
59,391
|
|
|
74,395
|
|
|
—
|
|
|
156,356
|
|
|
Assets held for sale
|
|
—
|
|
|
—
|
|
|
23,573
|
|
|
—
|
|
|
23,573
|
|
|
Other current assets
|
|
7,358
|
|
|
4,759
|
|
|
30,615
|
|
|
—
|
|
|
42,732
|
|
|
Total current assets
|
|
117,546
|
|
|
118,972
|
|
|
424,382
|
|
|
—
|
|
|
660,900
|
|
|
Property, plant & equipment, net
|
|
7,937
|
|
|
26,408
|
|
|
55,875
|
|
|
—
|
|
|
90,220
|
|
|
Goodwill
|
|
38,847
|
|
|
203,543
|
|
|
270,022
|
|
|
—
|
|
|
512,412
|
|
|
Other intangible assets, net
|
|
6,884
|
|
|
121,793
|
|
|
52,360
|
|
|
—
|
|
|
181,037
|
|
|
Investment in subsidiaries
|
|
1,836,954
|
|
|
1,211,781
|
|
|
789,917
|
|
|
(3,838,652
|
)
|
|
—
|
|
|
Intercompany receivables
|
|
—
|
|
|
622,646
|
|
|
200,173
|
|
|
(822,819
|
)
|
|
—
|
|
|
Other long-term assets
|
|
12,955
|
|
|
366
|
|
|
23,448
|
|
|
—
|
|
|
36,769
|
|
|
Total assets
|
|
$
|
2,021,123
|
|
|
$
|
2,305,509
|
|
|
$
|
1,816,177
|
|
|
$
|
(4,661,471
|
)
|
|
$
|
1,481,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
15,890
|
|
|
$
|
29,022
|
|
|
$
|
85,926
|
|
|
$
|
—
|
|
|
$
|
130,838
|
|
|
Accrued compensation and benefits
|
|
22,171
|
|
|
9,804
|
|
|
22,533
|
|
|
—
|
|
|
54,508
|
|
|
Current maturities of debt
|
|
30,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,000
|
|
|
Income taxes payable
|
|
—
|
|
|
—
|
|
|
4,091
|
|
|
—
|
|
|
4,091
|
|
|
Liabilities held for sale
|
|
—
|
|
|
—
|
|
|
44,225
|
|
|
—
|
|
|
44,225
|
|
|
Other current liabilities
|
|
17,379
|
|
|
11,078
|
|
|
38,842
|
|
|
—
|
|
|
67,299
|
|
|
Total current liabilities
|
|
85,440
|
|
|
49,904
|
|
|
195,617
|
|
|
—
|
|
|
330,961
|
|
|
Long-term debt
|
|
502,695
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
502,695
|
|
|
Deferred income taxes
|
|
17,467
|
|
|
—
|
|
|
4,466
|
|
|
—
|
|
|
21,933
|
|
|
Pension and post-retirement benefit liabilities
|
|
7,765
|
|
|
—
|
|
|
7,104
|
|
|
—
|
|
|
14,869
|
|
|
Other long-term liabilities
|
|
45,483
|
|
|
359
|
|
|
6,326
|
|
|
—
|
|
|
52,168
|
|
|
Intercompany payable
|
|
803,561
|
|
|
19,258
|
|
|
—
|
|
|
(822,819
|
)
|
|
—
|
|
|
Shareholders’ equity
|
|
558,712
|
|
|
2,235,988
|
|
|
1,602,664
|
|
|
(3,838,652
|
)
|
|
558,712
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
2,021,123
|
|
|
$
|
2,305,509
|
|
|
$
|
1,816,177
|
|
|
$
|
(4,661,471
|
)
|
|
$
|
1,481,338
|
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31, 2017
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
34,715
|
|
|
$
|
—
|
|
|
$
|
194,856
|
|
|
$
|
—
|
|
|
$
|
229,571
|
|
|
Accounts receivable, net
|
|
17,498
|
|
|
50,749
|
|
|
121,959
|
|
|
—
|
|
|
190,206
|
|
|
Inventories, net
|
|
23,308
|
|
|
48,492
|
|
|
71,851
|
|
|
—
|
|
|
143,651
|
|
|
Assets held for sale
|
|
—
|
|
|
—
|
|
|
21,835
|
|
|
—
|
|
|
21,835
|
|
|
Other current assets
|
|
23,576
|
|
|
3,619
|
|
|
34,468
|
|
|
—
|
|
|
61,663
|
|
|
Total current assets
|
|
99,097
|
|
|
102,860
|
|
|
444,969
|
|
|
—
|
|
|
646,926
|
|
|
Property, plant & equipment, net
|
|
7,049
|
|
|
26,130
|
|
|
61,342
|
|
|
—
|
|
|
94,521
|
|
|
Goodwill
|
|
38,847
|
|
|
200,499
|
|
|
290,735
|
|
|
—
|
|
|
530,081
|
|
|
Other intangible assets, net
|
|
8,156
|
|
|
138,042
|
|
|
74,291
|
|
|
—
|
|
|
220,489
|
|
|
Investment in subsidiaries
|
|
1,832,472
|
|
|
1,186,715
|
|
|
805,016
|
|
|
(3,824,203
|
)
|
|
—
|
|
|
Intercompany receivable
|
|
—
|
|
|
589,193
|
|
|
205,183
|
|
|
(794,376
|
)
|
|
—
|
|
|
Other long-term assets
