Atkore Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this report. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward- looking statements. Factors that could cause or contribute to these differences include those factors discussed below and included or referenced elsewhere in this report, particularly in the sections entitled "Forward-Looking Statements" and "Risk Factors". Impacts of COVID-19 The recent outbreak of the novel coronavirus (COVID-19) has continued to spread and is currently classified as a pandemic which is contributing to significant volatility and uncertainty in markets and the global economy. This heightened volatility and uncertainty makes it difficult for us to predict the extent of COVID-19’s impact on our operations going forward. As of the date of this filing, we have seen volume declines in our business across several product categories, as customers and end markets face some uncertainty and delays in timing of work. In particular, some construction site closures or project delays have occurred, and job sites have had to adjust to increased physical distancing and health-related precautions. Given the continued volatility within the economic impacts of the pandemic it is too early to make any judgment on how significant COVID-19 effect will become. Factors that contribute to our ability to adjust to the outbreak include currently being deemed an “essential business”, benefiting from mostly localized supply chains, and continuing to take actions within our control to minimize the disruptive impacts of the outbreak. However, there can be no assurance that we will not be materially and adversely impacted in the future. The extent to which COVID-19 will impact our business will depend on future developments and public health advancements, which are highly uncertain and cannot be predicted with confidence. Currently, we have no COVID-19 related facility closures as we look to serve our current levels of demand. In response to COVID-19, we have implemented a variety of countermeasures to promote the health and safety of our employees during this pandemic, including health screening, physical distancing practices, enhanced cleaning, use of personal protective equipment, business travel restrictions, and remote work capabilities. Results of Operations The results of operations for the three months ended June 26, 2020 and June 28, 2019 were as follows: Three months ended ($ in thousands) June 26, 2020 June 28, 2019 Change % Change Net sales $ 384,899 $ 493,491 $ (108,592) (22.0) % Cost of sales 289,086 367,357 (78,271) (21.3) % Gross profit 95,813 126,134 (30,321) (24.0) % Selling, general and administrative 46,159 59,049 (12,890) (21.8) % Intangible asset amortization 8,026 7,868 158 2.0 % Operating income 41,628 59,217 (17,589) (29.7) % Interest expense, net 9,421 12,789 (3,368) (26.3) % Other income, net (543) (1,228) 685 (55.8) % Income before income taxes 32,750 47,656 (14,906) (31.3) % Income tax expense 8,672 11,106 (2,434) (21.9) % Net income $ 24,078 $ 36,550 $ (12,472) (34.1) % 27 Net sales % Change Volume (20.7) % Average selling prices (1.8) % Foreign exchange (0.3) % Acquisitions 1.0 % Other (0.2) % Net sales (22.0) % Net sales decreased by $108.6 million, or 22.0%, to $384.9 million for the three months ended June 26, 2020, compared to $493.5 million for the three months ended June 28, 2019. The decrease in net sales is primarily attributed to $102.3 million of lower volume attributed predominantly to the impacts of COVID-19. The Company saw volume declines primarily in the armored cable and fittings and the metal electrical conduit and fittings product categories within the Electrical Raceway segment and the construction services and barbed tape product categories within the MP&S segment. Additionally, net sales decreased $9.1 million due to lower average selling prices resulting from lower input costs of steel and resin. The decrease in net sales was partially offset by increased sales of $5.1 million from the acquisition of the assets of United Structural Products, LLC. ("US Tray") and Rocky Mountain Pipe ("Cor-Tek") and the acquisition of Flytec Systems Ltd. and its parent holding company, Modern Associates Ltd., in fiscal 2019 (together, the "2019 acquisitions"). Cost of sales % Change Volume (20.5) % Average input costs 1.1 % Acquisitions 1.2 % Other (3.1) % Cost of sales (21.3) % Cost of sales decreased by $78.3 million, or 21.3%, to $289.1 