NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Nature of Operations: Actuant Corporation, doing business as Enerpac Tool Group (“Actuant” or the “Company”), is a global manufacturer of a broad range of industrial products and solutions, organized into three operating segments. The Industrial Tools & Services segment ("IT&S"), the Company's only reportable 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.
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.
During the fourth quarter of fiscal 2019, the Company’s financial reporting segments were modified to reflect changes in our reporting structure as a result of entering into a Securities Purchase Agreement ("SPA") to sell the remaining businesses within our legacy Engineered Components & Systems segment exclusive of Cortland U.S. The Company now has three operating segments; Industrial Tools & Services ("IT&S"), Other, and Engineered Components and Systems ("EC&S"). The IT&S segment remains unchanged from our previous segment structure and represents the only reportable segment. All prior period disclosures have been adjusted to reflect the one reportable segment. The IT&S reportable segment is primarily engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools as well as providing services and tool rentals to the industrial, maintenance, infrastructure, oil & gas, energy and other markets. The Other operating segment is comprised of Cortland U.S., along with the Viking business which was divested on the first day of the second quarter of fiscal 2018. These two operating segments represent continuing operations within our consolidated financial statements. The EC&S segment, after the change in reporting structure, represents the businesses currently subject to the SPA with an anticipated closure date in the fourth calendar quarter of 2019, as well as the Cortland Fibron and Precision Hayes International ("PHI") businesses which were divested in fiscal 2019. As the pending divestiture of the remaining businesses within the EC&S segment in combination with the divestiture of Cortland Fibron and PHI represent a strategic shift in our operations, the results of operations for the EC&S segment are classified in "(Loss) earnings from discontinued operations" within the Consolidated Statements of Operations for all periods presented. In addition, the Consolidated Balance Sheets have been recast such that the assets and liabilities of the EC&S segment are classified as "Assets from discontinued operations" and "Liabilities from discontinued operations", respectively, for both periods presented. Furthermore, all disclosures within these footnotes to the financial statements have also been recast to coincide with our updated segmentation.
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 (47.9% and 40.7% of total inventories in 2019 and 2018, 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 $10.3 million and $5.4 million at August 31, 2019 and 2018, 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. Certain 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 IT&S segment. Leasehold improvements are amortized over the life of the related asset or the term of the lease, whichever is shorter. Depreciation expense was $11.3 million, $11.1 million and $13.8 million for the years ended August
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
31, 2019, 2018 and 2017, respectively. The following is a summary of the Company's components of property, plant and equipment (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
August 31, 2019
|
|
August 31, 2018
|
Land, buildings and improvements
|
|
$
|
29,661
|
|
|
$
|
30,296
|
|
Machinery and equipment
|
|
140,083
|
|
|
131,716
|
|
Gross property, plant and equipment
|
|
169,744
|
|
|
162,012
|
|
Less: Accumulated depreciation
|
|
(113,015
|
)
|
|
(107,038
|
)
|
Property, plant and equipment, net
|
|
$
|
56,729
|
|
|
$
|
54,974
|
|
Goodwill and Other Intangible Assets: Goodwill and other intangible assets with indefinite lives are not subject to amortization, but are subject to annual impairment testing. 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.
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, most significantly forecasted revenues and operating profit margins, and the weighted average cost of capital. 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 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 an assurance 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 2019 and 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Beginning balance
|
|
$
|
931
|
|
|
$
|
1,353
|
|
Provision for warranties
|
|
1,326
|
|
|
962
|
|
Warranty payments and costs incurred
|
|
(1,077
|
)
|
|
(1,388
|
)
|
Impact of changes in foreign currency rates
|
|
(35
|
)
|
|
4
|
|
Ending balance
|
|
$
|
1,145
|
|
|
$
|
931
|
|
Revenue from Contracts with Customers: The Company recognizes revenue when it satisfies a performance obligation in a contract by transferring control of a distinct good or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation and revenue is measured based on the consideration that the Company expects to be entitled to in exchange for the goods or services transferred. When contracts include multiple products or services to be delivered to the customer, the consideration for each element is generally allocated on the standalone transaction prices of the separate performance obligations, using the adjusted market assessment approach.
Under normal circumstances, the Company invoices the customer once transfer of control has occurred and has a right to payment. The typical payment terms vary based on the customer and the types of goods and services in the contract. The period of time between invoicing and when payment is due is not significant, as our standard payment terms are less than one year. Amounts billed and due from customers are classified as receivables on the balance sheet.
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
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
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 $5.1 million and $5.0 million at August 31, 2019 and 2018, respectively.
Taxes Collected: Taxes collected by the Company from a customer concurrent with revenue-producing activities are excluded from "Net sales" within the Consolidated Statements of Operations.
Shipping and Handling Costs: The Company records costs associated with shipping its products after control over a product has transferred to a customer and are accounted for as fulfillment costs. These costs are reported in the Consolidated Statements of Operations 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 $9.3 million, $8.7 million and $8.9 million in fiscal 2019, 2018 and 2017, 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 losses of $0.2 million and $3.6 million in fiscal 2019 and 2017, respectively, with a gain of less than $0.1 million in fiscal 2018.
Financing Costs: Financing costs represent interest expense, financing fees and amortization of debt issuance costs, net of interest income. Interest income was $0.7 million for fiscal 2019 and $1.2 million for both fiscal 2018 and 2017.
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. The Company has not provided for any residual U.S. income taxes on unremitted earnings of non-U.S. subsidiaries, as such earnings are intended to be indefinitely reinvested. 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 within the Consolidated Statements of Operations. 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,
|
|
|
2019
|
|
2018
|
Foreign currency translation adjustments
|
|
$
|
151,115
|
|
|
$
|
158,497
|
|
Pension and other postretirement benefit plans, net of tax
|
|
20,557
|
|
|
15,748
|
|
Accumulated other comprehensive loss
|
|
$
|
171,672
|
|
|
$
|
174,245
|
|
Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The Company regularly evaluates the estimates and assumptions related to the allowance for doubtful accounts, inventory valuation, warranty reserves, fair value of stock-based awards, goodwill, intangible and long-lived asset valuations, employee benefit plan liabilities, over time revenue recognition, income tax liabilities, deferred tax assets and related valuation allowances, uncertain tax positions, restructuring reserves, and litigation and other loss contingencies. Actual results could differ materially and adversely from those estimates and assumptions, and such results could materially affect the Company’s consolidated net income, financial position, or cash flows.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
With the divestiture of the EC&S segment the Company now meets the threshold requirements of Regulation S-X 5-03(1) to breakout sales and cost of sales by various categories on the Statements of Operations. The Company manages the profitability of its product and service & rental categories on a combined basis given the complexity of the business model. This model includes providing integrated product and service solutions resulting in facilities that generate revenues from both product and service & rental categories, which also have significant indirect and facility overhead costs included in cost of sales. As such, significant judgment and estimates are required to disaggregate product and service & rental cost of sales including allocating indirect and facility overhead costs between cost of product sales and the cost of service & rental sales. Changes in these judgments and estimates could materially change the allocation of the indirect and facility overhead costs to the different sales categories and the resulting ratio of cost of sales to net sales by category. Because the sales mix heavily favors the product category, a change in the mix of cost of sales between the sales categories would have a more significant impact on the ratio of cost of sales to net sales for the service & rental category. In addition, due to the recent changes in our business model, which includes the integration of the Enerpac and Hydratight businesses within the IT&S segment, the decision to exit certain non-strategic businesses and product lines, and the restructuring actions taken by the Company, the historical ratios of cost of sales to net sales by category may not be indicative of future ratios of cost of sales to net sales by category.
Subsequent Events: Subsequent to August 31, 2019, the Company divested certain assets and liabilities of two non-core product lines for cash proceeds of $8.5 million.
New Accounting Pronouncements
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 (collectively referred to as Accounting Standards Codification 606 “ASC 606”), 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 was adopted by the Company on September 1, 2018 using the modified retrospective method and was applied to contracts that were not completed or substantially complete as of September 1, 2018. Results for the reporting period beginning after September 1, 2018 are presented under ASC 606, while prior year amounts have not been adjusted and continue to be reported in accordance with the Company’s historical accounting policy in accordance with ASC 605 Revenue Recognition. The Company reported a net increase to opening retained earnings of $0.1 million on September 1, 2018 as a result of the cumulative impact of adopting ASC 606. See Note 2, “Revenue from Contracts with Customers,” for further discussion of the adoption of ASC 606.
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 was adopted by the Company on September 1, 2018. Due to a majority of the Company's defined benefit pension and other postretirement benefit plans being frozen and the net periodic benefit pension cost not being significant, the adoption of this guidance did not have a material impact on the financial statements of the Company. However, prior year amounts have been retrospectively adjusted to reflect this change in accounting principle.
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 was adopted on September 1, 2018. The adoption did not have an impact on the financial statements of the Company.
In February 2016, the FASB issued ASU 2016-02, Leases (and subsequently ASU 2018-01 and ASU 2019-01), to increase transparency and comparability among organizations by recognizing all lease transactions 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 including interim periods within those fiscal years. The Company will adopt this standard in the first quarter of fiscal year ending November 30, 2019 (fiscal 2020) using a modified retrospective approach and through implementing selected third-party lease software utilized as a central repository for all leases. We will make certain elections including the package of practical expedients allowing us to not reassess whether any expired or existing contracts contain leases, the lease classification for any expired or
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
existing leases, and initial direct costs for any existing leases. In addition, we will elect not to recognize right of use (“ROU”) assets or lease liabilities for leases containing terms of 12 months or less, and the Company will elect to not separate lease components from non-lease components for all asset classes. As of September 1, 2019, the Company anticipates additions to the balance sheet of right-of-use assets, offset by the associated liabilities, of approximately $55 million to $65 million. We do not expect adoption to have a significant impact on our consolidated statements of operations or consolidated statements of cash flows. The Company is finalizing its accounting policies, controls, processes, and disclosures that will change as a result of adopting the new standard.
In addition, as a result of sale leaseback transactions in previous years for which gains were deferred which under the new standard would have been recognized, the Company will record an increase to retained earnings of $0.2 million in the first quarter of fiscal 2020 which represents the recognition of these previously deferred gains.
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 will adopt the guidance in the first quarter of fiscal 2020 which will result in an increase to retained earnings with an offsetting increase in accumulated other comprehensive loss of $3.5 million.
Note 2. Revenue from Contracts with Customers
Nature of Goods and Services
The Company generates its revenue under two principal activities, which are discussed below:
Product Sales: Sales of tools, heavy-lifting solutions, and rope and cable solutions are recorded when control is transferred to the customer (i.e. performance obligation has been satisfied). For the majority of the Company’s product sales, revenue is recognized at a point in time when control of the product is transferred to the customer, which generally occurs when the product is shipped from the Company to the customer. Due to the highly customized nature and limited alternative use of certain products, for which the Company has an enforceable right of reimbursement for performance completed to date, revenue is recognized over time. We consider the input measure (efforts-expended or cost-to-cost) or output measure as a fair measure of progress for the recognition of over time revenue associated with these custom products. For a majority of the Company’s custom products, machine hours and labor hours (efforts-expended measurement) are used as a measure of progress.
Service & Rental Sales: Service contracts consist of providing highly trained technicians to perform bolting, technical services, machining and joint integrity work for our customers. These revenues are recognized over time as our customers simultaneously receive and consume the benefits provided by the Company. We consider the input measure (efforts-expended or cost-to-cost) or output measure as a fair measure of progress for the recognition of over time revenue associated with service contracts. For a majority of the Company’s service contracts, labor hours (efforts-expended measurement) is used as the measure of progress when it is determined to be a better depiction of the transfer of control to the customer due to the timing and pattern of labor hours incurred. Revenue from rental contracts (less than a year and non-customized products) is generally recognized ratably over the contract term, depicting the customer’s consumption of the benefit related to the rental equipment.
Disaggregated Revenue and Performance Obligations
The Company disaggregates revenue from contracts with customers by reportable segment and product line and by the timing of when goods and services are transferred. See Note 15, "Business Segment, Geographic and Customer Information" for information regarding our revenue disaggregation by reportable segment and product line.