|
|
8,377
|
|
|
812
|
|
|
15,749
|
|
|
—
|
|
|
24,938
|
|
|
Total assets
|
|
$
|
1,993,998
|
|
|
$
|
2,244,251
|
|
|
$
|
1,897,285
|
|
|
$
|
(4,618,579
|
)
|
|
$
|
1,516,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
15,412
|
|
|
$
|
27,168
|
|
|
$
|
90,807
|
|
|
$
|
—
|
|
|
$
|
133,387
|
|
|
Accrued compensation and benefits
|
|
19,082
|
|
|
7,672
|
|
|
24,185
|
|
|
—
|
|
|
50,939
|
|
|
Current maturities of debt
|
|
30,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,000
|
|
|
Income taxes payable
|
|
153
|
|
|
—
|
|
|
5,927
|
|
|
—
|
|
|
6,080
|
|
|
Liabilities held for sale
|
|
—
|
|
|
—
|
|
|
101,083
|
|
|
—
|
|
|
101,083
|
|
|
Other current liabilities
|
|
18,512
|
|
|
7,169
|
|
|
31,764
|
|
|
—
|
|
|
57,445
|
|
|
Total current liabilities
|
|
83,159
|
|
|
42,009
|
|
|
253,766
|
|
|
—
|
|
|
378,934
|
|
|
Long-term debt
|
|
531,940
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
531,940
|
|
|
Deferred income taxes
|
|
24,164
|
|
|
—
|
|
|
5,695
|
|
|
—
|
|
|
29,859
|
|
|
Pension and post-retirement benefit liabilities
|
|
12,540
|
|
|
—
|
|
|
7,322
|
|
|
—
|
|
|
19,862
|
|
|
Other long-term liabilities
|
|
48,692
|
|
|
352
|
|
|
6,777
|
|
|
—
|
|
|
55,821
|
|
|
Intercompany payable
|
|
792,964
|
|
|
—
|
|
|
1,412
|
|
|
(794,376
|
)
|
|
—
|
|
|
Shareholders’ equity
|
|
500,539
|
|
|
2,201,890
|
|
|
1,622,313
|
|
|
(3,824,203
|
)
|
|
500,539
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
1,993,998
|
|
|
$
|
2,244,251
|
|
|
$
|
1,897,285
|
|
|
$
|
(4,618,579
|
)
|
|
$
|
1,516,955
|
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2018
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
63,264
|
|
|
$
|
27,673
|
|
|
$
|
15,156
|
|
|
$
|
—
|
|
|
$
|
106,093
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(2,822
|
)
|
|
(8,015
|
)
|
|
(10,033
|
)
|
|
—
|
|
|
(20,870
|
)
|
|
Proceeds from sale of property, plant and equipment
|
|
—
|
|
|
99
|
|
|
54
|
|
|
—
|
|
|
153
|
|
|
Rental asset buyout for Viking divestiture
|
|
—
|
|
|
—
|
|
|
(27,718
|
)
|
|
—
|
|
|
(27,718
|
)
|
|
Proceeds from sale of businesses, net of transaction costs
|
|
198
|
|
|
—
|
|
|
8,704
|
|
|
—
|
|
|
8,902
|
|
|
Cash paid for business acquisitions, net of cash acquired
|
|
—
|
|
|
(1,732
|
)
|
|
(21,486
|
)
|
|
—
|
|
|
(23,218
|
)
|
|
Intercompany investment
|
|
(11,754
|
)
|
|
(1
|
)
|
|
—
|
|
|
11,755
|
|
|
—
|
|
|
Cash used in investing activities
|
|
(14,378
|
)
|
|
(9,649
|
)
|
|
(50,479
|
)
|
|
11,755
|
|
|
(62,751
|
)
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Principal repayment on term loan
|
|
(30,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30,000
|
)
|
|
Taxes paid related to the net share settlement of equity awards
|
|
(1,284
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,284
|
)
|
|
Stock option exercises, related tax benefits and other
|
|
15,681
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,681
|
|
|
Cash dividend
|
|
(2,390
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,390
|
)
|
|
Changes in receivables and payable to subsidiaries
|
|
2,041
|
|
|
(18,024
|
)
|
|
15,983
|
|
|
—
|
|
|
—
|
|
|
Intercompany capital contribution
|
|
—
|
|
|
—
|
|
|
11,755
|
|
|
(11,755
|
)
|
|
—
|
|
|
Cash (used in) provided by financing activities
|
|
(15,952
|
)
|
|
(18,024
|
)
|
|
27,738
|
|
|
(11,755
|
)
|
|
(17,993
|
)
|
|
Effect of exchange rate changes on cash
|
|
—
|
|
|
—
|
|
|
(4,430