million for the three months ended June 26, 2020 compared to $367.4 million for the three months ended June 28, 2019. The decrease was primarily due to lower volume of $75.2 million and the associated freight costs of $6.4 million. Additionally, cost of sales decreased by $1.2 million due to $5.3 million from favorable inventory adjustments related to changes in market prices, partially offset by higher input costs of steel and resin of $4.1 million above the pass through impact of average selling prices. The decrease in cost of sales is partially offset by incremental costs of $4.5 million due to the 2019 acquisitions and higher input costs of steel and resin. Selling, general and administrative Selling, general and administrative expenses decreased by $12.9 million, or 21.8%, to $46.2 million for the three months ended June 26, 2020 compared to $59.0 million for the three months ended June 28, 2019. The decrease was primarily due to cost reduction initiatives as a result of COVID-19, in particular lower variable compensation of $5.1 million, lower medical costs of $1.4 million, reduced travel costs of $1.0 million and lower consulting costs of $1.0 million. Additionally, due to sales volume declines associated with COVID-19, commissions expense decreased $3.1 million. Intangible asset amortization Intangible asset amortization expense increased by $0.1 million, or 2.0%, to $8.0 million for the three months ended June 26, 2020 compared to $7.9 million for the three months ended June 28, 2019. The increase in intangible asset amortization is primarily due to additional amortization resulting from fiscal 2019 acquisitions, partially offset by certain assets that reached the end of their amortized lives by the conclusion of fiscal 2019. 28 Interest expense, net Interest expense, net decreased by $3.4 million, or 26.3% to $9.4 million for the three months ended June 26, 2020 compared to $12.8 million for the three months ended June 28, 2019. The decrease is primarily due to the Company's principal payments in fiscal 2019 resulting in a lower principal balance in fiscal 2020 from which interest expense was derived. Other income, net Other income, net decreased by $0.7 million to $0.5 million for the three months ended June 26, 2020 compared to $1.2 million for the three months ended June 28, 2019 primarily due to gains from the Company's undesignated foreign currency derivative instruments partially offset by foreign exchange losses on intercompany loans. Income tax expense The Company's income tax rate increased to 26.5% for the three months ended June 26, 2020 compared to 23.3% for the three months ended June 28, 2019. The increase in the current period effective tax rate was primarily due to an increase in losses incurred by our foreign jurisdictions for which we are not able to realize the related tax benefit. Segment results Both segments use Adjusted EBITDA as the primary measure of profit and loss. Segment Adjusted EBITDA is the sum of income (loss) before income taxes, adjusted to exclude unallocated expenses, depreciation and amortization, interest expense, net, restructuring charges, stock-based compensation, certain legal matters, transaction costs and other items, such as inventory reserves and adjustments, loss on disposal of property, plant and equipment, insurance recovery related to damages of property, plant and equipment, release of indemnified uncertain tax positions, and realized or unrealized gain (loss) on foreign currency transactions. We define segment Adjusted EBITDA margin as segment Adjusted EBITDA as a percentage of segment Net sales. Electrical Raceway Three months ended ($ in thousands) June 26, 2020 June 28, 2019 Change % Change Net sales $ 286,046 $ 373,229 $ (87,183) (23.4) % Adjusted EBITDA $ 57,455 $ 76,721 $ (19,266) (25.1) % Adjusted EBITDA margin 20.1 % 20.6 % Net sales % Change Volume (23.5) % Average selling prices (1.0) % Foreign exchange (0.4) % Acquisitions 1.4 % Other 0.1 % Net sales (23.4) % Net sales decreased by $87.2 million, or 23.4%, to $286.0 million for the three months ended June 26, 2020 compared to $373.2 million for the three months ended June 28, 2019. The decrease in net sales is primarily driven by $87.6 million in lower volume attributed primarily to impacts of COVID-19. The Electrical Raceway segment saw volume declines in the armored cable and fittings and the metal electrical conduit and fittings product categories. Additionally net sales decreased $3.6 million due to lower average selling prices resulting from lower input costs of steel and resin. The decrease in net sales was partially offset by the 2019 acquisitions, which contributed $5.1 million in sales for the three months ended June 26, 2020. 