The following table presents information regarding revenues disaggregated by the timing of when goods and services are transferred for the fiscal year ended August 31, 2019 (in thousands):
|
|
|
|
|
|
Revenues recognized at point in time
|
|
$
|
453,427
|
|
Revenues recognized over time
|
|
201,331
|
|
Total
|
|
$
|
654,758
|
|
Contract Balances
The Company's contract assets and liabilities are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2019
|
|
2018
|
Receivables, which are included in accounts receivable, net
|
|
$
|
125,883
|
|
|
$
|
123,261
|
|
Contract assets, which are included in other current assets
|
|
3,747
|
|
|
6,367
|
|
Contract liabilities, which are included in other current liabilities
|
|
3,707
|
|
|
12,937
|
|
Receivables: The Company performs its obligations under a contract with a customer by transferring goods or services in exchange for consideration from the customer. The Company typically invoices its customers as soon as control of an asset is transferred and a receivable for the Company is established.
Contract Assets: Contract assets relate to the Company’s rights to consideration for work completed but not billed as of the reporting date on contracts with customers. The contract assets are transferred to receivables when the rights become unconditional. The Company has contract assets on contracts that are generally long-term and have revenues that are recognized over time. The decrease in this balance from August 31, 2018 to August 31, 2019 is a result of our strategic exit of certain low profit margin, heavy lifting solution work that was still in progress as of August 31, 2018.
Contract Liabilities: As of August 31, 2019, the Company had certain contracts where there were unsatisfied performance obligations and the Company had received cash consideration from customers before the performance obligations were satisfied. The majority of these contracts relate to long-term customer contracts (project durations of greater than three months) and are recognized over time. The Company estimates that the $3.7 million will be recognized in net sales from satisfying those performance obligations within the next twelve months with an immaterial amount recognized in periods thereafter. The decrease in the balance from August 31, 2018 to August 31, 2019 was a result of several large contracts that were in their early stages at August 31, 2018 where similar volumes of orders with prepayment terms were not in our backlog at August 31, 2019.
Significant Judgments
Timing of Performance Obligations Satisfied at a Point in Time: The Company evaluates when the customer obtains control of the product based on shipping terms, as control will transfer, depending upon such terms, at different points between the Company's manufacturing facility or warehouse and the customer’s location. The Company considers control to have transferred upon shipment or delivery because (i) the Company has a present right to payment at that time; (ii) the legal title has been transferred to the customer; (iii) the Company has transferred physical possession of the product to the customer; and (iv) the customer has significant risks and rewards of ownership of the product.
Variable Consideration: The Company estimates whether it will be subject to variable consideration under the terms of the contract and includes its estimate of variable consideration in the transaction price based on the expected value method when it is deemed probable of being realized based on historical experience and trends. Types of variable consideration may include rebates, incentives and discounts, among others, which are recorded as a reduction to net sales at the time when control of a performance obligation is transferred to the customer.
Practical Expedients & Exemptions: The Company elected to expense the incremental cost to obtaining a contract when the amortization period for such contracts would be one year or less. The Company does not disclose the value of unperformed obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed.
Note 3. Restructuring Charges
The Company has undertaken or committed to various restructuring initiatives including workforce reductions; leadership changes; plant consolidations to reduce manufacturing overhead; satellite office closures; the continued movement of production and product sourcing to low-cost alternatives; and the centralization and standardization of certain administrative functions. Liabilities for severance will generally be paid within twelve months, while future lease payments related to facilities vacated as a result of restructuring will be paid over the underlying remaining lease terms. During fiscal 2019, the Company announced a new restructuring plan focused on i) the integration of the Enerpac and Hydratight businesses (IT&S segment), ii) the strategic exit of certain commodity type services in our North America Services operations (IT&S segment) and iii) driving efficiencies within the overall corporate structure. Total restructuring charges associated with this new restructuring plan were $4.2 million for the year ended August 31, 2019, with no additional charges associated with the previously announced restructuring initiatives.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Total restructuring charges associated with previously announced restructuring initiatives were $11.4 million for the year-ended August 31, 2018 with approximately $0.9 million of the restructuring charges recognized for the year ended August 31, 2018 being reported in the Consolidated Statements of Operations in "Cost of products sold," with the balance of the charges reported in "Restructuring charges." The year ended August 31, 2018 included $2.6 million of restructuring expenses related to Cortland U.S. and Viking. Restructuring reserves for Cortland U.S. and Viking (Other Segment) were $0.9 million and $1.9 million for the year ended August 31, 2019 and 2018, respectively.
The following rollforwards summarize restructuring reserve activity for the IT&S reportable segment and corporate (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2018
|
|
|
Industrial Tools & Services
|
|
Corporate
|
|
Total
|
Balance as of August 31, 2017
|
|
$
|
1,499
|
|
|
$
|
232
|
|
|
$
|
1,731
|
|
Restructuring charges
|
|
4,286
|
|
|
4,524
|
|
|
8,810
|
|
Cash payments
|
|
(3,375
|
)
|
|
(2,483
|
)
|
|
(5,858
|
)
|
Other non-cash uses of reserve (1)
|
|
(635
|
)
|
|
(2,227
|
)
|
|
(2,862
|
)
|
Impact of changes in foreign currency rates
|
|
(88
|
)
|
|
—
|
|
|
(88
|
)
|
Balance as of August 31, 2018
|
|
$
|
1,687
|
|
|
$
|
46
|
|
|
$
|
1,733
|
|
(1) Majority of non-cash uses of reserve represents accelerated equity vesting with employee severance agreements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2019
|
|
|
Industrial Tools & Services
|
|
Corporate
|
|
Total
|
Balance as of August 31, 2018
|
|
$
|
1,687
|
|
|
$
|
46
|
|
|
$
|
1,733
|
|
Restructuring charges
|
|
4,161
|
|
|
—
|
|
|
4,161
|
|
Cash payments
|
|
(2,954
|
)
|
|
(46
|
)
|
|
(3,000
|
)
|
Other non-cash uses/reclasses of reserve
|
|
54
|
|
|
—
|
|
|
54
|
|
Impact of changes in foreign currency rates
|
|
(36
|
)
|
|
—
|
|
|
(36
|
)
|
Balance as of August 31, 2019
|
|
$
|
2,912
|
|
|
$
|
—
|
|
|
$
|
2,912
|
|
Note 4. Acquisitions
During fiscal 2018, the Company completed two acquisitions which 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.
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 IT&S segment tuck-in acquisition is a provider of industrial and energy maintenance tools. The final purchase price allocation resulted in $10.3 million of goodwill (which is not deductible for tax purposes) and $4.1 million of intangible assets. The intangible assets were comprised of $2.3 million of indefinite-lived tradenames and $1.8 million of amortizable customer relationships.
The Company acquired the stock of Equalizer International, Limited ("Equalizer") on May 11, 2018 for a purchase price of $5.8 million, net of cash acquired. This IT&S segment tuck-in acquisition is a provider of industrial and energy maintenance tools, expanding our pipe and flange alignment offerings. The final purchase price allocation resulted in $2.4 million of goodwill (a portion of which is not deductible for tax purposes) and $2.1 million of intangible assets. The intangible assests were comprised of $0.8 million of indefinite lived tradenames and $1.3 million of amortizable customer relationships and patents.
The Company incurred acquisition transaction costs of $1.1 million for the year ended August 31, 2018 (included in "Selling, administrative and engineering expenses" in the Consolidated Statements of Operations) related to these acquisitions.
The acquired businesses generated combined net sales of $14.1 million and $9.4 million for the year ended August 31, 2019 and 2018, respectively. The acquisitions individually and in the aggregate do not meet the significance tests to require pro forma financial information otherwise required for acquisitions.
Note 5. Divestiture Activities
On July 9, 2019, as part of our overall strategy to become a pure-play industrial tools and services company, the Company entered into a SPA to divest the remaining businesses within the EC&S segment at a purchase price of approximately $214.5 million (which includes approximately $3.0 million to be paid in four quarterly installments after closing). At August 31, 2019, the EC&S segment met the criteria for assets held for sale treatment. As a result, the Company recognized impairment & divestiture charges in fiscal 2019 of $264.5 million which consisted of $210.0 million representing the excess net book value of the net assets over the anticipated sales proceeds less costs to sell and $54.5 million representing the recognition in earnings of the cumulative effect of foreign currency exchange losses previously recorded in equity since acquisition.
On December 31, 2018, the Company completed the sale of the PHI business for $23.6 million cash, net of final transaction costs, working capital adjustments, accelerated vesting of equity compensation, retention bonuses and other adjustments. The Company recorded $9.5 million of impairment & divestiture charges during the fiscal year representing the excess of the net book value of the assets held for sale less the anticipated proceeds, less costs to sell. During the fourth quarter of fiscal 2018, the Company recognized impairment & divestiture charges of $23.7 million relating to the excess of net book value of assets over anticipated proceeds which consisted of i) $17.5 million related to goodwill, ii) $5.0 million related to amortizable intangible assets and ii) $1.2 million related to fixed asset impairment.
The Company also completed the sale of the Cortland Fibron business on December 19, 2018 for $12.5 million in cash. The Company recognized $1.7 million of impairment & divestiture charges in fiscal 2019 representing the excess net book value of the net assets less the proceeds from sale, net of transaction costs. Additionally, due to the business meeting the criteria for asset held for sale treatment at August 31, 2018, the Company recognized impairment & divestiture charges in fiscal 2018 of $46.3 million which consisted of i) $35.3 million related to the recognition in earnings of the cumulative effect of foreign currency rate changes since acquisition; ii) $10.5 million representing the excess of the net book value of assets held for sale to the anticipated proceeds and iii) $0.5 million of other divestiture charges.
As the aforementioned divestitures were a part of our strategic shift to become a pure-play industrial tools and services company, the results of their operations (including the stated impairment & divestiture charges) are recorded as a component of "(Loss) earnings from discontinued operations" in the Consolidated Statements of Operations for all periods presented. In addition, their assets and liabilities are recorded as "Assets from discontinued operations" and "Liabilities from discontinued operations", respectively, within the Consolidated Balance Sheets for each period presented.
The following is a summary of the assets and liabilities of discontinued operations (in thousands):
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
2019
|
|
2018
|
Accounts receivable, net
|
$
|
52,802
|
|
|
$
|
67,412
|
|
Inventories, net
|
76,825
|
|
|
86,933
|
|
Other current assets
|
8,058
|
|
|
13,467
|
|
Property, plant & equipment, net
|
32,172
|
|
|
37,432
|
|
Goodwill
|
16,862
|
|
|
233,779
|
|
Other intangible assets, net
|
93,314
|
|
|
120,344
|
|
Other long-term assets
|
5,545
|
|
|
9,566
|
|
Assets of discontinued operations
|
$
|
285,578
|
|
|
$
|
568,933
|
|
|
|
|
|
Trade accounts payable
|
$
|
43,628
|
|
|
$
|
65,169
|
|
Accrued compensation and benefits
|
12,101
|
|
|
19,930
|
|
Reserve for cumulative translation adjustment
|
54,469
|
|
|
35,346
|
|
Other current liabilities
|
12,101
|
|
|
14,800
|
|
Deferred income taxes
|
20,029
|
|
|
24,145
|
|
Pension and postretirement benefit liabilities
|
1,344
|
|
|
912
|
|
Other long-term liabilities
|
91
|
|
|
271
|
|
Liabilities of discontinued operations
|
$
|
143,763
|
|
|
$
|
160,573
|
|
The following represents the detail of "(Loss) earnings from discontinued operations, net of income taxes" within the Consolidated Statements of Operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
|
|
2019
|
|
2018
|
|
2017
|
Net sales
|
|
$
|
459,144
|
|
|
$
|
541,308
|
|
|
$
|
479,193
|
|
Cost of products sold
|
|
344,563
|
|
|
409,332
|
|
|
359,846
|
|
Gross profit
|
|
114,581
|
|
|
131,976
|
|
|
119,347
|
|
|
|
|
|
|
|
|
Selling, administrative and engineering expenses
|
|
68,339
|
|
|
81,188
|
|
|
69,360
|
|
Amortization of intangible assets
|
|
5,666
|
|
|
11,285
|
|
|
11,377
|
|
Restructuring charges
|
|
1,779
|
|
|
1,440
|
|
|
3,994
|
|
Impairment & divestiture charges*
|
|
286,175
|
|
|
70,071
|
|
|
—
|
|
Operating (loss) profit
|
|
(247,378
|
)
|
|
(32,008
|
)
|
|
34,616
|
|
|
|
|
|
|
|
|
Financing costs, net
|
|
124
|
|
|
619
|
|
|
482
|
|
Other expense (income), net
|
|
1,922
|
|
|
(759
|
)
|
|
(1,064
|
)
|
Loss (earnings) before income tax expense (benefit)
|
|
(249,424
|
)
|
|
(31,868
|
)
|
|
35,198
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
7,788
|
|
|
(5,474
|
)
|
|
6,136
|
|
Net (loss) earnings from discontinued operations
|
|
$
|
(257,212
|
)
|
|
$
|
(26,394
|
)
|
|
$
|
29,062
|
|
*In addition to the impairment & divestiture charges discussed above, the Company also incurred approximately $10.5 million of divestiture charges in fiscal 2019 related to the anticipated divestiture of EC&S.