|
)
|
|
—
|
|
|
(4,430
|
)
|
|
Net increase (decrease) in cash and cash equivalents
|
|
32,934
|
|
|
—
|
|
|
(12,015
|
)
|
|
—
|
|
|
20,919
|
|
|
Cash and cash equivalents—beginning of period
|
|
34,715
|
|
|
—
|
|
|
194,856
|
|
|
—
|
|
|
229,571
|
|
|
Cash and cash equivalents—end of period
|
|
$
|
67,649
|
|
|
$
|
—
|
|
|
$
|
182,841
|
|
|
$
|
—
|
|
|
$
|
250,490
|
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2017
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
99,241
|
|
|
$
|
14,340
|
|
|
$
|
39,672
|
|
|
$
|
(64,754
|
)
|
|
$
|
88,499
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(3,391
|
)
|
|
(9,265
|
)
|
|
(15,539
|
)
|
|
—
|
|
|
(28,195
|
)
|
|
Proceeds from sale of property, plant and equipment
|
|
—
|
|
|
207
|
|
|
363
|
|
|
—
|
|
|
570
|
|
|
Intercompany investment
|
|
(6,900
|
)
|
|
—
|
|
|
—
|
|
|
6,900
|
|
|
—
|
|
|
Cash used in investing activities
|
|
(10,291
|
)
|
|
(9,058
|
)
|
|
(15,176
|
)
|
|
6,900
|
|
|
(27,625
|
)
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Principal repayment on term loan
|
|
(18,750
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,750
|
)
|
|
Redemption on 5.625% Senior Notes
|
|
(500
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(500
|
)
|
|
Taxes paid related to the net share settlement of equity awards
|
|
(1,065
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,065
|
)
|
|
Stock option exercises, related tax benefits and other
|
|
8,265
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,265
|
|
|
Payment of deferred acquisition consideration
|
|
—
|
|
|
—
|
|
|
(742
|
)
|
|
—
|
|
|
(742
|
)
|
|
Cash dividend
|
|
(2,358
|
)
|
|
(5,353
|
)
|
|
(59,401
|
)
|
|
64,754
|
|
|
(2,358
|
)
|
|
Intercompany loan activity
|
|
(47,780
|
)
|
|
—
|
|
|
47,780
|
|
|
—
|
|
|
—
|
|
|
Intercompany capital contributions
|
|
—
|
|
|
—
|
|
|
6,900
|
|
|
(6,900
|
)
|
|
—
|
|
|
Cash used in financing activities
|
|
(62,188
|
)
|
|
(5,353
|
)
|
|
(5,463
|
)
|
|
57,854
|
|
|
(15,150
|
)
|
|
Effect of exchange rate changes on cash
|
|
—
|
|
|
—
|
|
|
4,243
|
|
|
—
|
|
|
4,243
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
26,762
|
|
|
(71
|
)
|
|
23,276
|
|
|
—
|
|
|
49,967
|
|
|
Cash and cash equivalents—beginning of period
|
|
7,953
|
|
|
71
|
|
|
171,580
|
|
|
—
|
|
|
179,604
|
|
|
Cash and cash equivalents—end of period
|
|
$
|
34,715
|
|
|
$
|
—
|
|
|
$
|
194,856
|
|
|
$
|
—
|
|
|
$
|
229,571
|
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2016
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
58,926
|
|
|
$
|
(1,953
|
)
|
|
$
|
66,062
|
|
|
$
|
(5,338
|
)
|
|
$
|
117,697
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(2,135
|
)
|
|
(6,781
|
)
|
|
(11,293
|
)
|
|
—
|
|
|
(20,209
|
)
|
|
Proceeds from sale of property, plant and equipment
|
|
13
|
|
|
7,000
|
|
|
2,283
|
|
|
—
|
|
|
9,296
|
|
|
Intercompany investment
|
|
(339
|
)
|
|
(3,458
|
)
|
|
—
|
|
|
3,797
|
|
|
—
|
|
|
Business acquisitions, net of cash acquired
|
|
—
|
|
|
—
|
|
|
(81,916
|
)
|
|
—
|
|
|
(81,916
|
)
|
|
Proceeds from sale of businesses, net of transaction costs
|
|
—
|
|
|
9,695
|
|
|
—
|
|
|
—
|
|
|
9,695
|
|
|
Cash (used in) provided by investing activities
|
|
(2,461
|
)
|
|
6,456
|
|
|
(90,926
|
)
|
|
3,797
|
|
|
(83,134
|
)
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Net repayments on revolving credit facility
|
|
—
|
|
|
—
|
|
|
(210
|
)
|
|
—
|
|
|
