ENERPAC TOOL GROUP CORP - FORM 10-Q

ENERPAC TOOL GROUP CORP - FORM 10-Q - April 9, 2018

Attached files

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - ENERPAC TOOL GROUP CORP	atu-20180228exhibit322.htm
EX-32.1 - EXHIBIT 32.1 - ENERPAC TOOL GROUP CORP	atu-20180228exhibit321.htm
EX-31.2 - EXHIBIT 31.2 - ENERPAC TOOL GROUP CORP	atu-20180228exhibit312.htm
EX-31.1 - EXHIBIT 31.1 - ENERPAC TOOL GROUP CORP	atu-20180228exhibit311.htm
EX-10.3 - EXHIBIT 10.3 - ENERPAC TOOL GROUP CORP	atu-20180228exhibit103.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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(Mark One)



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

For the quarterly period ended February 28, 2018



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

Commission File No. 1-11288

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ACTUANT CORPORATION

(Exact name of registrant as specified in its charter)

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

N86 W12500 WESTBROOK CROSSING

MENOMONEE FALLS, WISCONSIN 53051

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

(Address of principal executive offices)

(262) 293-1500

(Registrant’s telephone number, including area code)

————————————

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ¨ No ¨

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

The number of shares outstanding of the registrant’s Class A Common Stock as of March 31, 2018 was 60,686,435.

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TABLE OF CONTENTS



	Page No.

Part I—Financial Information

Item 1—Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Statements of Operations	3

Condensed Consolidated Statements of Comprehensive Income (Loss)	4

Condensed Consolidated Balance Sheets	5

Condensed Consolidated Statements of Cash Flows	6

Notes to Condensed Consolidated Financial Statements	7

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3—Quantitative and Qualitative Disclosures about Market Risk	30

Item 4—Controls and Procedures	31

Part II—Other Information

Item 2—Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 6—Exhibits	32

FORWARD LOOKING STATEMENTS AND CAUTIONARY FACTORS

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

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


•	economic uncertainty or a prolonged economic downturn;


•	end market conditions in the industrial, oil & gas, energy, power generation, infrastructure, commercial construction, truck, automotive, specialty vehicle, mining and agriculture industries;


•	competition in the markets we serve and market acceptance of existing and new products;


•	a material disruption at a significant manufacturing facility;


•	our ability to successfully identify and integrate acquisitions and realize anticipated benefits/results from acquired companies;


•	divestitures and/or discontinued operations including retained liabilities from businesses that we sell;


•	operating margin risk due to competitive pricing, operating inefficiencies, production levels and material, labor and overhead cost increases;


•	our international operations present special risks, primarily from currency exchange rate fluctuations, exposure to local economic and political conditions, export and import restrictions and controls on repatriation of cash;


•	regulatory and legal developments including changes to United States taxation rules, conflict mineral supply chain compliance, environmental laws and governmental climate change initiatives;


•	the potential for a non-cash asset impairment charge, if operating performance or the outlook for one or more of our businesses were to fall significantly below current levels;


•	our ability to execute restructuring actions and the realization of anticipated cost savings from those restructuring actions and cost reduction efforts;

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


•	due to the assembly nature of our operations we purchase a significant amount of components from suppliers and our reliance on suppliers involves certain risks;


•	litigation, including product liability and warranty claims;


•	inadequate intellectual property protection or if our products are deemed to infringe on the intellectual property of others;


•	our level of indebtedness, ability to comply with the financial and other covenants in our debt agreements and fluctuations in interest rates; and


•	numerous other matters including those of a political, economic, business, competitive and regulatory nature contained from time to time in U.S. Securities and Exchange Commission ("SEC") filings, including, but not limited to, those factors listed in the "Risk Factors" section within Item 1A of Part I of the Form 10-K filed with the SEC on October 26, 2017.

When used herein, the terms “Actuant,” “we,” “us,” “our” and the “Company” refer to Actuant Corporation and its subsidiaries. Actuant Corporation provides free-of-charge access to its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments thereto, through its website, www.actuant.com, as soon as reasonably practical after such reports are electronically filed with the SEC.

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PART I—FINANCIAL INFORMATION

Item 1—Financial Statements

ACTUANT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)



	Three Months Ended February 28,					Six Months Ended February 28,
	2018			2017		2018			2017
Net sales	$	275,165		$	258,869	$	564,120		$	524,662
Cost of products sold	185,469			171,543		373,513			344,269
Gross profit	89,696			87,326		190,607			180,393
Selling, administrative and engineering expenses	68,502			66,957		142,980			135,561
Amortization of intangible assets	5,168			5,069		10,299			10,330
Director & officer transition charges	—			—		—			7,784
Restructuring charges	3,450			2,101		10,079			5,048
Impairment & divestiture charges	2,987			—		2,987			—
Operating profit	9,589			13,199		24,262			21,670
Financing costs, net	7,604			7,334		15,118			14,467
Other expense (income), net	367			591		696			(38		)
Earnings before income tax expense (benefit)	1,618			5,274		8,448			7,241
Income tax expense (benefit)	19,839			200		21,443			(2,798		)
Net (loss) earnings	$	(18,221	)	$	5,074	$	(12,995	)	$	10,039

(Loss) earnings per share
Basic	$	(0.30	)	$	0.09	$	(0.22	)	$	0.17
Diluted	$	(0.30	)	$	0.08	$	(0.22	)	$	0.17

Weighted average common shares outstanding:
Basic	60,318			59,368		60,095			59,170
Diluted	60,318			60,146		60,095			59,881

See accompanying Notes to Condensed Consolidated Financial Statements

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ACTUANT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)



	Three Months Ended February 28,					Six Months Ended February 28,
	2018			2017		2018			2017
Net (loss) earnings	$	(18,221	)	$	5,074	$	(12,995	)	$	10,039
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	13,237			2,909		16,135			(23,749		)
Foreign currency translation due to divested business	67,645			—		67,645			—
Pension and other postretirement benefit plans	127			202		254			738
Total other comprehensive income (loss), net of tax	81,009			3,111		84,034			(23,011		)
Comprehensive income (loss)	$	62,788		$	8,185	$	71,039		$	(12,972	)