29 Adjusted EBITDA Adjusted EBITDA for the three months ended June 26, 2020 decreased by $19.3 million, or 25.1%, to $57.5 million from $76.7 million for the three months ended June 28, 2019. Adjusted EBITDA margins decreased to 20.1% for the three months ended June 26, 2020 compared to 20.6% for the three months ended June 28, 2019. The decrease in Adjusted EBITDA was largely due to lower volume, partially offset by the benefit of lower material costs in excess of declines in average selling prices, operational efficiencies and cost reductions in response to COVID-19, and the contributions from the 2019 acquisitions. Mechanical Products & Solutions Three months ended ($ in thousands) June 26, 2020 June 28, 2019 Change % Change Net sales $ 99,487 $ 120,596 $ (21,109) (17.5) % Adjusted EBITDA $ 12,243 $ 20,595 $ (8,352) (40.6) % Adjusted EBITDA margin 12.3 % 17.1 % Net sales % Change Volume (12.2) % Average selling prices (4.6) % Other (0.7) % Net sales (17.5) % Net sales decreased by $21.1 million, or 17.5%, for the three months ended June 26, 2020 to $99.5 million compared to $120.6 million for the three months ended June 28, 2019. The decrease is primarily attributed to lower volume of $14.7 million primarily attributed to the impacts of COVID-19 and certain one-time projects in the prior year period within the construction services and barbed tape product categories. Additionally, net sales decreased due to lower average selling prices resulting from the lower input cost of steel of $5.5 million. Adjusted EBITDA Adjusted EBITDA decreased by $8.4 million, or 40.6%, to $12.2 million for the three months ended June 26, 2020 compared to $20.6 million for the three months ended June 28, 2019. Adjusted EBITDA margins decreased to 12.3% for the three months ended June 26, 2020 compared to 17.1% for the three months ended June 28, 2019. The Adjusted EBITDA decrease is primarily due to the lower volume and the mix of products sold in the prior year period, partially offset by cost reductions in response to COVID-19. The results of operations for the nine months ended June 26, 2020 and June 28, 2019 were as follows: 30 Nine months ended ($ in thousands) June 26, 2020 June 28, 2019 Change % Change Net sales $ 1,288,001 $ 1,414,828 $ (126,827) (9.0) % Cost of sales 943,741 1,061,350 (117,609) (11.1) % Gross profit 344,260 353,478 (9,218) (2.6) % Selling, general and administrative 164,734 171,778 (7,044) (4.1) % Intangible asset amortization 24,210 24,278 (68) (0.3) % Operating income 155,316 157,422 (2,106) (1.3) % Interest expense, net 30,605 38,277 (7,672) (20.0) % Other income, net (2,462) (3,422) 960 (28.1) % Income before income taxes 127,173 122,567 4,606 3.8 % Income tax expense 29,112 29,513 (401) (1.4) % Net income $ 98,061 $ 93,054 $ 5,007 5.4 % Net sales % Change Volume (6.6) % Average selling prices (4.1) % Foreign exchange (0.2) % Acquisitions 2.0 % Other (0.1) % Net sales (9.0) % Net sales decreased by $126.8 million, or 9.0%, to $1,288.0 million for the nine months ended June 26, 2020 compared to $1,414.8 million for the nine months ended June 28, 2019. The decrease is primarily attributed to lower volume of $92.8 million predominantly due to the impacts of COVID-19. The Company experienced volume declines in the armored cable and fittings and the metal electrical conduit and fittings product categories within the Electrical Raceway segment and the construction services and barbed tape product categories within the MP&S segment. The decrease in volume is partially offset by volume gains in the PVC electrical conduit and fittings product category within the Electrical Raceway segment and the mechanical pipe product category within the MP&S segment. Additionally, net sales decreased $57.8 million due to lower average selling prices resulting from lower input costs of steel and resin. The decrease in net sales was partially offset by $28.1 million of sales from the 2019 acquisitions. Cost of sales % Change Volume (6.5) % Average input costs (6.0) % Foreign exchange (0.2) % Acquisitions 2.2 % Other (0.6) % Cost of sales (11.1) % Cost of sales decreased by $117.6 million, or 11.1% to $943.7 million for the nine months ended June 26, 2020 compared to $1,061.4 million for the nine months ended June 28, 2019. The decrease was primarily due to lower volume of $69.1 million, the lower input costs of steel and resin of $63.3 million, and $6.9 million f rom favorable inventory adjustments related to changes in market prices. The decrease was partially offset by incremental costs related to the 2019 acquisitions of $23.5 million. 