On December 1, 2017, the Company completed the sale of the Viking business (Other Segment) for net cash proceeds of $8.8 million, which resulted in an after-tax impairment & 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. In the fourth quarter of fiscal 2017, related to the then pending sale of our Viking business, we recognized impairment & divestiture charges of $117.0 million which consisted of (i) a $16.1 million charge representing the excess of the net book value of assets held for sale to the anticipated proceeds; (ii) a 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) a $28.6 million cash charge related to the operating lease buyout of certain rental assets and (iv) a $3.3 million of other divestiture charges.
The historical results of the Viking business (which had net sales of $2.7 million in the year ended August 31, 2018) are not material to the consolidated financial results.
Note 6. Goodwill, Intangible Assets and Long-Lived Assets
Changes in the gross carrying value of goodwill and intangible assets result from changes in foreign currency exchange rates, business acquisitions, divestitures and impairment charges. The changes in the carrying amount of goodwill for the years ended August 31, 2019 and 2018 by operating segment are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Tools & Services
|
|
Other
|
|
Total
|
Balance as of August 31, 2017
|
|
$
|
238,707
|
|
|
$
|
33,712
|
|
|
$
|
272,419
|
|
Business acquisitions
|
|
12,441
|
|
|
—
|
|
|
12,441
|
|
Impact of changes in foreign currency rates
|
|
(2,443
|
)
|
|
(2,285
|
)
|
|
(4,728
|
)
|
Balance as of August 31, 2018
|
|
248,705
|
|
|
31,427
|
|
|
280,132
|
|
Purchase accounting adjustments
|
|
253
|
|
|
—
|
|
|
253
|
|
Impairment charge
|
|
—
|
|
|
(13,678
|
)
|
|
(13,678
|
)
|
Impact of changes in foreign currency rates
|
|
(6,085
|
)
|
|
(207
|
)
|
|
(6,292
|
)
|
Balance as of August 31, 2019
|
|
$
|
242,873
|
|
|
$
|
17,542
|
|
|
$
|
260,415
|
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The changes in the carrying amount of goodwill included within "Assets from discontinued operations" on the Consolidated Balance Sheets for the years ended August 31, 2019 and 2018 are as follows (in thousands):
|
|
|
|
|
|
Balance as of August 31, 2017
|
|
$
|
257,662
|
|
Impairment charge
|
|
(21,227
|
)
|
Impact of changes in foreign currency rates
|
|
(2,655
|
)
|
Balance as of August 31, 2018
|
|
233,780
|
|
Impairment charge
|
|
(209,489
|
)
|
Impact of changes in foreign currency rates
|
|
(7,429
|
)
|
Balance as of August 31, 2019
|
|
$
|
16,862
|
|
The gross carrying value and accumulated amortization of the Company’s intangible assets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Amortization Period (Year)
|
|
August 31, 2019
|
|
August 31, 2018
|
|
|
Gross
|
|
Accumulated Amortization
|
|
Net Book Value
|
|
Gross
|
|
Accumulated Amortization
|
|
Net Book Value
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
14
|
|
$
|
126,229
|
|
|
$
|
96,817
|
|
|
$
|
29,412
|
|
|
$
|
128,561
|
|
|
$
|
84,029
|
|
|
$
|
44,532
|
|
Patents
|
|
12
|
|
13,227
|
|
|
12,276
|
|
|
951
|
|
|
13,324
|
|
|
11,915
|
|
|
1,409
|
|
Trademarks and tradenames
|
|
16
|
|
4,513
|
|
|
2,921
|
|
|
1,592
|
|
|
4,275
|
|
|
2,826
|
|
|
1,449
|
|
Non-compete agreements & other
|
|
3
|
|
4,835
|
|
|
4,835
|
|
|
—
|
|
|
4,942
|
|
|
4,813
|
|
|
129
|
|
Indefinite lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradenames
|
|
N/A
|
|
20,420
|
|
|
—
|
|
|
20,420
|
|
|
24,138
|
|
|
—
|
|
|
24,138
|
|
|
|
|
|
$
|
169,224
|
|
|
$
|
116,849
|
|
|
$
|
52,375
|
|
|
$
|
175,240
|
|
|
$
|
103,583
|
|
|
$
|
71,657
|
|
The Company estimates that amortization expense for future years is estimated to be $7.6 million in fiscal year 2020, $6.7 million in fiscal 2021, $5.9 million in fiscal 2022, $4.4 million in fiscal 2023, $2.7 million in fiscal 2024 and $4.7 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, among other causes.
Fiscal 2019 Impairment Charges
During fiscal 2019, within the Other segment, the Company recognized a $13.7 million Goodwill impairment charge related to Cortland U.S. in conjunction with triggering events identified during the fiscal year.
In the fourth quarter of fiscal 2019, the Company's branding strategy was revised such that two secondary tradenames previously considered to have indefinite lives are to be phased out and re-branded within 12-15 months. As such, the Company recorded an impairment & divestiture charge of $2.6 million based on the estimated remaining fair value of the respective tradenames. In addition, based on restructuring actions taken in the fourth quarter related to the North America Services operations, the Company concluded that the fair value of a customer relationship intangible was less than the current net book value, and therefore, a $6.2 million impairment & divestiture charge was recorded. The tradename and customer relationships impairments both related to assets within the IT&S segment.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Note 7. Debt
The following is a summary of the Company’s long-term indebtedness (in thousands):
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
2019
|
|
2018
|
Previous Senior Credit Facility
|
|
|
|
Revolver
|
$
|
—
|
|
|
$
|
—
|
|
Term Loan
|
—
|
|
|
247,500
|
|
Total Previous Senior Credit Facility
|
—
|
|
|
247,500
|
|
New Senior Credit Facility
|
|
|
|
Revolver
|
—
|
|
|
—
|
|
Term Loan
|
175,000
|
|
|
—
|
|
Total New Senior Credit Facility
|
175,000
|
|
|
—
|
|
5.625% Senior Notes
|
287,559
|
|
|
287,559
|
|
Total Senior Indebtedness
|
462,559
|
|
|
535,059
|
|
Less: Current maturities of long-term debt
|
(7,500
|
)
|
|
(30,000
|
)
|
Debt issuance costs
|
(2,114
|
)
|
|
(2,364
|
)
|
Total long-term debt, less current maturities
|
$
|
452,945
|
|
|
$
|
502,695
|
|
Senior Credit Facility
Prior to the refinancing of the Company's Senior Credit Facility on March 29, 2019, the Company’s previous Senior Credit Facility matured on May 8, 2020, and provided a $300 million revolver, a $300 million term loan and a $450 million expansion option, subject to certain conditions. Borrowings were subject to a pricing grid, which could 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. In addition, a non-use fee was payable quarterly on the average unused credit line under the revolver ranging from 0.15% to 0.35% per annum.
On March 29, 2019, the Company refinanced its Senior Credit Facility resulting in a new $600 million Senior Credit Facility, comprised of a $400 million revolving line of credit and a $200 million term loan. The new facility, which matures in March 2024, includes a reduction in pricing and expands the revolving credit facility from $300 million to $400 million. Borrowings under the new Senior Credit Facility bear interest based on LIBOR or a base rate, with interest rate spreads above LIBOR or the base rate being subject to adjustments based on the Company's net leverage ratio, ranging from 1.125% to 2.00% in the case of loans bearing interest at LIBOR and from 1.25% to 1.00% in the case of loans bearing interest at the base rate. In addition, a non-use fee is payable quarterly in the average unused revolving credit facility ranging from 0.15% to 0.30% per annum, based on the Company's net leverage ratio. Quarterly term loan principal payments of $1.25 million began on August 31, 2019, will escalate to $5.0 million by May 31, 2022, with the remaining principal due at maturity. During fiscal 2019 and in line with its capital allocation strategy, the Company electively prepaid $23.8 million against the remaining principal balance of the term loan subsequent to the refinancing.
The new Senior Credit Facility contains financial covenants that are consistent with the prior facility, with enhancements that improve overall liquidity, and provides the option for future expansion through a $300 million accordion on the revolver. The two financial covenants included are a maximum leverage ratio of 3.75:1 and a minimum interest coverage ratio of 3.50:1. For each covenant, certain transactions lead to adjustments to the underlying ratio, including a reduction of the minimum interest coverage ratio from 3.5 to 3.0 for any fiscal quarter ending within twelve months after the sale of the EC&S segment and an increase to the leverage ratio from 3.75 to 4.25 during the four fiscal quarters after a significant acquisition.
Borrowings under the credit agreement are secured by substantially all personal property assets of the Company and its domestic subsidiary guarantors and certain equity interests owned by the foreign law pledgors. In preparation for the divestiture of the EC&S segment, the Company needed to transfer certain assets between guarantor and non-guarantor entities. While this action was contemplated in the new Senior Credit Facility, the Company did not timely notify the lendors of these transactions, and as such, the Company was not in technical compliance with this restrictive covenant at August 31, 2019. However, the Company subsequently obtained the necessary waivers from the lendors to be in compliance as of the date of this report. The Company was in compliance with all financial covenants at August 31, 2019.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
As of August 31, 2019, the variable borrowing rate on the outstanding term loan balance was 3.50% and the unused credit line and amount available for borrowing under the revolver was $398.8 million.
Senior Notes
On April 16, 2012, the Company issued $300 million of 5.625% Senior Notes due 2022 (the “Senior Notes”) of which $287.6 million remain outstanding. 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 currently at 100.9% and reducing to 100.0% on June 15, 2020, 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 $26.3 million, $28.8 million and $27.1 million in fiscal 2019, 2018 and 2017, respectively.
As of August 31, 2019, future debt maturities for each of the next five fiscal years were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Term Loan
|
|
Senior Notes
|
|
Total
|
2020
|
|
$
|
7,500
|
|
|
$
|
—
|
|
|
$
|
7,500
|
|
2021
|
|
12,500
|
|
|
—
|
|
|
12,500
|
|
2022
|
|
17,500
|
|
|
287,559
|
|
|
305,059
|
|
2023
|
|
20,000
|
|
|
—
|
|
|
20,000
|
|
2024
|
|
117,500
|
|
|
—
|
|
|
117,500
|
|
|
|
$
|
175,000
|
|
|
$
|
287,559
|
|
|
$
|
462,559
|
|
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 unadjusted 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 an asset or liability.
The fair value of the Company’s cash and cash equivalents, accounts receivable, accounts payable and variable rate long-term debt approximated book value at both August 31, 2019 and 2018 due to their short-term nature and the fact that the interest rates approximated 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 less than $0.1 million at August 31, 2019 and a net asset of $0.4 million at August 31, 2018. 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 Senior Notes was $291.5 million and $293.5 million at August 31, 2019 and 2018, 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.
As discussed in Note 6, “Goodwill, Intangible Assets and Long-Lived Assets”, the Company recorded impairment on indefinite-lived tradenames and customer relationships in the fourth quarter of fiscal 2019. The fair value of the tradenames and customer relationships were determined utilizing generally accepted valuation techniques, specifically, forecasting future revenues and/or using a market royalty rate. These valuations represent Level 3 assets measured at fair value on a nonrecurring basis.
Note 9. Derivatives
All derivatives are recognized in the balance sheet at their estimated fair value. The Company does not enter into derivatives for speculative purposes. Changes in the value of derivatives (not designated as hedges) are recorded in earnings along with the gain or loss on the hedged asset or liability, while changes in the value of derivatives designated as 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 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. These derivative gains and losses offset foreign currency gains and losses from the related
revaluation of non-functional currency assets and liabilities (amounts included in "Other expense" in the Consolidated Statements of Operations). The U.S. dollar equivalent notional value of these short duration foreign currency exchange contracts (cash flow hedges or non-designated hedges) was $13.3 million and $11.9 million at August 31, 2019 and 2018, respectively. The fair value of outstanding foreign currency exchange contracts was an asset of less than $0.1 million at August 31, 2019 and an asset of $0.4 million at August 31, 2018. Net foreign currency (losses) gains (included in "Other expense" in the Consolidated Statements of Operations) related to these derivative instruments are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
|
2019
|
|
2018
|
|
2017
|
Foreign Currency (losses) gains
|
$
|
(292
|
)
|
|
$
|
249
|
|
|
$
|
(3,113
|
)
|
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, 2019, future obligations under non-cancelable operating leases associated with continuing operations were as follows: $15.8 million in fiscal 2020; $12.3 million in fiscal 2021; $10.1 million in fiscal 2022; $6.9 million in fiscal 2023; $5.2 million in fiscal 2024; and $21.6 million in aggregate thereafter. Total rental expense under operating leases was $26.5 million, $24.3 million and $27.6 million in fiscal 2019, 2018 and 2017, 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. Further, the Company continues to work with the buyer in the pending divestiture of the EC&S segment and the respective lessors of certain assets leased within those businesses (but in the name of Actuant Corporation or a retained subsidiary) to either transfer the lease to the name of the buyer or buyout existing leases.