See accompanying Notes to Condensed Consolidated Financial Statements

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ACTUANT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)



	February 28, 2018			August 31, 2017
ASSETS
Current assets
Cash and cash equivalents	$	153,595		$	229,571
Accounts receivable, net	210,650			190,206
Inventories, net	166,227			143,651
Assets held for sale	—			21,835
Other current assets	60,569			61,663
Total current assets	591,041			646,926
Property, plant and equipment
Land, buildings and improvements	48,457			43,737
Machinery and equipment	241,393			227,535
Gross property, plant and equipment	289,850			271,272
Less: Accumulated depreciation	(187,439		)	(176,751		)
Property, plant and equipment, net	102,411			94,521
Goodwill	546,135			530,081
Other intangibles, net	216,370			220,489
Other long-term assets	24,348			24,938
Total assets	$	1,480,305		$	1,516,955
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts payable	$	136,941		$	133,387
Accrued compensation and benefits	41,518			50,939
Current maturities of debt and short-term borrowings	30,000			30,000
Income taxes payable	7,687			6,080
Liabilities held for sale	—			101,083
Other current liabilities	58,368			57,445
Total current liabilities	274,514			378,934
Long-term debt, net	517,318			531,940
Deferred income taxes	23,262			29,859
Pension and postretirement benefit liabilities	19,338			19,862
Other long-term liabilities	56,592			55,821
Total liabilities	891,024			1,016,416
Commitments and contingencies (Note 14)
Shareholders’ equity
Class A common stock, $0.20 par value per share, authorized 168,000,000 shares, issued 81,087,904 and 80,200,110 shares, respectively	16,218			16,040
Additional paid-in capital	155,974			138,449
Treasury stock, at cost, 20,439,434 shares	(617,731		)	(617,731		)
Retained earnings	1,178,047			1,191,042
Accumulated other comprehensive loss	(143,227		)	(227,261		)
Stock held in trust	(2,848		)	(2,696		)
Deferred compensation liability	2,848			2,696
Total shareholders’ equity	589,281			500,539
Total liabilities and shareholders’ equity	$	1,480,305		$	1,516,955

See accompanying Notes to Condensed Consolidated Financial Statements

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ACTUANT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Six Months Ended February 28,
	2018			2017
Operating Activities
Net (loss) earnings	$	(12,995	)	$	10,039
Adjustments to reconcile net (loss) earnings to net cash (used in) provided by operating activities:
Impairment & divestiture charges, including tax expense	12,385			—
Depreciation and amortization	20,385			21,625
Stock based compensation expense	8,292			12,177
(Benefit) expense for deferred income taxes	(7,124		)	551
Amortization of debt issuance costs	826			826
Other non-cash adjustments	200			715
Changes in components of working capital and other, excluding acquisitions and divestitures:
Accounts receivable	(16,872		)	(20,897		)
Inventories	(18,433		)	(394		)
Trade accounts payable	(1,753		)	12,276
Prepaid expenses and other assets	(9,168		)	(10,819		)
Income taxes payable/receivable	17,505			(6,918		)
Accrued compensation and benefits	(9,959		)	(3,704		)
Other accrued liabilities	(5,395		)	(795		)
Cash (used in) provided by operating activities	(22,106		)	14,682
Investing Activities
Capital expenditures	(12,547		)	(14,695		)
Proceeds from sale of property, plant and equipment	113			244
Rental asset buyout for Viking divestiture	(27,718		)	—
Proceeds from sale of business, net of transaction costs	8,780			—
Cash paid for business acquisitions, net of cash acquired	(16,517		)	—
Cash used in investing activities	(47,889		)	(14,451		)
Financing Activities
Principal repayments on term loan	(15,000		)	(7,500		)
Stock option exercises and other	10,305			5,949
Taxes paid related to the net share settlement of equity awards	(1,107		)	(920		)
Cash dividend	(2,390		)	(2,358		)
Cash used in financing activities	(8,192		)	(4,829		)
Effect of exchange rate changes on cash	2,211			(3,116		)
Net decrease in cash and cash equivalents	(75,976		)	(7,714		)
Cash and cash equivalents - beginning of period	229,571			179,604
Cash and cash equivalents - end of period	$	153,595		$	171,890

See accompanying Notes to Condensed Consolidated Financial Statements

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

General

The accompanying unaudited condensed consolidated financial statements of Actuant Corporation (“Actuant,” or the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial reporting and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The condensed consolidated balance sheet data as of August 31, 2017 was derived from the Company’s audited financial statements, but does not include all disclosures required by United States generally accepted accounting principles. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes in the Company’s fiscal 2017 Annual Report on Form 10-K.

In the opinion of management, all adjustments considered necessary for a fair statement of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Operating results for the three and six months ended February 28, 2018 are not necessarily indicative of the results that may be expected for the entire fiscal year ending August 31, 2018.

New Accounting Pronouncements

In March 2016, the FASB issued ASU 2016-09, Stock Compensation: Improvements to Employee Share-Based Payment Accounting, to simplify several aspects of accounting for share-based payment transactions. Under the new guidance it is required, among other items, that all excess tax deficiencies or benefits be recorded as income tax expense or benefit in the statement of operations and not in additional paid-in capital (shareholder's equity). This guidance was adopted on September 1, 2017 and the impact of adopting this guidance had the following effects:


•	for the three and six months ended February 28, 2018, we recorded $1.3 million and $1.5 million, respectively, in excess tax deficiency as an increase to our income tax expense. This requirement was applied prospectively;

•

excess tax benefits are now presented as operating activities in the statement of cash flows, rather than as financing activities. The Company chose to apply this requirement retrospectively, and as a result, reclassified approximately $0.6 million of excess tax benefits recognized during the six months ended February 28, 2017 from financing activities to operating activities in the condensed consolidated statement of cash flows;


•	our computation of diluted earnings per share now excludes the excess tax benefits or deficiencies from the assumed proceeds available to repurchase shares. This requirement was applied prospectively.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. Under ASU 2014-09 and subsequent updates included in ASU 2016-10, ASU 2016-12, ASU 2017-13 and ASU 2017-14, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. It also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This guidance is effective for fiscal years beginning on or after December 15, 2017 (fiscal 2019 for the Company). The Company has begun assessing its various revenue streams to identify performance obligations under these ASUs and the key aspects of the standard that will impact the Company's revenue recognition process. Based upon our preliminary assessments, these standards may impact our allocation of contract revenue between various products and services and the timing of when those revenues are recognized, but do not expect a material or significant impact to amounts recognized. Given the diversity of its commercial arrangements, the Company is continuing to assess the impact these standards may have on its consolidated results of operations, financial position, cash flows and related financial statement disclosures upon adoption.