(210
|
)
|
|
Principal repayments on term loan
|
|
(3,750
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,750
|
)
|
|
Purchase of treasury shares
|
|
(17,101
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,101
|
)
|
|
Taxes paid related to the net share settlement of equity awards
|
|
(1,409
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,409
|
)
|
|
Stock option exercises, related tax benefits and other
|
|
6,416
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,416
|
|
|
Cash dividend
|
|
(2,376
|
)
|
|
(5,338
|
)
|
|
—
|
|
|
5,338
|
|
|
(2,376
|
)
|
|
Intercompany loan activity
|
|
(48,980
|
)
|
|
—
|
|
|
48,980
|
|
|
—
|
|
|
—
|
|
|
Intercompany capital contributions
|
|
—
|
|
|
339
|
|
|
3,458
|
|
|
(3,797
|
)
|
|
—
|
|
|
Cash (used in) provided by financing activities
|
|
(67,200
|
)
|
|
(4,999
|
)
|
|
52,228
|
|
|
1,541
|
|
|
(18,430
|
)
|
|
Effect of exchange rate changes on cash
|
|
—
|
|
|
—
|
|
|
(5,375
|
)
|
|
—
|
|
|
(5,375
|
)
|
|
Net increase (decrease) in cash and cash equivalents
|
|
(10,735
|
)
|
|
(496
|
)
|
|
21,989
|
|
|
—
|
|
|
10,758
|
|
|
Cash and cash equivalents—beginning of period
|
|
18,688
|
|
|
567
|
|
|
149,591
|
|
|
—
|
|
|
168,846
|
|
|
Cash and cash equivalents—end of period
|
|
$
|
7,953
|
|
|
$
|
71
|
|
|
$
|
171,580
|
|
|
$
|
—
|
|
|
$
|
179,604
|
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Note 18. Quarterly Financial Data (Unaudited)
Quarterly financial data for fiscal
2018
and fiscal
2017
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2018
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Total
|
|
Net sales
|
|
$
|
288,955
|
|
|
$
|
275,165
|
|
|
$
|
317,096
|
|
|
$
|
301,395
|
|
|
$
|
1,182,611
|
|
|
Gross profit
|
|
100,911
|
|
|
89,696
|
|
|
116,509
|
|
|
108,144
|
|
|
415,260
|
|
|
Net earnings (loss)
|
|
5,226
|
|
|
(18,221
|
)
|
|
29,012
|
|
|
(37,665
|
)
|
|
(21,648
|
)
|
|
Net earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.09
|
|
|
$
|
(0.30
|
)
|
|
$
|
0.48
|
|
|
$
|
(0.62
|
)
|
|
$
|
(0.36
|
)
|
|
Diluted
|
|
$
|
0.09
|
|
|
$
|
(0.30
|
)
|
|
$
|
0.48
|
|
|
$
|
(0.62
|
)
|
|
$
|
(0.36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2017
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Total
|
|
Net sales
|
|
$
|
265,793
|
|
|
$
|
258,869
|
|
|
$
|
295,427
|
|
|
$
|
275,695
|
|
|
$
|
1,095,784
|
|
|
Gross profit
|
|
93,067
|
|
|
87,327
|
|
|
102,804
|
|
|
96,519
|
|
|
379,717
|
|
|
Net earnings (loss)
|
|
4,966
|
|
|
5,074
|
|
|
22,511
|
|
|
(98,764
|
)
|
|
(66,213
|
)
|
|
Net earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.08
|
|
|
$
|
0.09
|
|
|
$
|
0.38
|
|
|
$
|
(1.65
|
)
|
|
$
|
(1.11
|
)
|
|
Diluted
|
|
$
|
0.08
|
|
|
$
|
0.08
|
|
|
$
|
0.37
|
|
|
$
|
(1.65
|
)
|
|
$
|
(1.11
|
)
|
The sum of the quarters may not equal the total of the respective year’s earnings (loss) per share on either a basic or diluted basis due to changes in the weighted average shares outstanding during the year.
During the fourth quarter of fiscal 2018, the Company recognized impairment and divestiture charges of
$73.1 million
(see Note 5, "Divestiture Activities" and Note 6, "Goodwill, Intangible Assets and Long-Lived Assets").
During the fourth quarter of fiscal 2017, the Company recognized impairment and divestiture charges of
$117.0 million
(see Note 5, "Divestitures Activities" and Note 6, "Goodwill, Intangible Assets and Long-Lived Assets").