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):
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Reconciliation of benefit obligations:
|
|
|
|
Benefit obligation at beginning of year
|
$
|
43,280
|
|
|
$
|
46,806
|
|
Interest cost
|
1,694
|
|
|
1,633
|
|
Actuarial loss/(gain)
|
5,339
|
|
|
(2,330
|
)
|
Benefits paid
|
(2,913
|
)
|
|
(2,829
|
)
|
Benefit obligation at end of year
|
$
|
47,400
|
|
|
$
|
43,280
|
|
Reconciliation of plan assets:
|
|
|
|
Fair value of plan assets at beginning of year
|
$
|
40,244
|
|
|
$
|
40,027
|
|
Actual return on plan assets
|
2,972
|
|
|
2,938
|
|
Company contributions
|
108
|
|
|
108
|
|
Benefits paid from plan assets
|
(2,912
|
)
|
|
(2,829
|
)
|
Fair value of plan assets at end of year
|
40,412
|
|
|
40,244
|
|
Funded status of the plans (underfunded)
|
$
|
(6,988
|
)
|
|
$
|
(3,036
|
)
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The following table provides detail on the Company’s domestic net periodic benefit expense (income) (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended August 31,
|
|
2019
|
|
2018
|
|
2017
|
Interest cost
|
$
|
1,694
|
|
|
$
|
1,633
|
|
|
$
|
1,690
|
|
Expected return on assets
|
(2,208
|
)
|
|
(2,668
|
)
|
|
(2,867
|
)
|
Amortization of actuarial loss
|
990
|
|
|
1,127
|
|
|
1,141
|
|
Net periodic benefit expense (income)
|
$
|
476
|
|
|
$
|
92
|
|
|
$
|
(36
|
)
|
As of August 31, 2019 and 2018, $16.1 million and $13.2 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 2020, $1.2 million of these actuarial losses, net of tax, are expected to be recognized in net periodic benefit cost.
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:
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Assumptions for benefit obligations:
|
|
|
|
|
|
Discount rate
|
2.90
|
%
|
|
4.05
|
%
|
|
3.60
|
%
|
Assumptions for net periodic benefit cost:
|
|
|
|
|
|
Discount rate
|
4.05
|
%
|
|
3.60
|
%
|
|
3.45
|
%
|
Expected return on plan assets
|
5.75
|
%
|
|
7.00
|
%
|
|
7.15
|
%
|
Prior to fiscal 2019, the Company focused on employing a total-return-on-investment approach for its pension plan assets whereby a mix of equity and fixed income investments were used to maximize the long-term return for plan assets, at prudent levels of risk. During fiscal 2019, the Company made a strategic decision to shift the focus to an objective to achieve an asset and liability duration match so that interim fluctuations in funded status should be limited by increasing the correlation between assets and liabilities. As such, the plan assets are invested to maintain funded ratios over the long term, while managing the risk that funded ratios fall meaningfully below 100%. At this time, the plan portfolio is significantly invested in duration-matched fixed income securities, which aligns to the plan's asset investment mix of 70% fixed income securities and 30% equity securities. 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, 2019, the Company’s overall expected long-term rate of return for assets in U.S. pension plans was 4.60%. 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,
|
|
|
2019
|
|
%
|
|
2018
|
|
%
|
Cash and cash equivalents
|
|
$
|
304
|
|
|
0.8
|
%
|
|
$
|
559
|
|
|
1.4
|
%
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
5,127
|
|
|
12.7
|
|
|
19,107
|
|
|
47.5
|
|
Mutual funds
|
|
23,206
|
|
|
57.4
|
|
|
814
|
|
|
2.0
|
|
|
|
28,333
|
|
|
70.1
|
|
|
19,921
|
|
|
49.5
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
11,775
|
|
|
29.1
|
|
|
19,764
|
|
|
49.1
|
|
Total plan assets
|
|
$
|
40,412
|
|
|
100.0
|
%
|
|
$
|
40,244
|
|
|
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 $14.5 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 2020.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Foreign Defined Benefit Pension Plans
The Company has eight 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 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 foreign defined benefit pension plans as of the respective August 31 measurement date (in thousands):
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Reconciliation of benefit obligations:
|
|
|
|
Benefit obligation at beginning of year
|
$
|
13,056
|
|
|
$
|
13,423
|
|
Employer Service Costs
|
450
|
|
|
440
|
|
Interest cost
|
257
|
|
|
278
|
|
Actuarial loss/(gain)
|
2,594
|
|
|
(337
|
)
|
Benefits paid
|
(421
|
)
|
|
(555
|
)
|
Plan amendments
|
89
|
|
|
—
|
|
Curtailments
|
(107
|
)
|
|
—
|
|
Currency impact
|
(815
|
)
|
|
(193
|
)
|
Benefit obligation at end of year
|
$
|
15,103
|
|
|
$
|
13,056
|
|
Reconciliation of plan assets:
|
|
|
|
Fair value of plan assets at beginning of year
|
$
|
7,902
|
|
|
$
|
7,904
|
|
Actual return on plan assets
|
752
|
|
|
32
|
|
Company contributions
|
374
|
|
|
588
|
|
Benefits paid from plan assets
|
(421
|
)
|
|
(555
|
)
|
Currency impact
|
(489
|
)
|
|
(67
|
)
|
Fair value of plan assets at end of year
|
8,118
|
|
|
7,902
|
|
Funded status of the plans (underfunded)
|
$
|
(6,985
|
)
|
|
$
|
(5,154
|
)
|
The following table provides detail on the Company’s foreign net periodic benefit expense (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended August 31,
|
|
2019
|
|
2018
|
|
2017
|
Employer service costs
|
$
|
450
|
|
|
$
|
440
|
|
|
$
|
413
|
|
Interest cost
|
257
|
|
|
278
|
|
|
239
|
|
Expected return on assets
|
(345
|
)
|
|
(366
|
)
|
|
(379
|
)
|
Amortization of net prior service credit
|
(65
|
)
|
|
(69
|
)
|
|
(61
|
)
|
Amortization of net loss
|
263
|
|
|
306
|
|
|
438
|
|
(Income) or cost of special events
|
(56
|
)
|
|
18
|
|
|
268
|
|
Net periodic benefit expense
|
$
|
504
|
|
|
$
|
607
|
|
|
$
|
918
|
|
The weighted average discount rate utilized for determining the benefit obligation at August 31, 2019 and 2018 was 1.1% and 2.0%, respectively. The plan assets of these foreign pension plans consist primarily of participating units in fixed income and equity securities and insurance contracts. The Company’s overall expected long-term rate of return on these investments is 4.2%. During fiscal 2020, the Company anticipates contributing $0.3 million to these pension plans.
Projected benefit payments to participants in the these foreign plans are $0.2 million for fiscal 2020, $0.3 million for fiscal 2021, $0.4 million for fiscal 2022, $0.3 million for both fiscal 2023 and fiscal 2024 and $1.9 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 $3.1 million and $2.9 million at August 31, 2019 and 2018, respectively. These obligations are determined
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
utilizing assumptions consistent with those used for our U.S. pension plans and a health care cost trend rate of 6.8%, trending downward to 5.0% by the year 2026, and remaining level thereafter. Net periodic benefit costs for other postretirement benefits was income of $0.1 million for the year-ended August 31, 2019 and expense of $0.1 million and $0.2 million for the year-ended August 31, 2018 and 2017, respectively. Benefit payments from the plan are funded through participant contributions and Company contributions, which are projected to be $0.2 million in fiscal 2020.
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, prior to fiscal 2019, the Company generally made core contributions to employee accounts equal to 3% of each employee’s eligible annual cash compensation, subject to IRS limitations. In addition, the Company matched 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 were made in the form of its Class A common stock and contributed into each eligible participant’s deferred compensation plan account. Effective September 1, 2018, the Company changed the method of employer contributions. The Company's match contribution is $0.50 for every $1 contributed by employees, up to 8% of the employees' eligible pay. These match contributions are made on every payroll run, meaning the contribution is immediately 100% vested. In addition, the Company may make an annual, discretionary contribution of up to 3% of employees' eligible pay to employees employed as of end of the plan year. The discretionary contribution has a three year vesting period. The Company elected not to provide a discretionary contribution for the year ended August 31, 2019. Expense recognized related to the 401(k) plan totaled $2.7 million, $3.1 million and $3.2 million for the year ended August 31, 2019, 2018 and 2017, respectively.
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 $1.6 million and $1.7 million obligation at August 31, 2019 and 2018, respectively. Expense recognized for the SERP Plan was $0.4 million for fiscal 2019 and $0.3 million for both 2018 and 2017.
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 $18.4 million and $20.1 million are included in the consolidated balance sheets at August 31, 2019 and 2018, respectively, to reflect the unfunded portion of the deferred compensation liability. The Company recorded expense in "Financing costs, net" of $1.4 million, $1.5 million and $1.6 million for the years ended August 31, 2019, 2018 and 2017, 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 on the Consolidated Balance Sheets with the corresponding deferred compensation liability also recorded within shareholders’ equity on the Consolidated Balance Sheets. 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) from continuing operations is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended August 31,
|
|
2019
|
|
2018
|
|
2017
|
Currently payable:
|
|
|
|
|
|
Federal
|
$
|
(2,040
|
)
|
|
$
|
291
|
|
|
$
|
(22,002
|
)
|
Foreign
|
9,370
|
|
|
9,223
|
|
|
11,239
|
|
State
|
1,347
|
|
|
358
|
|
|
(675
|
)
|
|
8,677
|
|
|
9,872
|
|
|
(11,438
|
)
|
Deferred:
|
|
|
|
|
|
Federal
|
(400
|
)
|
|
(1,143
|
)
|
|
3,278
|
|
Foreign
|
2,172
|
|
|
5,807
|
|
|
(14,406
|
)
|
State
|
208
|
|
|
(86
|
)
|
|
(48
|
)
|
|
1,980
|
|
|
4,578
|
|
|
(11,176
|
)
|
Income tax expense (benefit)
|
$
|
10,657
|
|
|
$
|
14,450
|
|
|
$
|
(22,614
|
)
|
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 earnings (loss) 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,
|
|
2019
|
|
2018
|
|
2017
|
Federal statutory rate
|
21.0
|
%
|
|
25.7
|
%
|
|
35.0
|
%
|
State income taxes, net of Federal effect
|
(4.0
|
)
|
|
(0.5
|
)
|
|
0.6
|
|
Net effects of foreign tax rate differential and credits (1)
|
11.3
|
|
|
(12.2
|
)
|
|
(5.4
|
)
|
Domestic manufacturing deduction
|
—
|
|
|
(1.3
|
)
|
|
0.2
|
|
Foreign branch currency losses
|
—
|
|
|
(2.1
|
)
|
|
(0.2
|
)
|
Compensation adjustment
|
4.4
|
|
|
7.0
|
|
|
—
|
|
Impairment and divestiture charges (2)
|
19.3
|
|
|
39.1
|
|
|
(7.9
|
)
|
Valuation allowance additions and releases (3)
|
3.9
|
|
|
20.3
|
|
|
(12.3
|
)
|
Changes in liability for unrecognized tax benefits
|
4.1
|
|
|
(34.1
|
)
|
|
(2.6
|
)
|
U.S. tax reform, net impact (4)
|
(31.1
|
)
|
|
2.4
|
|
|
—
|
|
Taxable liquidation of foreign subsidiaries (5)
|
—
|
|
|
7.7
|
|
|
15.5
|
|
Foreign non-deductible expenses
|
16.2
|
|
|
12.0
|
|
|
(2.1
|
)
|
Changes in tax rates
|
1.7
|
|
|
(1.4
|
)
|
|
(1.5
|
)
|
R&D credit, audits and adjustments
|
4.8
|
|
|
15.3
|
|
|
1.0
|
|
Other items
|
5.3
|
|
|
(2.6
|
)
|
|
(1.1
|
)
|
Effective income tax rate
|
56.9
|
%
|
|
75.3
|
%
|
|
19.2
|
%
|
(1) The Company generated $0.7 million, $10.2 million and $4.2 million of foreign tax credits, excluding the impact of tax reform for fiscal 2019, 2018 and 2017, respectively.