In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which changes how employers that sponsor defined benefit pension or other postretirement benefit plans present the net periodic benefit cost in the income statement. The new guidance requires the service cost component of net periodic benefit cost to be presented in the same income statement line items as other employee compensation costs arising from services rendered during the period. Other components of the net periodic benefit cost are to be stated separately from service cost and outside of operating income. This guidance is effective for fiscal years beginning after December 15, 2017 (fiscal 2019 for the Company) and interim periods within those annual periods. The amendment is to be applied retrospectively. Due to a majority of the Company's defined benefit pension or other postretirement benefit plans being frozen and the net periodic benefit pension cost not being significant, the Company does not believe that adoption of this guidance will have a significant impact on the financial statements of the Company.

In August 2016, the FASB issued ASU 2016‑15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments, to address how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This guidance is effective for fiscal years beginning after December 15, 2017 (fiscal 2019 for the Company), including interim

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periods within those fiscal years. This update will require adoption on a retrospective basis unless it is impracticable to apply. The Company does not believe that this guidance will have a significant impact on its presentation of the statement of cash flows.

In February 2016, the FASB issued ASU 2016-02, Leases (and subsequent ASU 2018-01), to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset. This guidance is effective for fiscal years beginning after December 15, 2018 (fiscal 2020 for the Company), including interim periods within those fiscal years. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented under a modified retrospective approach using a cumulative effect adjustment in the year of adoption. The Company is currently gathering, documenting and analyzing lease agreements subject to this ASU and anticipates material additions to the balance sheet (upon adoption) of right-of-use assets, offset by the associated liabilities, due to our routine use of operating leases over time.

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows companies to reclassify stranded income tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings in their consolidated financial statements. This guidance is effective for fiscal years beginning after December 15, 2018 (fiscal 2020 for Company), including interim periods within those fiscal years. We are currently evaluating the impact of this new standard on our consolidated financial statements.

Accumulated Other Comprehensive Loss

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



	February 28, 2018		August 31, 2017
Foreign currency translation adjustments	$	124,024	$	207,804
Pension and other postretirement benefit plans, net of tax	19,203		19,457
Accumulated other comprehensive loss	$	143,227	$	227,261

Note 2. Director & Officer Transition Charges

During the six months ended February 28, 2017, the Company recorded separation and transition charges of $7.8 million in connection with the retirement of one director of the Company's Board of Directors and the transition of the Executive Vice President/Chief Financial Officer. The charges were mainly comprised of compensation expense for accelerated equity vesting, severance, outplacement, legal, signing bonus and relocation costs.

Note 3. Restructuring Charges

The Company has committed to various restructuring initiatives including workforce reductions, leadership changes, plant consolidations to reduce manufacturing overhead, satellite office closures, the continued movement of production and product sourcing to low cost alternatives and the centralization and standardization of certain administrative functions. Total restructuring charges for these activities were $4.3 million and $2.1 million in the three months ended February 28, 2018 and 2017, respectively. Year-to-date restructuring charges totaled $10.9 million and $5.0 million for fiscal 2018 and 2017. Approximately $0.8 million of the restructuring charges recognized in the three and six months ended February 28, 2018 were reported in the Consolidated Statements of Operations in “Cost of products sold,” with the balance of the charges reported in “Restructuring charges.” Liabilities for severance will generally be paid during the next twelve months, while future lease payments related to facilities vacated as a result of restructuring will be paid over the underlying remaining lease terms.

The following rollforwards summarize restructuring reserve activity by segment (in thousands):



	Six Months Ended February 28, 2018
	Industrial					Energy			Engineered Solutions			Corporate				Total
Balance as of August 31, 2017	$	202				$	3,613		$	1,792		$	30			$	5,637
Restructuring charges	2,951					3,205			486			4,271				10,913
Cash payments	(868		)			(2,666		)	(1,517		)	(1,648		)		(6,699		)
Other non-cash uses of reserve	(490		)	⁽¹	⁾	(473		)	(192		)	(2,007		)	⁽¹⁾	(3,162		)
Impact of changes in foreign currency rates	(10		)			(83		)	21			—				(72		)
Balance as of February 28, 2018	$	1,785				$	3,596		$	590		$	646			$	6,617

⁽¹⁾ Majority of non-cash uses of reserve represents accelerated equity vesting in connection with employee severance agreements.

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	Six Months Ended February 28, 2017
	Industrial			Energy			Engineered Solutions			Corporate			Total
Balance as of August 31, 2016	$	1,343		$	3,021		$	1,863		$	46		$	6,273
Restructuring charges	1,372			48			3,546			82			5,048
Cash payments	(1,394		)	(973		)	(2,312		)	(83		)	(4,762		)
Other non-cash uses of reserve	(438		)	(14		)	(16		)	(36		)	(504		)
Impact of changes in foreign currency rates	(21		)	44			(8		)	—			15
Balance as of February 28, 2017	$	862		$	2,126		$	3,073		$	9		$	6,070

Note 4. Acquisitions

The Company acquired the stock and certain assets of Mirage Machines, Ltd. ("Mirage") on December 1, 2017 for a purchase price of $16.5 million, net of cash acquired and subject to closing working capital adjustments plus potential future performance-based consideration. This Energy segment tuck-in acquisition is a provider of industrial and energy maintenance tools. This acquisition resulted in the recognition of goodwill in the Company’s consolidated financial statements because the purchase price reflected the future earnings and cash flow potential of Mirage, as well as the complementary strategic fit and resulting synergies. The Company incurred acquisition transaction costs of $0.3 million in the six months ended February 28, 2018 (included in selling, administrative and engineering expenses in the condensed consolidated statement of operations) related to this acquisition.

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 accordingly.

The preliminary purchase price allocation resulted in $8.9 million of goodwill (which is not deductible for tax purposes) and $4.1 million of intangible assets, including $2.3 million of indefinite lived tradenames and $1.8 million of amortizable customer relationships.

Net sales of $1.9 million are included in our consolidated financial results for both the three and six months ended February 28, 2018 related to Mirage. Because the net sales and earnings impact of the Mirage acquisition are not material to the three and six month periods ended February 28, 2018 and 2017, respectively, the Company has not included the pro forma operating result disclosures otherwise required for acquisitions. The following table summarizes the preliminary estimated fair value of the assets acquired and the liabilities assumed, at the date of acquisition, for Mirage (in thousands):



	Total
Accounts receivable, net	$	1,090
Inventories, net	3,004
Other current assets	90
Property, plant & equipment	2,014
Goodwill	8,856
Other intangible assets, net	4,126
Trade accounts payable	(1,299		)
Accrued compensation and benefits	(97		)
Income taxes payable	(586		)
Deferred income taxes	(681		)
Cash paid, net of cash acquired	$	16,517

Note 5. Divestiture Activities

On December 1, 2017, the Company completed the sale of the Viking business for net cash proceeds of $8.8 million, net of transaction costs of $1.6 million, subject to closing working capital adjustments. In the second quarter of fiscal 2018, we recognized an after-tax impairment and divestiture charge of $12.4 million comprised of real estate lease exit charges related to retained facilities that became vacant as a result of the Viking divestiture ($3.0 million) and approximately $9.4 million of associated discrete income

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tax expense. The divestiture results in the Company's exit from the offshore mooring market and will significantly limit our exposure to the upstream, offshore oil & gas market.

The results of the Viking business are not material to the consolidated financial results of the Company and are included in continuing operations. The Viking business had net sales of $6.0 million and $11.5 million in the three and six months ended February 28, 2017, respectively. In addition, net sales were $2.7 million for the six months ended February 28, 2018.

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

Changes in the gross carrying value of intangible assets and goodwill can result from changes in foreign currency exchange rates, business acquisitions, divestitures or impairment charges. The changes in the carrying amount of goodwill for the six months ended February 28, 2018 are as follows (in thousands):



	Industrial		Energy		Engineered Solutions		Total
Balance as of August 31, 2017	$	103,875	$	188,830	$	237,376	$	530,081
Business acquisitions	—		8,856		—		8,856
Impact of changes in foreign currency rates	968		4,180		2,050		7,198
Balance as of February 28, 2018	$	104,843	$	201,866	$	239,426	$	546,135

The gross carrying value and accumulated amortization of the Company’s other intangible assets are as follows (in thousands):



		February 28, 2018						August 31, 2017
	Weighted Average Amortization Period (Years)	Gross Carrying Value		Accumulated Amortization		Net Book Value		Gross Carrying Value		Accumulated Amortization		Net Book Value
Amortizable intangible assets:
Customer relationships	15	$	268,105	$	163,676	$	104,429	$	263,498	$	153,003	$	110,495
Patents	10	30,538		24,918		5,620		30,401		24,027		6,374
Trademarks and tradenames	18	21,396		10,015		11,381		21,498		9,396		12,102
Other intangibles	3	6,777		6,458		319		6,672		6,234		438
Indefinite lived intangible assets:
Tradenames	N/A	94,621		—		94,621		91,080		—		91,080
		$	421,437	$	205,067	$	216,370	$	413,149	$	192,660	$	220,489

The Company estimates that amortization expense will be $10.4 million for the remaining six months of fiscal 2018. Amortization expense for future years is estimated to be: $20.2 million in fiscal 2019, $19.5 million in 2020, $18.6 million in fiscal 2021, $16.6 million in fiscal 2022, $13.6 million in fiscal 2023 and $22.9 million thereafter. The future amortization expense amounts represent estimates and may be impacted by future acquisitions, divestitures or changes in foreign currency exchange rates.

Note 7. Product Warranty Costs

The Company generally offers its customers a warranty on products sold, although warranty periods vary by product type and application. The reserve for future warranty claims is based on historical claim rates and current warranty cost experience. The following is a rollforward of the product warranty reserves for the six months ended February 28, 2018 and 2017 (in thousands):



	Six Months Ended February 28,
	2018			2017
Beginning balance	$	6,616		$	5,592
Provision for warranties	3,403			1,482
Warranty payments and costs incurred	(3,582		)	(3,096		)
Impact of changes in foreign currency rates	213			(101		)
Ending balance	$	6,650		$	3,877

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Note 8. Debt

The following is a summary of the Company’s long-term indebtedness (in thousands):



	February 28, 2018			August 31, 2017
Senior Credit Facility
Revolver	$	—		$	—
Term Loan	262,500			277,500
Total Senior Credit Facility	262,500			277,500
5.625% Senior Notes	287,559			287,559
Total Senior Indebtedness	550,059			565,059
Less: Current maturities of long-term debt	(30,000		)	(30,000		)
Debt issuance costs	(2,741		)	(3,119		)
Total long-term debt, net	$	517,318		$	531,940

The Company’s Senior Credit Facility matures on May 8, 2020 and provides a $600 million revolver, an amortizing term loan and a $450 million expansion option, subject to certain conditions. Borrowings are subject to a pricing grid, which can result in increases or decreases to the borrowing spread, depending on the Company’s leverage ratio, ranging from 1.00% to 2.25% in the case of loans bearing interest at LIBOR and from 0.00% to 1.25% in the case of loans bearing interest at the base rate. As of February 28, 2018, the borrowing spread on LIBOR based borrowings was 2.00% (aggregating to a 3.69% variable rate borrowing cost on the outstanding term loan balance). In addition, a non-use fee is payable quarterly on the average unused credit line under the revolver ranging from 0.15% to 0.35% per annum. As of February 28, 2018, the unused credit line under the revolver was $597.1 million, of which $83.7 million was available for borrowing. Quarterly term loan principal payments of $3.8 million began on June 30, 2016, increased to $7.5 million starting on June 30, 2017 and extend through March 31, 2020, with the remaining principal due at maturity. The Senior Credit Facility, which is secured by substantially all of the Company’s domestic personal property assets, also contains customary limits and restrictions concerning investments, sales of assets, liens on assets, dividends and other payments. The two financial covenants included in the Senior Credit Facility agreement are a maximum leverage ratio of 3.75:1 and a minimum interest coverage ratio of 3.5:1. The Company was in compliance with all financial covenants at February 28, 2018.