(2) Fiscal 2019, 2018 and 2017 pretax earnings (loss) include $22.8 million, $3.0 million and $117.0 million, respectively, in impairment & divestiture charges related to goodwill, intangible assets, tangible assets and the cumulative effect of foreign currency rate changes of which $14.0 million, $0.7 million and $69.0 million, respectively, are not deductible for income tax purposes.
(3) Incremental valuation allowances of $1.7 million and $20.4 million were recorded in fiscal 2019 and 2018, respectively, due to uncertainty regarding utilization of foreign operating loss carryforwards, which were partially offset by a reduction of $2.9 million and $11.8 million of valuation allowances for fiscal 2019 and 2018, respectively. These amounts exclude valuation allowances related to foreign tax credits that are categorized with tax reform.
(4) During fiscal 2019, legislative changes and additional guidance related to the Act resulted in tax benefit of $5.8 million related to the fiscal 2018 tax year.
(5) 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.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Temporary differences and carryforwards that gave rise to deferred tax assets and liabilities include the following items (in thousands):
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
2019
|
|
2018
|
Deferred income tax assets:
|
|
|
|
Operating loss and tax credit carryforwards
|
$
|
88,198
|
|
|
$
|
38,414
|
|
Compensation related liabilities
|
7,752
|
|
|
8,821
|
|
Postretirement benefits
|
9,289
|
|
|
8,659
|
|
Inventory
|
629
|
|
|
520
|
|
Book reserves and other items
|
11,465
|
|
|
17,499
|
|
Total deferred income tax assets
|
117,333
|
|
|
73,913
|
|
Valuation allowance
|
(73,255
|
)
|
|
(32,426
|
)
|
Net deferred income tax assets
|
44,078
|
|
|
41,487
|
|
Deferred income tax liabilities:
|
|
|
|
Depreciation and amortization
|
(26,248
|
)
|
|
(23,517
|
)
|
Other items
|
(862
|
)
|
|
(611
|
)
|
Deferred income tax liabilities
|
(27,110
|
)
|
|
(24,128
|
)
|
Net deferred income tax asset (1)
|
$
|
16,968
|
|
|
$
|
17,359
|
|
(1) The net deferred income tax asset is reflected on the balance sheet in two categories: an asset of $18.4 million and $21.3 million for fiscal 2019 and 2018, respectively, is included in "Other long-term assets" and a liability of $1.6 million and $3.9 million for fiscal 2019 and 2018, respectively, is included in "Deferred income taxes".
The Company has $68.8 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 2039. The Company also has $85.3 million of 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 2029. 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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Beginning balance
|
$
|
24,359
|
|
|
$
|
31,446
|
|
|
$
|
29,174
|
|
Increases based on tax positions related to the current year
|
2,169
|
|
|
2,599
|
|
|
6,057
|
|
Increase for tax positions taken in a prior period
|
1,422
|
|
|
359
|
|
|
297
|
|
Decrease for tax positions taken in a prior period
|
—
|
|
|
(349
|
)
|
|
(627
|
)
|
Decrease due to lapse of statute of limitations
|
(3,212
|
)
|
|
(9,163
|
)
|
|
(4,008
|
)
|
Decrease due to settlements
|
(324
|
)
|
|
—
|
|
|
—
|
|
Changes in foreign currency exchange rates
|
(247
|
)
|
|
(533
|
)
|
|
553
|
|
Ending balance
|
$
|
24,167
|
|
|
$
|
24,359
|
|
|
$
|
31,446
|
|
Substantially all of these unrecognized tax benefits, if recognized, would impact the effective income tax rate. As of August 31, 2019, 2018 and 2017, the Company recognized $3.7 million, $3.0 million and $2.9 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 2009. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits could decrease by up to $2.4 million throughout fiscal 2020.
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 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 $5.4 million would have been necessary as of August 31, 2019.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Earnings (loss) before income taxes from continuing operations, are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
|
2019
|
|
2018
|
|
2017
|
Domestic
|
$
|
(715
|
)
|
|
$
|
5,337
|
|
|
$
|
(10,023
|
)
|
Foreign
|
19,439
|
|
|
13,859
|
|
|
(107,866
|
)
|
|
$
|
18,724
|
|
|
$
|
19,196
|
|
|
$
|
(117,889
|
)
|
Both domestic and foreign pre-tax earnings from continuing operations 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 2019, domestic and foreign earnings included non-cash impairment and other divestiture costs of $9.0 million and $13.8 million, respectively. In fiscal 2018, foreign earnings included $3.0 million of non-cash impairment & divestiture charges. In fiscal 2017, domestic earnings included $7.8 million of director and officer transition charges and foreign earnings included $117.0 million of non-cash impairment & divestiture charges. Approximately 70% - 80% of pre-tax earnings from continuing operations (excluding impairment & divestiture charges) were generated in foreign jurisdictions with tax rates different than the U.S. federal income tax rate.
Cash paid for income taxes, net of refunds, totaled $15.4 million, $1.5 million (refund) and $11.8 million during the years ended August 31, 2019, 2018 and 2017, respectively.
Note 13. Capital Stock and Share Repurchases
The authorized common stock of the Company as of August 31, 2019 consisted of 168,000,000 shares of Class A common stock, $0.20 par value, of which 81,920,679 and 60,465,111 shares were issued and outstanding, respectively; 1,500,000 shares of Class B common stock, $0.20 par value, none of which are outstanding; 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. During the year ended August 31, 2019, the Company repurchased 1,016,134 shares for $22.5 million. At August 31, 2019, cumulative shares repurchased under these authorizations totaled 21,455,568, leaving 6,544,432 shares authorized for future buy backs.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
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,
|
|
2019
|
|
2018
|
|
2017
|
Numerator:
|
|
|
|
|
|
Net earnings (loss) from continuing operations
|
$
|
8,067
|
|
|
$
|
4,746
|
|
|
$
|
(95,275
|
)
|
Net (loss) earnings from discontinued operations
|
(257,212
|
)
|
|
(26,394
|
)
|
|
29,062
|
|
Net loss
|
(249,145
|
)
|
|
(21,648
|
)
|
|
(66,213
|
)
|
Denominator:
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
61,151
|
|
|
60,441
|
|
|
59,436
|
|
Net effect of dilutive securities - stock based compensation plans
|
456
|
|
|
587
|
|
|
—
|
|
Weighted average common shares outstanding - diluted
|
61,607
|
|
|
61,028
|
|
|
59,436
|
|
|
|
|
|
|
|
Earnings (loss) per common share from continuing operations:
|
|
|
|
|
|
Basic
|
$
|
0.13
|
|
|
$
|
0.08
|
|
|
$
|
(1.60
|
)
|
Diluted
|
$
|
0.13
|
|
|
$
|
0.08
|
|
|
$
|
(1.60
|
)
|
|
|
|
|
|
|
(Loss) earnings per common share from discontinued operations:
|
|
|
|
|
|
Basic
|
$
|
(4.21
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
0.49
|
|
Diluted
|
$
|
(4.18
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
0.49
|
|
|
|
|
|
|
|
Loss per common share:
|
|
|
|
|
|
Basic
|
$
|
(4.07
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(1.11
|
)
|
Diluted
|
$
|
(4.04
|
)
|
|
$
|
(0.35
|
)
|
|
$
|
(1.11
|
)
|
|
|
|
|
|
|
Anti-dilutive securities- stock based compensation plans (excluding from earnings per share calculation) (1)
|
1,239
|
|
|
1,477
|
|
|
4,482
|
|
(1) As a result of the impairment and divestiture charges which caused a net loss from continuing operations in fiscal 2017, 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, 2019, 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 3,212,656 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 vest 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 2019 is as follows:
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted-Average Fair Value at Grant Date (Per Share)
|
Outstanding on August 31, 2018
|
1,153,737
|
|
|
$25.25
|
Granted
|
705,602
|
|
|
22.75
|
Forfeited
|
(117,899
|
)
|
|
24.24
|
Vested
|
(460,614
|
)
|
|
25.49
|
Outstanding on August 31, 2019
|
1,280,826
|
|
|
$23.87
|
A summary of stock option activity during fiscal 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average
Exercise Price
(Per Share)
|
|
Weighted-Average
Remaining Contractual
Term
|
|
Aggregate
Intrinsic Value
|
Outstanding on September 1, 2018
|
|
1,769,076
|
|
|
$
|
25.40
|
|
|
|
|
|
Granted
|
|
—
|
|
|
—
|
|
|
|
|
|
Exercised
|
|
(84,277
|
)
|
|
19.72
|
|
|
|
|
|
Forfeited
|
|
(19,566
|
)
|
|
24.44
|
|
|
|
|
|
Expired
|
|
(58,690
|
)
|
|
20.77
|
|
|
|
|
|
Outstanding on August 31, 2019
|
|
1,606,543
|
|
|
$
|
25.88
|
|
|
4.1
|
|
$
|
0.5
|
million
|
Exercisable on August 31, 2019
|
|
1,298,308
|
|
|
$
|
26.01
|
|
|
3.5
|
|
$
|
0.5
|
million
|
Intrinsic value is the difference between the market value of the stock at August 31, 2019 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,
|
|
2019
|
|
2018
|
|
2017
|
Weighted-average fair value of options granted (per share)
|
N/A
|
|
|
N/A
|
|
|
$
|
11.88
|
|
Intrinsic value of options exercised
|
$
|
429
|
|
|
$
|
5,284
|
|
|
2,208
|
|
Cash receipts from exercise of options
|
1,404
|
|
|
15,140
|
|
|
7,762
|
|
The Company generally records compensation expense over the vesting period for restricted stock awards based on the market value of the Company's Class A common stock on the grant date and utilized an expected forfeiture rate of 10%, 10% and 11%, for fiscal years ended August 31, 2019, 2018 and 2017, 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 both fiscal 2019 and 2018. The following weighted-average assumptions were used in fiscal year 2017:
|
|
|
|
|
Fiscal Year Ended August 31, 2017
|
Dividend yield
|
0.15
|
%
|
Expected volatility
|
38.12
|
%
|
Risk-free rate of return
|
2.42
|
%
|
Expected forfeiture rate
|
11
|
%
|
Expected life
|
7.4 years
|
|
As of August 31, 2019, there was $18.9 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 1.9 years. The total fair value of share-based awards that vested during the fiscal years ended August 31, 2019 and 2018 was $11.9 million and $14.3 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 solutions. The IT&S reportable 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 Other segment is included for purposes of reconciliation of the respective balances below to the consolidated financial statements. All operations within the EC&S operating segment are considered discontinued operations and are therefore excluded from all disclosures herein.
The following tables summarize financial information by reportable segment and product line (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
|
|
2019
|
|
2018
|
|
2017
|
Net Sales by Reportable Segment & Product Line
|
|
|
|
|
|
|
Industrial Tools & Services Segment
|
|
|
|
|
|
|
Product
|
|
$
|
433,703
|
|
|
$
|
439,405
|
|
|
$
|
396,381
|
|
Service & Rental
|
|
175,812
|
|
|
151,680
|
|
|
156,201
|
|
|
|
609,515
|
|
|
591,085
|
|
|
552,582
|
|
|
|
|
|
|
|
|
Other Operating Segment
|
|
45,243
|
|
|
50,218
|
|
|
64,009
|
|
|
|
$
|
654,758
|
|
|
$
|
641,303
|
|
|
$
|
616,591
|
|
|
|
|
|
|
|
|
Operating Profit (Loss)
|
|
|
|
|
|
|
Industrial Tools & Services
|
|
$
|
101,411
|
|
|
$
|
99,432
|
|
|
$
|
95,825
|
|
Other Operating Segment
|
|
(11,821
|
)
|
|
(5,690
|
)
|
|
(130,396
|
)
|
General Corporate
|
|
(42,076
|
)
|
|
(43,536
|
)
|
|
(50,281
|
)
|
|
|
$
|
47,516
|
|
|
$
|
50,206
|
|
|
$
|
(84,852
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
Industrial Tools & Services
|
|
$
|
14,762
|
|
|
$
|
15,301
|
|
|
$
|
15,025
|
|
Other Operating Segment
|
|
3,408
|
|
|
3,122
|
|
|
5,886
|
|
General Corporate
|
|
2,047
|
|
|
1,982
|
|
|
2,014
|
|
|
|
$
|
20,217
|
|
|
$
|
20,405
|
|
|
$
|
22,925
|
|
|
|
|
|
|
|
|
Capital Expenditures:
|
|
|
|
|
|
|
Industrial Tools & Services
|
|
$
|
9,945
|
|
|
$
|
7,799
|
|
|
$
|
8,614
|
|
Other Operating Segment
|
|
3,917
|
|
|
1,295
|
|
|
5,411
|
|
General Corporate
|
|
1,061
|
|
|
1,927
|
|
|
3,213
|
|
|
|
$
|
14,923
|
|
|
$
|
11,021
|
|
|
$
|
17,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2019
|
|
2018
|
Assets:*
|
|
|
|
|
Industrial Tools & Services
|
|
$
|
553,615
|
|
|
$
|
589,926
|
|
Other Operating Segment
|
|
54,484
|
|
|
76,506
|
|
General Corporate
|
|
230,597
|
|
|
249,852
|
|
|
|
$
|
838,696
|
|
|
$
|
916,284
|
|
*Excludes "Assets from discontinued operations" as of August 31, 2019 and 2018, respectively.
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.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The following tables summarize net sales and property, plant and equipment by geographic region (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
|
|
2019
|
|
2018
|
|
2017
|
Net Sales:
|
|
|
|
|
|
|
United States
|
|
$
|
249,644
|
|
|
$
|
236,036
|
|
|
$
|
230,513
|
|
United Kingdom
|
|
30,127
|
|
|
35,388
|
|
|
42,875
|
|
Kazakhstan
|
|
30,081
|
|
|
19,814
|
|
|
22,989
|
|
Germany
|
|
26,445
|
|
|
30,643
|
|
|
27,611
|
|
Australia
|
|
25,749
|
|
|
30,796
|
|
|
36,076
|
|
Saudi Arabia
|
|
21,625
|
|
|
20,749
|
|
|
22,089
|
|
Brazil
|
|
18,779
|
|
|
17,900
|
|
|
15,456
|
|
Canada
|
|
18,686
|
|
|
20,172
|
|
|
17,458
|
|
China
|
|
18,548
|
|
|
19,239
|
|
|
18,323
|
|
All other
|
|
215,074
|
|
|
210,566
|
|
|
183,201
|
|
|
|
$
|
654,758
|
|
|
$
|
641,303
|
|
|
$
|
616,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
2019
|
|
2018
|
Property, Plant and Equipment, net:
|
|
|
|
|
United States
|
|
$
|
21,047
|
|
|
$
|
17,040
|
|
China
|
|
12,179
|
|
|
13,442
|
|
UAE
|
|
8,734
|
|
|
7,876
|
|
United Kingdom
|
|
2,983
|
|
|
3,663
|
|
Brazil
|
|
2,851
|
|
|
2,923
|
|
Netherlands
|
|
2,720
|
|
|
3,530
|
|
Kazakhstan
|
|
2,635
|
|
|
3,056
|
|
All other
|
|
3,580
|
|
|
3,444
|
|
|
|
$
|
56,729
|
|
|
$
|
54,974
|
|
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 7.4%, 7.9% and 6.0% of total net sales from continuing operations in fiscal 2019, 2018 and 2017, respectively.
Note 16. Commitments and Contingencies
The Company had outstanding letters of credit of $18.2 million and $23.6 million at August 31, 2019 and 2018, respectively, the majority of which relate to commercial contracts and self-insured workers' compensation programs.
As part of the Company's global sourcing strategy, we have entered into agreements with certain suppliers that require the supplier to maintain minimum levels of inventory to support certain products for which we require a short lead time to fulfill customer orders. We have the ability to notify the supplier that they no longer need maintain the minimum level of inventory should we discontinue manufacture of a product during the contract period, however, we must purchase the remaining minimum inventory levels the supplier was required to maintain within a defined period of time.
The Company is a party to various legal proceedings that have arisen in the normal course of business. These legal proceedings typically include product liability, breaches of contract, employment, personal injury 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 a loss has been incurred and can be reasonably estimated. In the opinion of management, resolution of these contingencies is 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
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
value of future minimum lease payments for these leases at August 31, 2019 was $9.1 million using a weighted average discount rate of 1.9%.
The Company has facilities in numerous geographic locations that are subject to environmental laws and regulations. Environmental expenditures over the past three years have not been material. Soil and groundwater contamination has been identified at certain facilities that we operate or formerly owned or operated. We are also a party to certain state and local environmental matters, have provided environmental indemnifications for certain divested businesses and retain responsibility for certain potential environmental liabilities. Management believes that such costs will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.
As previously disclosed, in October 2018, the Company filed a 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 totaling approximately $0.5 million by certain of its foreign subsidiaries to two Iranian distributors. It is possible that certain limited transactions relating to the authorized sales fell outside the scope of General License H under the Iranian Transaction and Sanctions Regulations, 31 C.F.R. Part 560. The 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, as certain sales of products and services may have been diverted to the Crimea region of Ukraine. OFAC is currently reviewing the Company’s disclosures 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
As discussed in Note 7, “Debt” 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, 2019. Certain 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 the subsidiaries that do not guarantee the 5.625% Senior Notes (the "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 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 the Parent, the Guarantors and the non-Guarantors and the eliminations necessary to arrive at the information for the Company on a consolidated basis. As a result of the refinancing of the Senior Credit Facility in March 2019, certain domestic subsidiaries that were previously Guarantors of the Senior Notes are now non-Guarantors. As such, prior period financial information has been recast to reflect the current Parent, Guarantor, and non-Guarantor structure.
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2019
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
Net sales
|
|
$
|
167,009
|
|
|
$
|
70,621
|
|
|
$
|
417,128
|
|
|
$
|
—
|
|
|
$
|
654,758
|
|
Cost of products sold
|
|
46,220
|
|
|
44,007
|
|
|
271,879
|
|
|
—
|
|
|
362,106
|
|
Gross profit
|
|
120,789
|
|
|
26,614
|
|
|
145,249
|
|
|
—
|
|
|
292,652
|
|
Selling, administrative and engineering expenses
|
|
85,399
|
|
|
20,095
|
|
|
103,737
|
|
|
—
|
|
|
209,231
|
|
Amortization of intangible assets
|
|
1,272
|
|
|
2,600
|
|
|
5,050
|
|
|
—
|
|
|
8,922
|
|
Restructuring charges
|
|
562
|
|
|
1,402
|
|
|
2,192
|
|
|
—
|
|
|
4,156
|
|
Impairment & divestiture charges
|
|
—
|
|
|
6,243
|
|
|
16,584
|
|
|
—
|
|
|
22,827
|
|
Operating profit (loss)
|
|
33,556
|
|
|
(3,726
|
)
|
|
17,686
|
|
|
—
|
|
|
47,516
|
|
Financing costs (income), net
|
|
28,716
|
|
|
—
|
|
|
(553
|
)
|
|
—
|
|
|
28,163
|
|
Intercompany (income) expense, net
|
|
(15,020
|
)
|
|
21,573
|
|
|
70,086
|
|
|
(76,639
|
)
|
|
—
|
|
Intercompany dividends
|
|
(447,637
|
)
|
|
(39,208
|
)
|
|
—
|
|
|
486,845
|
|
|
—
|
|
Other (income) expense, net
|
|
(435
|
)
|
|
1
|
|
|
1,063
|
|
|
—
|
|
|
629
|
|
Earnings (loss) before income tax (benefit) expense
|
|
467,932
|
|
|
13,908
|
|
|
(52,910
|
)
|
|
(410,206
|
)
|
|
18,724
|
|
Income tax (benefit) expense
|
|
(5,113
|
)
|
|
(2,395
|
)
|
|
18,165
|
|
|
—
|
|
|
10,657
|
|
Earnings (loss) from continuing operations
|
|
473,045
|
|
|
16,303
|
|
|
(71,075
|
)
|
|
(410,206
|
)
|
|
8,067
|
|
Loss from discontinued operations
|
|
(3,148
|
)
|
|
(93,730
|
)
|
|
(83,695
|
)
|
|
(76,639
|
)
|
|
(257,212
|
)
|
Net earnings (loss) before equity in loss of subsidiaries
|
|
469,897
|
|
|
(77,427
|
)
|
|
(154,770
|
)
|
|
(486,845
|
)
|
|
(249,145
|
)
|
Equity in loss of subsidiaries
|
|
(719,042
|
)
|
|
(28,354
|
)
|
|
11,064
|
|
|
736,332
|
|
|
—
|
|
Net loss
|
|
(249,145
|
)
|
|
(105,781
|
)
|
|
(143,706
|
)
|
|
249,487
|
|
|
(249,145
|
)
|
Comprehensive loss
|
|
$
|
(246,572
|
)
|
|
$
|
(105,781
|
)
|
|
$
|
(137,292
|
)
|
|
$
|
243,073
|
|
|
$
|
(246,572
|
)
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2018
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
Net sales
|
|
$
|
159,411
|
|
|
$
|
65,128
|
|
|
$
|
416,764
|
|
|
$
|
—
|
|
|
$
|
641,303
|
|
Cost of products sold
|
|
29,811
|
|
|
41,674
|
|
|
286,534
|
|
|
—
|
|
|
358,019
|
|
Gross profit
|
|
129,600
|
|
|
23,454
|
|
|
130,230
|
|
|
—
|
|
|
283,284
|
|
Selling, administrative and engineering expenses
|
|
81,028
|
|
|
22,540
|
|
|
106,688
|
|
|
—
|
|
|
210,256
|
|
Amortization of intangible assets
|
|
1,272
|
|
|
2,892
|
|
|
5,116
|
|
|
—
|
|
|
9,280
|
|
Restructuring charges
|
|
6,109
|
|
|
661
|
|
|
3,785
|
|
|
|
|
|
10,555
|
|
Impairment & divestiture charges (benefit)