On April 16, 2012, the Company issued $300 million of 5.625% Senior Notes due 2022 (the “Senior Notes”), of which $287.6 million remains 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 (ranging from 100.0% to 102.8%), plus accrued and unpaid interest.

Note 9. Fair Value Measurement

The Company assesses the inputs used to measure the fair value of financial assets and liabilities using a three-tier hierarchy. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include management’s own judgments about the assumptions market participation 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 February 28, 2018 and August 31, 2017 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 liability of $0.1 million and $0.2 million at February 28, 2018 and August 31, 2017, respectively. 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 $293.3 million and $295.8 million at February 28, 2018 and August 31, 2017, respectively. The fair value of the Senior Notes was based on quoted inactive market prices and is therefore classified as Level 2 within the valuation hierarchy.

Note 10. Derivatives

All derivatives are recognized in the balance sheet at their estimated fair value. On the date the Company enters into a derivative contract, it designates the derivative as a hedge of a recognized asset or liability (fair value hedge) or a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). The Company does not enter into derivatives for speculative purposes. Changes in the value of fair value hedges and non-designated hedges are recorded in earnings along with the gain or loss on the hedged asset or liability, while changes in the value

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of cash flow hedges are recorded in accumulated other comprehensive loss, until earnings are affected by the variability of cash flows.

The Company is exposed to market risk for changes in foreign currency exchange rates due to the global nature of its operations. In order to manage this risk the Company has historically hedged portions of its forecasted inventory purchases and other cash flows that are denominated in non-functional currencies (cash flow hedges). However, there were no cash flow hedges outstanding at February 28, 2018 and August 31, 2017.

The Company also utilizes foreign currency exchange contracts to reduce the exchange rate risk associated with recognized non-functional currency balances. The effects of changes in exchange rates are reflected concurrently in earnings for both the fair value of the foreign currency exchange contracts and the related non-functional currency asset or liability. 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 condensed consolidated statement of operations). The U.S. dollar equivalent notional value of these short duration foreign currency exchange contracts (fair value hedges or non-designated hedges) was $26.5 million and $22.0 million at February 28, 2018 and August 31, 2017, respectively. The fair value of outstanding foreign currency exchange contracts was a net liability of $0.1 million and $0.2 million at February 28, 2018 and August 31, 2017, respectively. Net foreign currency gain (loss) related to these derivative instruments were as follows (in thousands):



	Three Months Ended February 28,						Six Months Ended February 28,
	2018			2017			2018		2017
Foreign currency (loss) gain, net	$	(74	)	$	(474	)	$	140	$	(1,966	)

Note 11. Capital Stock and Share Repurchases

The Company's Board of Directors authorized the repurchase of shares of the Company's common stock under publicly announced share repurchase programs. Since the inception of the initial share repurchase program in fiscal 2012, the Company has repurchased 20,439,434 shares of common stock for $617.7 million. As of February 28, 2018, the maximum number of shares that may yet be purchased under the programs is 7,560,566 shares. There were no share repurchases in the three and six months ended February 28, 2018.

The reconciliation between basic and diluted (loss) earnings per share is as follows (in thousands, except per share amounts):



	Three Months Ended February 28,					Six Months Ended February 28,
	2018			2017		2018			2017
Numerator:
Net (loss) earnings	$	(18,221	)	$	5,074	$	(12,995	)	$	10,039
Denominator:
Weighted average common shares outstanding - basic	60,318			59,368		60,095			59,170
Net effect of dilutive securities - stock based compensation plans ⁽¹⁾	—			778		—			711
Weighted average common shares outstanding - diluted	60,318			60,146		$	60,095		$	59,881

Basic (loss) earnings per share	$	(0.30	)	$	0.09	$	(0.22	)	$	0.17
Diluted (loss) earnings per share	(0.30		)	0.08		(0.22		)	0.17

Anti-dilutive securities from stock based compensation plans (excluded from earnings per share calculation)	3,397			2,011		2,613			1,987

⁽¹⁾ As a result of the net loss for the three and six months ended February 28, 2018, shares from stock based compensation plans are excluded from the calculation of diluted (loss) earnings per share, as the result would be anti-dilutive.

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Note 12. Income Taxes

The Company's income tax expense or benefit is impacted by a number of factors, including the amount of taxable earnings generated in foreign jurisdictions with tax rates that are lower than the U.S. federal statutory rate, permanent items, state tax rates, changes in tax laws, acquisitions and divestitures and the ability to utilize various tax credits and net operating loss carryforwards. The Company's global operations, acquisition activity and specific tax attributes provide opportunities for continuous global tax planning initiatives to maximize tax credits and deductions. Both fiscal 2018 and 2017 include the benefits of tax planning initiatives. Comparative earnings (loss) before income taxes, income tax expense or benefit and effective income tax rates are as follows (amounts in thousands):



	Three Months Ended February 28,						Six Months Ended February 28,
	2018			2017			2018			2017
Earnings (loss) before income taxes	$	1,618		$	5,274		$	8,448		$	7,241
Income tax expense (benefit)	19,839			200			21,443			(2,798		)
Effective income tax rate	1,226.1		%	3.8		%	253.8		%	(38.6		)%

The Company’s income tax expense and effective tax rates during the three and six months ended February 28, 2018 were impacted by the Tax Cuts and Jobs Act (the “Act”), which was enacted into law on December 22, 2017. The Act includes significant changes to the U.S. corporate income tax system which reduce the U.S. federal corporate income tax rate from 35.0% to 21.0% as of January 1, 2018; shifts to a modified territorial tax regime which requires companies to pay a transition tax on earnings of certain foreign subsidiaries that were previously deferred from U.S. income tax; and creates new taxes on certain foreign-sourced earnings. The decrease in the U.S. federal corporate income tax rate from 35.0% to 21.0% results in a blended statutory tax rate of 25.7% for the fiscal year ending August 31, 2018. The new taxes for certain foreign-sourced earnings under the Act are effective for the Company in fiscal 2019.

Income tax effects resulting from changes in tax laws are accounted for by the Company in the period in which the law is enacted and the effects are recorded as a component of income tax expense or benefit. As a result, the Company recorded provisional income tax expense resulting from the Act totaling $8.4 million during the three and six months ended February 28, 2018, which includes (i) a transition tax of $16.2 million on the Company’s total post-1986 earnings and profits (“E&P”) which, prior to the Act, were previously deferred from U.S. income tax, (ii) a $16.7 million decrease in income tax expense as a result of the re-measurement of the Company’s deferred tax assets and liabilities to the new corporate tax rate of 21% and (iii) $8.9 million in valuation allowances recorded against foreign tax credits as future utilization is now uncertain.

The amounts recorded are provisional and represent the Company’s best estimate of the tax effects of the Act as of February 28, 2018. Amounts recorded are based in part on a reasonable estimate of the effects on its transition tax and existing deferred tax balances which are subject to change and modification. Provisional amounts recorded may change as a result of the following:

•

The amount recorded for the transition tax liability is a provisional amount based on current estimates of total post-1986 foreign E&P and the income tax pools for all foreign subsidiaries which will continue to be refined over the coming periods. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when the Company finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalizes the amounts held in cash or other specified assets as of August 31, 2018. Further interpretations from U.S. federal and state governments and regulatory organizations may change the provisional tax liability or the accounting treatment of the provisional tax liability. It is anticipated that the amounts resulting from the transition tax will be fully offset by available foreign tax credits and will not result in future cash tax payments. In addition, there is a foreign tax credit carryforward on the balance sheet after the calculation of the transition tax liability. The Company is continuing to analyze the new provisions in order to determine future utilization of the credits and is anticipating further interpretive guidance in connection with the utilization of foreign tax credits going forward. As such, we are not yet able to reasonably estimate the future utilization of the foreign tax credits and have recorded the aforementioned valuation allowance.

•

The Company is still analyzing certain aspects of the Act and refining the estimate of the expected revaluation of its deferred tax balances. This can potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. In addition, the Act provides for accelerated first year expensing of certain capital expenditures for which an estimate has been included in the estimated deferred balances for the year but will continue to be refined as the year progresses. The Act also provides changes related to the limits of deduction for employee compensation. The Company is treating any future non-deductible compensation as impacting deductible compensation expenses in the period incurred until further guidance is provided.


•	The Act also includes a provision designed to tax global intangible low taxed income (GILTI) which will be effective in fiscal 2019. Under the provision, a U.S. shareholder is required to include in gross income the amount of its GILTI, which

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is generally the net income of its controlled foreign corporations in excess of a 10% return on depreciable tangible assets after identification of other income subject to non-deferral rules. Due to the complexity of the new GILTI tax rules and uncertainty of the application of the foreign tax credit rules in relation to GILTI, we are continuing to evaluate this provision of the Act, the application of ASC 740, and are considering available accounting policy alternatives to either record the U.S. income tax effect of future GILTI inclusions in the period in which they arise or establish deferred taxes with respect to the expected future tax liabilities associated with future GILTI inclusions. Our accounting policies depend, in part, on analyzing our global income to determine whether we expect a tax liability resulting from the application of this provision, and, if so, whether and when to record related current and deferred income taxes. Whether we intend to recognize deferred tax liabilities related to the GILTI provisions is dependent, in part, on our assessment of the Company's future operating structure. In addition, we are awaiting further interpretive guidance in connection with the computation of the GILTI tax. For these reasons, we are not yet able to reasonably estimate the effect of this provision of the Act. Therefore, we have not made any adjustments relating to potential GILTI tax in our consolidated financial statements and have not made a policy decision regarding our accounting for GILTI.

•

Prior to the Act, our practice and intention was to reinvest the earnings in our non-U.S. subsidiaries outside of the U.S., and no U.S. deferred income taxes or foreign withholding taxes were recorded. The transition tax noted above will result in the previously untaxed foreign earnings being included in the federal and state fiscal 2018 taxable income. We are currently analyzing our global working capital requirements and the potential tax liabilities that would be incurred if the non-U.S. subsidiaries distribute cash to the U.S. parent, which may include withholding taxes, local country taxes and potential U.S. state taxation. Furthermore, the transition tax will reduce the outside basis differences in our foreign corporations and any remaining temporary difference will potentially have some interaction with the GILTI tax noted above. For these reasons, we are not yet able to reasonably estimate the effect of this provision of the Act and have not recorded any withholding or state tax liabilities, any deferred taxes attributable to GILTI (as noted above) or any deferred taxes attributable to our investment in our foreign subsidiaries.

•

We are also currently analyzing certain additional provisions of the Act that come into effect in fiscal 2019 and will determine if and how these items would impact the effective tax rate in the year the income or expense occurs. These provisions include the Base Erosion Anti-Abuse Tax (BEAT), eliminating U.S. federal income taxes on dividends from foreign subsidiaries, the new provision that could limit the amount of deductible interest expense, and the limitations on the deductibility of certain executive compensation.

The effective tax rate for the six months ended February 28, 2018 was 253.8% compared to (38.6)% for the comparable prior year period. The effective tax rate for the current year results in significantly greater tax expense than the comparable prior year period due to recording the effects of the Act as described above. Additionally, the six months ended February 28, 2018 also include discrete income tax expense of $9.4 million related to the Viking divestiture and $1.5 million related to the shortfall of tax benefits on deductible equity compensation and expiration of unexercised stock options. Both the current and prior year income tax rates were impacted by the proportion of earnings in foreign jurisdictions (with income tax rates lower than the U.S. federal income tax rate) and tax benefits derived from tax planning initiatives which were comparable between years. In addition, the Company may release a material valuation allowance in a foreign jurisdiction in late fiscal 2018 or in fiscal 2019, if the Company determines that it is more likely than not the deferred tax assets will be realized.