|
|
4,217
|
|
|
—
|
|
|
(1,230
|
)
|
|
—
|
|
|
2,987
|
|
Operating profit (loss)
|
|
36,974
|
|
|
(2,639
|
)
|
|
15,871
|
|
|
—
|
|
|
50,206
|
|
Financing costs (income), net
|
|
31,752
|
|
|
—
|
|
|
(880
|
)
|
|
—
|
|
|
30,872
|
|
Intercompany (income) expense, net
|
|
(17,087
|
)
|
|
16,276
|
|
|
(46,961
|
)
|
|
47,772
|
|
|
—
|
|
Intercompany dividends
|
|
—
|
|
|
(28,822
|
)
|
|
—
|
|
|
28,822
|
|
|
—
|
|
Other (income) expense, net
|
|
(826
|
)
|
|
18
|
|
|
946
|
|
|
—
|
|
|
138
|
|
Earnings before income tax (benefit) expense
|
|
23,135
|
|
|
9,889
|
|
|
62,766
|
|
|
(76,594
|
)
|
|
19,196
|
|
Income tax (benefit) expense
|
|
(35,134
|
)
|
|
21,689
|
|
|
27,895
|
|
|
—
|
|
|
14,450
|
|
Earnings (loss) from continuing operations
|
|
58,269
|
|
|
(11,800
|
)
|
|
34,871
|
|
|
(76,594
|
)
|
|
4,746
|
|
(Loss) earnings from discontinued operations
|
|
(5,951
|
)
|
|
9,342
|
|
|
(77,557
|
)
|
|
47,772
|
|
|
(26,394
|
)
|
Net earnings (loss) before equity in (loss) earnings of subsidiaries
|
|
52,318
|
|
|
(2,458
|
)
|
|
(42,686
|
)
|
|
(28,822
|
)
|
|
(21,648
|
)
|
Equity in (loss) earnings of subsidiaries
|
|
(73,966
|
)
|
|
(54,385
|
)
|
|
613
|
|
|
127,738
|
|
|
—
|
|
Net loss
|
|
(21,648
|
)
|
|
(56,843
|
)
|
|
(42,073
|
)
|
|
98,916
|
|
|
(21,648
|
)
|
Comprehensive income (loss)
|
|
$
|
31,368
|
|
|
$
|
(56,843
|
)
|
|
$
|
9,555
|
|
|
$
|
47,288
|
|
|
$
|
31,368
|
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS AND COMPREHENSIVE LOSS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2017
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
Net sales
|
|
$
|
145,222
|
|
|
$
|
74,008
|
|
|
$
|
397,361
|
|
|
$
|
—
|
|
|
$
|
616,591
|
|
Cost of products sold
|
|
35,244
|
|
|
45,994
|
|
|
274,983
|
|
|
—
|
|
|
356,221
|
|
Gross profit
|
|
109,978
|
|
|
28,014
|
|
|
122,378
|
|
|
—
|
|
|
260,370
|
|
Selling, administrative and engineering expenses
|
|
76,816
|
|
|
24,958
|
|
|
106,354
|
|
|
—
|
|
|
208,128
|
|
Amortization of intangible assets
|
|
1,272
|
|
|
2,892
|
|
|
4,933
|
|
|
—
|
|
|
9,097
|
|
Director & officer transition charges
|
|
7,784
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,784
|
|
Restructuring charges
|
|
634
|
|
|
19
|
|
|
2,581
|
|
|
—
|
|
|
3,234
|
|
Impairment & divestiture charges
|
|
—
|
|
|
—
|
|
|
116,979
|
|
|
—
|
|
|
116,979
|
|
Operating profit (loss)
|
|
23,472
|
|
|
145
|
|
|
(108,469
|
)
|
|
—
|
|
|
(84,852
|
)
|
Financing costs (income), net
|
|
30,005
|
|
|
—
|
|
|
(784
|
)
|
|
—
|
|
|
29,221
|
|
Intercompany (income) expense, net
|
|
(23,302
|
)
|
|
84,562
|
|
|
(67,796
|
)
|
|
6,536
|
|
|
—
|
|
Intercompany dividends
|
|
—
|
|
|
(231,689
|
)
|
|
(5,623
|
)
|
|
237,312
|
|
|
—
|
|
Other expense (income), net
|
|
3,303
|
|
|
(26
|
)
|
|
539
|
|
|
—
|
|
|
3,816
|
|
Earnings (loss) before income tax (benefit) expense
|
|
13,466
|
|
|
147,298
|
|
|
(34,805
|
)
|
|
(243,848
|
)
|
|
(117,889
|
)
|
Income tax (benefit) expense
|
|
(4,623
|
)
|
|
(18,477
|
)
|
|
486
|
|
|
—
|
|
|
(22,614
|
)
|
Net earnings (loss) from continuing operations
|
|
18,089
|
|
|
165,775
|
|
|
(35,291
|
)
|
|
(243,848
|
)
|
|
(95,275
|
)
|
Net (loss) earnings from discontinued operations
|
|
(6,362
|
)
|
|
9,791
|
|
|
19,097
|
|
|
6,536
|
|
|
29,062
|
|
Net earnings (loss) before equity in (loss) earnings of subsidiaries
|
|
11,727
|
|
|
175,566
|
|
|
(16,194
|
)
|
|
(237,312
|
)
|
|
(66,213
|
)
|
Equity in (loss) earnings of subsidiaries
|
|
(77,940
|
)
|
|
(67,668
|
)
|
|
316
|
|
|
145,292
|
|
|
—
|
|
Net (loss) earnings
|
|
(66,213
|
)
|
|
107,898
|
|
|
(15,878
|
)
|
|
(92,020
|
)
|
|
(66,213
|
)
|
Comprehensive (loss) income
|
|
$
|
(41,651
|
)
|
|
$
|
90,011
|
|
|
$
|
43,818
|
|
|
$
|
(133,829
|
)
|
|
$
|
(41,651
|
)
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31, 2019
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
47,581
|
|
|
$
|
—
|
|
|
$
|
163,570
|
|
|
$
|
—
|
|
|
$
|
211,151
|
|
Accounts receivable, net
|
|
20,322
|
|
|
11,358
|
|
|
94,203
|
|
|
—
|
|
|
125,883
|
|
Inventories, net
|
|
26,737
|
|
|
6,566
|
|
|
43,884
|
|
|
—
|
|
|
77,187
|
|
Assets from discontinued operations
|
|
295
|
|
|
145,239
|
|
|
140,044
|
|
|
—
|
|
|
285,578
|
|
Other current assets
|
|
12,116
|
|
|
1,797
|
|
|
16,613
|
|
|
—
|
|
|
30,526
|
|
Total current assets
|
|
107,051
|
|
|
164,960
|
|
|
458,314
|
|
|
—
|
|
|
730,325
|
|
Property, plant & equipment, net
|
|
8,515
|
|
|
5,193
|
|
|
43,021
|
|
|
—
|
|
|
56,729
|
|
Goodwill
|
|
38,847
|
|
|
57,342
|
|
|
164,226
|
|
|
—
|
|
|
260,415
|
|
Other intangibles, net
|
|
5,611
|
|
|
8,451
|
|
|
38,313
|
|
|
—
|
|
|
52,375
|
|
Investment in subsidiaries
|
|
1,323,587
|
|
|
912,297
|
|
|
417,022
|
|
|
(2,652,906
|
)
|
|
—
|
|
Intercompany receivable
|
|
—
|
|
|
—
|
|
|
979,889
|
|
|
(979,889
|
)
|
|
—
|
|
Other long-term assets
|
|
27,510
|
|
|
(13,424
|
)
|
|
10,344
|
|
|
—
|
|
|
24,430
|
|
Total assets
|
|
$
|
1,511,121
|
|
|
$
|
1,134,819
|
|
|
$
|
2,111,129
|
|
|
$
|
(3,632,795
|
)
|
|
$
|
1,124,274
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
23,678
|
|
|
$
|
3,231
|
|
|
$
|
50,005
|
|
|
$
|
—
|
|
|
$
|
76,914
|
|
Accrued compensation and benefits
|
|
11,495
|
|
|
1,657
|
|
|
13,269
|
|
|
—
|
|
|
26,421
|
|
Current maturities of debt
|
|
7,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,500
|
|
Income taxes payable
|
|
—
|
|
|
—
|
|
|
4,838
|
|
|
—
|
|
|
4,838
|
|
Liabilities from discontinued operations
|
|
1,217
|
|
|
29,292
|
|
|
113,254
|
|
|
—
|
|
|
143,763
|
|
Other current liabilities
|
|
17,556
|
|
|
2,388
|
|
|
21,021
|
|
|
—
|
|
|
40,965
|
|
Total current liabilities
|
|
61,446
|
|
|
36,568
|
|
|
202,387
|
|
|
—
|
|
|
300,401
|
|
Long-term debt
|
|
452,945
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
452,945
|
|
Deferred income taxes
|
|
(4
|
)
|
|
—
|
|
|
1,568
|
|
|
—
|
|
|
1,564
|
|
Pension and post-retirement benefit liabilities
|
|
12,005
|
|
|
—
|
|
|
8,208
|
|
|
—
|
|
|
20,213
|
|
Other long-term liabilities
|
|
44,621
|
|
|
114
|
|
|
3,237
|
|
|
—
|
|
|
47,972
|
|
Intercompany payable
|
|
638,929
|
|
|
340,960
|
|
|
—
|
|
|
(979,889
|
)
|
|
—
|
|
Shareholders’ equity
|
|
301,179
|
|
|
757,177
|
|
|
1,895,729
|
|
|
(2,652,906
|
)
|
|
301,179
|
|
Total liabilities and shareholders’ equity
|
|
$
|
1,511,121
|
|
|
$
|
1,134,819
|
|
|
$
|
2,111,129
|
|
|
$
|
(3,632,795
|
)
|
|
$
|
1,124,274
|
|
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
|
|
$
|
67,945
|
|
|
$
|
—
|
|
|
$
|
182,545
|
|
|
$
|
—
|
|
|
$
|
250,490
|
|
Accounts receivable, net
|
|
19,969
|
|
|
15,634
|
|
|
87,658
|
|
|
—
|
|
|
123,261
|
|
Inventories, net
|
|
22,646
|
|
|
5,121
|
|
|
44,253
|
|
|
—
|
|
|
72,020
|
|
Assets from discontinued operations
|
|
(1,144
|
)
|
|
255,676
|
|
|
314,401
|
|
|
—
|
|
|
568,933
|
|
Other current assets
|
|
6,953
|
|
|
2,421
|
|
|
23,155
|
|
|
—
|
|
|
32,529
|
|
Total current assets
|
|
116,369
|
|
|
278,852
|
|
|
652,012
|
|
|
—
|
|
|
1,047,233
|
|
Property, plant & equipment, net
|
|
7,634
|
|
|
4,481
|
|
|
42,859
|
|
|
—
|
|
|
54,974
|
|
Goodwill
|
|
38,847
|
|
|
57,342
|
|
|
183,943
|
|
|
—
|
|
|
280,132
|
|
Other intangible assets, net
|
|
6,884
|
|
|
17,294
|
|
|
47,479
|
|
|
—
|
|
|
71,657
|
|
Investment in subsidiaries
|
|
1,836,879
|
|
|
918,050
|
|
|
301,782
|
|
|
(3,056,711
|
)
|
|
—
|
|
Intercompany receivables
|
|
—
|
|
|
—
|
|
|
937,259
|
|
|
(937,259
|
)
|
|
—
|
|
Other long-term assets
|
|
14,972
|
|
|
50
|
|
|
16,199
|
|
|
—
|
|
|
31,221
|
|
Total assets
|
|
$
|
2,021,585
|
|
|
$
|
1,276,069
|
|
|
$
|
2,181,533
|
|
|
$
|
(3,993,970
|
)
|
|
$
|
1,485,217
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
16,091
|
|
|
$
|
2,646
|
|
|
$
|
50,847
|
|
|
$
|
—
|
|
|
$
|
69,584
|
|
Accrued compensation and benefits
|
|
19,643
|
|
|
1,774
|
|
|
14,575
|
|
|
—
|
|
|
35,992
|
|
Current maturities of debt
|
|
30,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,000
|
|
Income taxes payable
|
|
—
|
|
|
—
|
|
|
4,091
|
|
|
—
|
|
|
4,091
|
|
Liabilities from discontinued operations
|
|
17,839
|
|
|
20,384
|
|
|
122,350
|
|
|
—
|
|
|
160,573
|
|
Other current liabilities
|
|
17,380
|
|
|
6,017
|
|
|
30,371
|
|
|
—
|
|
|
53,768
|
|
Total current liabilities
|
|
100,953
|
|
|
30,821
|
|
|
222,234
|
|
|
—
|
|
|
354,008
|
|
Long-term debt
|
|
502,695
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
502,695
|
|
Deferred income taxes
|
|
2,415
|
|
|
—
|
|
|
1,532
|
|
|
—
|
|
|
3,947
|
|
Pension and post-retirement benefit liabilities
|
|
7,765
|
|
|
—
|
|
|
6,192
|
|
|
—
|
|
|
13,957
|
|
Other long-term liabilities
|
|
45,483
|
|
|
265
|
|
|
6,150
|
|
|
—
|
|
|
51,898
|
|
Intercompany payable
|
|
803,562
|
|
|
133,697
|
|
|
—
|
|
|
(937,259
|
)
|
|
—
|
|
Shareholders’ equity
|
|
558,712
|
|
|
1,111,286
|
|
|
1,945,425
|
|
|
(3,056,711
|
)
|
|
558,712
|
|
Total liabilities and shareholders’ equity
|
|
$
|
2,021,585
|
|
|
$
|
1,276,069
|
|
|
$
|
2,181,533
|
|
|
$
|
(3,993,970
|
)
|
|
$
|
1,485,217
|
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended August 31, 2019
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) operating activities - continuing operations
|
|
$
|
182,274
|
|
|
$
|
107,127
|
|
|
$
|
(6,856
|
)
|
|
$
|
(241,642
|
)
|
|
$
|
40,903
|
|
Cash (used in) provided by operating activities - discontinued operations
|
|
(163,135
|
)
|
|
147,274
|
|
|
136,264
|
|
|
(107,461
|
)
|
|
12,942
|
|
Cash provided by operating activities
|
|
19,139
|
|
|
254,401
|
|
|
129,408
|
|
|
(349,103
|
)
|
|
53,845
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(2,292
|
)
|
|
(2,042
|
)
|
|
(10,589
|
)
|
|
—
|
|
|
(14,923
|
)
|
Proceeds from sale of property, plant and equipment
|
|
2
|
|
|
—
|
|
|
1,460
|
|
|
—
|
|
|
1,462
|
|
Intercompany investment
|
|
47,104
|
|
|
—
|
|
|
(49,366
|
)
|
|
2,262
|
|
|
—
|
|
Cash provided by (used in) investing activities - continuing operations
|
|