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Note 13. Segment Information

The Company is a global manufacturer of a broad range of industrial products and systems and is organized into three reportable segments: Industrial, Energy and Engineered Solutions. The Industrial segment is primarily involved in the design, manufacture and distribution of branded hydraulic and mechanical tools to the maintenance, industrial, infrastructure and production automation markets. The Energy segment provides joint integrity products and services, as well as rope and cable solutions to the global oil & gas, power generation and other markets. Divestiture of the Viking business during the quarter resulted in the elimination of the sale and rental of customized off-shore vessel mooring solutions. The Engineered Solutions segment provides highly engineered position and motion control systems to original equipment manufacturers ("OEM") in various on and off-highway vehicle markets, as well as a variety of other products to the industrial and agricultural markets.

The following tables summarize financial information by reportable segment and product line (in thousands):



	Three Months Ended February 28,						Six Months Ended February 28,
	2018			2017			2018			2017
Net Sales by Reportable Product Line & Segment:
Industrial Segment:
Industrial Tools	$	87,438		$	78,679		$	171,949		$	157,718
Heavy Lifting Technology	11,643			12,969			24,048			21,220
	99,081			91,648			195,997			178,938
Energy Segment:
Energy Maintenance & Integrity	48,889			51,590			105,598			116,411
Other Energy Solutions	17,103			21,294			36,235			41,119
	65,992			72,884			141,833			157,530
Engineered Solutions Segment:
On-Highway	59,297			50,611			124,179			102,242
Agriculture, Off-Highway and Other	50,795			43,726			102,111			85,952
	110,092			94,337			226,290			188,194
	$	275,165		$	258,869		$	564,120		$	524,662
Operating Profit (Loss):
Industrial	$	16,781		$	18,380		$	35,024		$	37,155
Energy ⁽¹⁾	(4,513		)	(579		)	(4,220		)	2,632
Engineered Solutions	2,209			1,816			8,543			2,571
General Corporate	(4,888		)	(6,418		)	(15,085		)	(20,688		)
	$	9,589		$	13,199		$	24,262		$	21,670

⁽¹⁾ Energy segment operating (loss) profit includes impairment and divestiture charges of $3.0 million for both the three and six months ended February 28, 2018.



	February 28, 2018		August 31, 2017
Assets by Segment:
Industrial	$	324,477	$	329,134
Energy	464,018		482,963
Engineered Solutions	548,547		531,068
General Corporate	143,263		173,790
	$	1,480,305	$	1,516,955

In addition to the impact of foreign currency exchange rate changes, the comparability of segment and product line information is impacted by acquisition/divestiture activities, impairment charges, director & officer transition 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.

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Note 14. Commitments and Contingencies

The Company had outstanding letters of credit of $23.4 million and $22.1 million at February 28, 2018 and August 31, 2017, respectively, the majority of which relate to commercial contracts and self-insured workers compensation programs.

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, environmental, labor, patent claims and other disputes. The Company has recorded reserves for loss contingencies based on the specific circumstances of each case. Such reserves are recorded when it is probable that a loss has been incurred and can be reasonably estimated. In the opinion of management, resolution of these contingencies are not expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

The Company remains contingently liable for lease payments under leases of businesses that it previously divested or spun-off, in the event that such businesses are unable to fulfill their future lease payment obligations. The discounted present value of future minimum lease payments for these leases was $12.1 million using a weighted average discount rate of 3.15% at February 28, 2018.

The Company has facilities in numerous geographic locations that are subject to a range of environmental laws and regulations. Environmental expenditures over the past two years have not been material. Management believes that such costs will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Note 15. Guarantor Subsidiaries

As discussed in Note 8, “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 February 28, 2018. All of our material, domestic wholly owned subsidiaries (the “Guarantors”) fully and unconditionally guarantee the 5.625% Senior Notes on a joint and several basis. There are no significant restrictions on the ability of the Guarantors to make distributions to the Parent.

Certain assets, liabilities and expenses have not been allocated to the Guarantors and non-Guarantors and therefore are included in the Parent column in the accompanying condensed 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 Actuant Corporation and its subsidiaries, the Guarantor and non-Guarantor entities, and the eliminations necessary to arrive at the information for the Company on a consolidated basis.

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CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands)



	Three Months Ended February 28, 2018
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales	$	36,219		$	83,072		$	155,874		$	—		$	275,165
Cost of products sold	5,848			63,979			115,642			—			185,469
Gross profit	30,371			19,093			40,232			—			89,696
Selling, administrative and engineering expenses	18,190			17,232			33,080			—			68,502
Amortization of intangible assets	318			2,861			1,989			—			5,168
Restructuring charges	194			909			2,347			—			3,450
Impairment & divestiture charges	4,217			—			(1,230		)	—			2,987
Operating profit (loss)	7,452			(1,909		)	4,046			—			9,589
Financing costs (income), net	7,777			22			(195		)	—			7,604
Intercompany (income) expense, net	(5,042		)	5,419			(377		)	—			—
Other expense, net	90			49			228			—			367
Earnings (loss) before income taxes	4,627			(7,399		)	4,390			—			1,618
Income tax expense (benefit)	10,612			(2,234		)	11,461			—			19,839
Net loss before equity in loss of subsidiaries	(5,985		)	(5,165		)	(7,071		)	—			(18,221		)
Equity in loss of subsidiaries	(12,236		)	(9,454		)	(1,459		)	23,149			—
Net loss	$	(18,221	)	$	(14,619	)	$	(8,530	)	$	23,149		$	(18,221	)
Comprehensive income (loss)	$	62,788		$	(14,619	)	$	74,820		$	(60,201	)	$	62,788

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CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands)



	Three Months Ended February 28, 2017
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales	$	34,953		$	80,973		$	142,943		$	—		$	258,869
Cost of products sold	10,049			61,821			99,673			—			171,543
Gross profit	24,904			19,152			43,270			—			87,326
Selling, administrative and engineering expenses	18,553			16,549			31,855			—			66,957
Amortization of intangible assets	318			2,918			1,833			—			5,069
Restructuring charges	372			441			1,288			—			2,101
Operating profit (loss)	5,661			(756		)	8,294			—			13,199
Financing costs (income), net	7,430			—			(96		)	—			7,334
Intercompany (income) expense, net	(7,882		)	11,242			(3,360		)	—			—
Intercompany dividends	—			(4,258		)	—			4,258			—
Other (income) expense, net	(48		)	(4		)	643			—			591
Earnings (loss) before income taxes	6,161			(7,736		)	11,107			(4,258		)	5,274
Income tax expense (benefit)	151			(667		)	716			—			200
Net earnings (loss) before equity in (loss) earnings of subsidiaries	6,010			(7,069		)	10,391			(4,258		)	5,074
Equity in earnings (loss) of subsidiaries	(936		)	8,057			(268		)	(6,853		)	—
Net earnings	$	5,074		$	988		$	10,123		$	(11,111	)	$	5,074
Comprehensive income	$	8,185		$	1,324		$	12,828		$	(14,152	)	$	8,185

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CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands)



	Six Months Ended February 28, 2018
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales	$	71,929		$	170,906		$	321,285		$	—		$	564,120
Cost of products sold	12,811			128,553			232,149			—			373,513
Gross profit	59,118			42,353			89,136			—			190,607
Selling, administrative and engineering expenses	37,905			35,680			69,395			—			142,980
Amortization of intangible assets	636			5,722			3,941			—			10,299
Restructuring charges	5,550			1,078			3,451			—			10,079
Impairment & divestiture charges	4,217			—			(1,230		)	—			2,987
Operating profit (loss)	10,810			(127		)	13,579			—			24,262
Financing costs (income), net	15,400			43			(325		)	—			15,118
Intercompany (income) expense, net	(9,919		)	10,903			(984		)	—			—
Other expense, net	40			94			562			—			696
Earnings (loss) before income taxes	5,289			(11,167		)	14,326			—			8,448
Income tax expense (benefit)	10,327			(1,797		)	12,913			—			21,443
Net (loss) earnings before equity in loss of subsidiaries	(5,038		)	(9,370		)	1,413			—			(12,995		)
Loss in earnings of subsidiaries	(7,957		)	(661		)	(1,505		)	10,123			—
Net loss	$	(12,995	)	$	(10,031	)	$	(92	)	$	10,123		$	(12,995	)
Comprehensive income (loss)	$	71,039		$	(10,031	)	$	86,386		$	(76,355	)	$	71,039

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CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands)



	Six Months Ended February 28, 2017
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales	$	66,682		$	165,249		$	292,731		$	—		$	524,662
Cost of products sold	17,143			123,237			203,889			—			344,269
Gross profit	49,539			42,012			88,842			—			180,393
Selling, administrative and engineering expenses	36,520			33,185			65,856			—			135,561
Amortization of intangible assets	636			5,994			3,700			—			10,330
Restructuring charges	727			1,164			3,157			—			5,048
Director & officer transition charges	7,784			—			—			—			7,784
Operating profit	3,872			1,669			16,129			—			21,670
Financing costs (income), net	14,756			—			(289		)	—			14,467
Intercompany (income) expense, net	(12,950		)	10,156			2,794			—			—
Intercompany dividends	—			(59,401		)	—			59,401			—
Other expense (income), net	2,037			(74		)	(2,001		)	—			(38		)
Earnings before income taxes	29			50,988			15,625			(59,401		)	7,241
Income tax (benefit) expense	(2,563		)	(697		)	462			—			(2,798		)
Net earnings before equity in earnings of subsidiaries	2,592			51,685			15,163			(59,401		)	10,039
Equity in earnings of subsidiaries	7,447			13,682			2,862			(23,991		)	—
Net earnings	$	10,039		$	65,367		$	18,025		$	(83,392	)	$	10,039
Comprehensive (loss) income	$	(12,972	)	$	47,616		$	13,459		$	(61,075	)	$	(12,972	)

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CONDENSED CONSOLIDATING BALANCE SHEETS

(in thousands)



	February 28, 2018
	Parent		Guarantors		Non-Guarantors		Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	4,276	$	—	$	149,319	$	—		$	153,595
Accounts receivable, net	19,641		52,171		138,838		—			210,650
Inventories, net	26,915		61,363		77,949		—			166,227
Other current assets	14,186		3,263		43,120		—			60,569
Total current assets	65,018		116,797		409,226		—			591,041
Property, plant and equipment, net	8,076		31,661		62,674		—			102,411
Goodwill	38,846		201,578		305,711		—			546,135
Other intangibles, net	7,521		132,320		76,529		—			216,370
Investment in subsidiaries	1,902,303		1,274,274		806,292		(3,982,869		)	—
Intercompany receivable	—		564,517		208,983		(773,500		)	—
Other long-term assets	7,407		1,864		15,077		—			24,348
Total assets	$	2,029,171	$	2,323,011	$	1,884,492	$	(4,756,369	)	$	1,480,305
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable	$	15,469	$	31,079	$	90,393	$	—		$	136,941
Accrued compensation and benefits	13,376		5,239		22,903		—			41,518
Current maturities of debt and short-term borrowings	30,000		—		—		—			30,000
Income taxes payable	152		—		7,535		—			7,687
Other current liabilities	13,683		7,951		36,734		—			58,368
Total current liabilities	72,680		44,269		157,565		—			274,514
Long-term debt, net	517,318		—		—		—			517,318
Deferred income taxes	17,631		—		5,631		—			23,262
Pension and postretirement benefit liabilities	11,942		—		7,396		—			19,338
Other long-term liabilities	48,651		383		7,558		—			56,592
Intercompany payable	771,668		—		1,832		(773,500		)	—
Shareholders’ equity	589,281		2,278,359		1,704,510		(3,982,869		)	589,281
Total liabilities and shareholders’ equity	$	2,029,171	$	2,323,011	$	1,884,492	$	(4,756,369	)	$	1,480,305

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CONDENSED CONSOLIDATING BALANCE SHEETS

(in thousands)

August 31, 2017

Parent

Guarantors

Non-Guarantors

Eliminations

Consolidated

ASSETS

Current assets

Cash and cash equivalents

34,715

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company