44,814
|
|
|
(2,042
|
)
|
|
(58,495
|
)
|
|
2,262
|
|
|
(13,461
|
)
|
Cash provided by (used in) investing activities - discontinued operations
|
|
21,039
|
|
|
(3,288
|
)
|
|
30,988
|
|
|
(24,232
|
)
|
|
24,507
|
|
Cash provided by (used in) investing activities
|
|
65,853
|
|
|
(5,330
|
)
|
|
(27,507
|
)
|
|
(21,970
|
)
|
|
11,046
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
Payment for redemption of term loan
|
|
(200,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(200,000
|
)
|
Proceeds from issuance of term loan
|
|
200,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
200,000
|
|
Principal Repayments on term loan
|
|
(72,500
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(72,500
|
)
|
Purchase of treasury shares
|
|
(22,481
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(22,481
|
)
|
Taxes paid related to the net share settlement of equity awards
|
|
(1,872
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,872
|
)
|
Stock option exercises, related tax benefits and other
|
|
1,900
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,900
|
|
Cash dividends
|
|
(2,439
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,439
|
)
|
Payment of debt issuance costs
|
|
(2,125
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,125
|
)
|
Intercompany dividends paid
|
|
—
|
|
|
(30,465
|
)
|
|
(85,941
|
)
|
|
116,406
|
|
|
—
|
|
Intercompany loan activity
|
|
(5,839
|
)
|
|
—
|
|
|
(21,894
|
)
|
|
27,733
|
|
|
—
|
|
Intercompany capital contribution
|
|
—
|
|
|
(42,539
|
)
|
|
(80,880
|
)
|
|
123,419
|
|
|
—
|
|
Cash used in financing activities - continuing operations
|
|
(105,356
|
)
|
|
(73,004
|
)
|
|
(188,715
|
)
|
|
267,558
|
|
|
(99,517
|
)
|
Cash (used in) provided by financing activities - discontinued operations
|
|
—
|
|
|
(176,067
|
)
|
|
72,552
|
|
|
103,515
|
|
|
—
|
|
Cash used in financing activities
|
|
(105,356
|
)
|
|
(249,071
|
)
|
|
(116,163
|
)
|
|
371,073
|
|
|
(99,517
|
)
|
Effect of exchange rate changes on cash
|
|
—
|
|
|
—
|
|
|
(4,713
|
)
|
|
—
|
|
|
(4,713
|
)
|
Net decrease in cash and cash equivalents
|
|
(20,364
|
)
|
|
—
|
|
|
(18,975
|
)
|
|
—
|
|
|
(39,339
|
)
|
Cash and cash equivalents—beginning of period
|
|
67,945
|
|
|
—
|
|
|
182,545
|
|
|
—
|
|
|
250,490
|
|
Cash and cash equivalents—end of period
|
|
$
|
47,581
|
|
|
$
|
—
|
|
|
$
|
163,570
|
|
|
$
|
—
|
|
|
$
|
211,151
|
|
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
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities - continuing operations
|
|
$
|
66,416
|
|
|
$
|
11,374
|
|
|
$
|
60,866
|
|
|
$
|
(66,740
|
)
|
|
$
|
71,916
|
|
Cash provided by operating activities - discontinued operations
|
|
(3,123
|
)
|
|
13,399
|
|
|
23,944
|
|
|
(43
|
)
|
|
34,177
|
|
Cash provided by operating activities
|
|
63,293
|
|
|
24,773
|
|
|
84,810
|
|
|
(66,783
|
)
|
|
106,093
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(2,822
|
)
|
|
(2,320
|
)
|
|
(5,879
|
)
|
|
—
|
|
|
(11,021
|
)
|
Proceeds from sale of property, plant and equipment
|
|
—
|
|
|
—
|
|
|
104
|
|
|
—
|
|
|
104
|
|
Intercompany investment
|
|
(11,754
|
)
|
|
—
|
|
|
—
|
|
|
11,754
|
|
|
—
|
|
Rental asset buyout for Viking divestiture
|
|
—
|
|
|
—
|
|
|
(27,718
|
)
|
|
—
|
|
|
(27,718
|
)
|
Proceeds from sale of business, net of transaction costs
|
|
198
|
|
|
—
|
|
|
8,704
|
|
|
—
|
|
|
8,902
|
|
Cash paid for business acquisitions, net of cash acquired
|
|
—
|
|
|
(1,732
|
)
|
|
(21,486
|
)
|
|
—
|
|
|
(23,218
|
)
|
Cash provided by (used in) investing activities - continuing operations
|
|
(14,378
|
)
|
|
(4,052
|
)
|
|
(46,275
|
)
|
|
11,754
|
|
|
(52,951
|
)
|
Cash provided by (used in) investing activities - discontinued operations
|
|
—
|
|
|
(2,664
|
)
|
|
(7,137
|
)
|
|
1
|
|
|
(9,800
|
)
|
Cash used in investing activities
|
|
(14,378
|
)
|
|
(6,716
|
)
|
|
(53,412
|
)
|
|
11,755
|
|
|
(62,751
|
)
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
Principal repayments 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 dividends
|
|
(2,390
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,390
|
)
|
Intercompany dividends paid
|
|
—
|
|
|
—
|
|
|
(28,822
|
)
|
|
28,822
|
|
|
—
|
|
Intercompany loan activity
|
|
2,041
|
|
|
(18,057
|
)
|
|
105,386
|
|
|
(89,370
|
)
|
|
—
|
|
Intercompany capital contribution
|
|
—
|
|
|
—
|
|
|
100
|
|
|
(100
|
)
|
|
—
|
|
Cash used in financing activities - continuing operations
|
|
(15,952
|
)
|
|
(18,057
|
)
|
|
76,664
|
|
|
(60,648
|
)
|
|
(17,993
|
)
|
Cash used in financing activities - discontinued operations
|
|
—
|
|
|
—
|
|
|
(115,676
|
)
|
|
115,676
|
|
|
—
|
|
Cash used in financing activities
|
|
(15,952
|
)
|
|
(18,057
|
)
|
|
(39,012
|
)
|
|
55,028
|
|
|
(17,993
|
)
|
Effect of exchange rate changes on cash
|
|
—
|
|
|
—
|
|
|
(4,430
|
)
|
|
—
|
|
|
(4,430
|
)
|
Net decrease in cash and cash equivalents
|
|
32,963
|
|
|
—
|
|
|
(12,044
|
)
|
|
—
|
|
|
20,919
|
|
Cash and cash equivalents—beginning of period
|
|
34,982
|
|
|
—
|
|
|
194,589
|
|
|
$
|
—
|
|
|
229,571
|
|
Cash and cash equivalents—end of period
|
|
$
|
67,945
|
|
|
$
|
—
|
|
|
$
|
182,545
|
|
|
$
|
—
|
|
|
$
|
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
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities - continuing operations
|
|
$
|
112,557
|
|
|
$
|
(93,067
|
)
|
|
$
|
(201,903
|
)
|
|
$
|
230,505
|
|
|
$
|
48,092
|
|
Cash provided by operating activities - discontinued operations
|
|
(23,697
|
)
|
|
14,820
|
|
|
42,748
|
|
|
6,536
|
|
|
40,407
|
|
Cash provided by operating activities
|
|
88,860
|
|
|
(78,247
|
)
|
|
(159,155
|
)
|
|
237,041
|
|
|
88,499
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(2,697
|
)
|
|
(1,824
|
)
|
|
(12,717
|
)
|
|
—
|
|
|
(17,238
|
)
|
Proceeds from sale of property, plant and equipment
|
|
—
|
|
|
—
|
|
|
448
|
|
|
—
|
|
|
448
|
|
Intercompany investment
|
|
2,882
|
|
|
78,154
|
|
|
(26,600
|
)
|
|
(54,436
|
)
|
|
—
|
|
Cash provided by (used in) investing activities - continuing operations
|
|
185
|
|
|
76,330
|
|
|
(38,869
|
)
|
|
(54,436
|
)
|
|
(16,790
|
)
|
Cash provided by (used in) investing activities - discontinued operations
|
|
—
|
|
|
(3,436
|
)
|
|
(7,399
|
)
|
|
—
|
|
|
(10,835
|
)
|
Cash used in investing activities
|
|
185
|
|
|
72,894
|
|
|
(46,268
|
)
|
|
(54,436
|
)
|
|
(27,625
|
)
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
Principal Repayments on term loan
|
|
(18,750
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,750
|
)
|
Redemption of 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
|
|
Cash dividends
|
|
(2,358
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,358
|
)
|
Intercompany dividends paid
|
|
—
|
|
|
—
|
|
|
231,688
|
|
|
(231,688
|
)
|
|
—
|
|
Intercompany loan activity
|
|
(47,780
|
)
|
|
—
|
|
|
47,780
|
|
|
—
|
|
|
—
|
|
Intercompany capital contribution
|
|
—
|
|
|
—
|
|
|
(54,436
|
)
|
|
54,436
|
|
|
—
|
|
Cash used in financing activities - continuing operations
|
|
(62,188
|
)
|
|
—
|
|
|
225,032
|
|
|
(177,252
|
)
|
|
(14,408
|
)
|
Cash used in financing activities - discontinued operations
|
|
—
|
|
|
5,353
|
|
|
(742
|
)
|
|
(5,353
|
)
|
|
(742
|
)
|
Cash used in financing activities
|
|
(62,188
|
)
|
|
5,353
|
|
|
224,290
|
|
|
(182,605
|
)
|
|
(15,150
|
)
|
Effect of exchange rate changes on cash
|
|
—
|
|
|
—
|
|
|
4,243
|
|
|
—
|
|
|
4,243
|
|
Net decrease in cash and cash equivalents
|
|
26,857
|
|
|
—
|
|
|
23,110
|
|
|
—
|
|
|
49,967
|
|
Cash and cash equivalents—beginning of period
|
|
8,125
|
|
|
$
|
—
|
|
|
171,479
|
|
|
—
|
|
|
179,604
|
|
Cash and cash equivalents—end of period
|
|
$
|
34,982
|
|
|
$
|
—
|
|
|
$
|
194,589
|
|
|
$
|
—
|
|
|
$
|
229,571
|
|
ACTUANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Note 18. 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 19. Quarterly Financial Data (Unaudited)
Quarterly financial data for fiscal 2019 and fiscal 2018 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to date August 31, 2019
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Total
|
Net sales
|
|
$
|
158,551
|
|
|
$
|
159,788
|
|
|
$
|
178,095
|
|
|
$
|
158,324
|
|
|
$
|
654,758
|
|
Gross profit
|
|
70,312
|
|
|
71,316
|
|
|
81,954
|
|
|
69,070
|
|
|
292,652
|
|
Net (loss) earnings from continuing operations
|
|
(16,423
|
)
|
|
765
|
|
|
26,858
|
|
|
(3,133
|
)
|
|
8,067
|
|
Net (loss) earnings per share from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.27
|
)
|
|
$
|
0.01
|
|
|
$
|
0.44
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.13
|
|
Diluted
|
|
$
|
(0.27
|
)
|
|
$
|
0.01
|
|
|
$
|
0.43
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to date August 31, 2018
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Total
|
Net sales
|
|
$
|
155,767
|
|
|
$
|
148,601
|
|
|
$
|
170,466
|
|
|
$
|
166,469
|
|
|
$
|
641,303
|
|
Gross profit
|
|
68,704
|
|
|
62,216
|
|
|
79,003
|
|
|
73,361
|
|
|
283,284
|
|
Net (loss) earnings from continuing operations
|
|
(2,841
|
)
|
|
(21,568
|
)
|
|
17,827
|
|
|
11,328
|
|
|
4,746
|
|
Net (loss) earnings per share from continuing operations :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.05
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
0.29
|
|
|
$
|
0.19
|
|
|
$
|
0.08
|
|
Diluted
|
|
$
|
(0.05
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
0.29
|
|
|
$
|
0.18
|
|
|
$
|
0.08
|
|
The total of the individual quarters may not equal the annual or year-to-date total due to rounding.
During the year ended August 31, 2019, the Company recognized impairment and divestiture charges of $22.8 million of which $23.5 million was recorded in the first quarter, $6.1 million in the second quarter, a benefit of $13.0 million in the third quarter and a charge of $6.2 million in the fourth quarter (see Note 6, "Goodwill, Intangible Assets and Long-Lived Assets").