31 Selling, general and administrative Selling, general and administrative expenses decreased by $7.0 million, or 4.1% to $164.7 million for the nine months ended June 26, 2020 compared to $171.8 million for the nine months ended June 28, 2019. The decrease in selling, general and administrative expenses was primarily due to cost reduction incentives as a result of COVID-19, in particular lower variable compensation related expenses of $6.7 million. Intangible asset amortization Intangible asset amortization expense decreased by $0.1 million, or 0.3% to $24.2 million for the nine months ended June 26, 2020 compared to $24.3 million for the nine months ended June 28, 2019. The decrease in intangible asset amortization is primarily due to certain assets that reached the end of their amortized lives by the conclusion of fiscal 2019, partially offset by additional amortization resulting from the fiscal 2019 acquisitions. Interest expense, net Interest expense, net, decreased by $7.7 million, or 20.0% to $30.6 million for the nine months ended June 26, 2020 compared to $38.3 million for the nine months ended June 28, 2019. The decrease is primarily due to the Company's principal payments in fiscal 2019 resulting in a lower principal balance in fiscal 2020 from which interest expense was derived. Other income, net Other income, net decreased by $1.0 million to $2.5 million for the nine months ended June 26, 2020 compared to $3.4 million for the nine months ended June 28, 2019 primarily due to lower gains from undesignated foreign currency derivative instruments, partially offset by foreign exchange gains on intercompany loans in the nine months ended June 28, 2019. Income tax expense The Company's income tax rate decreased to 22.9% for the nine months ended June 26, 2020 compared to 24.1% for the nine months ended June 28, 2019. The decrease in the current period effective tax rate was primarily due to an increase in the excess tax benefit associated with stock compensation, partially offset by the increase in losses incurred by our foreign jurisdictions for which we are not able to realize the related tax benefit. Electrical Raceway Nine months ended ($ in thousands) June 26, 2020 June 28, 2019 Change % Change Net sales $ 967,127 $ 1,070,149 $ (103,022) (9.6) % Adjusted EBITDA $ 206,630 $ 212,585 $ (5,955) (2.8) % Adjusted EBITDA margin 21.4 % 19.9 % Net sales % Change Volume (8.8) % Average selling prices (3.0) % Foreign exchange (0.3) % Acquisitions 2.6 % Other (0.1) % Net sales (9.6) % 32 Net sales decreased by $103.0 million, or 9.6%, to $967.1 million for the nine months ended June 26, 2020 compared to $1,070.1 million for the nine months ended June 28, 2019. Net sales decreased by $94.4 million due to lower volume primarily attributed to the impacts of COVID-19. The Electrical Raceway segment experienced declines predominately in the armored cable and fittings and the metal electrical conduit and fittings product categories, partially offset by volume gains in the PVC electrical conduit and fittings product category within the first six months of the year. Additionally, net sales decreased by $32.2 million as a result of lower average selling prices resulting from lower input costs of steel and resin. The decrease in net sales was partially offset by the 2019 acquisitions, which contributed $28.1 million in sales for the nine months ended June 26, 2020. Adjusted EBITDA Adjusted EBITDA for the nine months ended June 26, 2020 decreased by $6.0 million, or 2.8%, to $206.6 million from $212.6 million for the nine months ended June 28, 2019. The decrease in Adjusted EBITDA was largely due to lower volume, partially offset by the benefit of lower material costs in excess of declines in average selling prices, operational efficiencies, and the contributions from the 2019 acquisitions. Mechanical Products & Solutions Nine months ended ($ in thousands) June 26, 2020 June 28, 2019 Change % Change Net sales $ 322,796 $ 345,599 $ (22,803) (6.6) % Adjusted EBITDA $ 45,041 $ 48,903 $ (3,862) (7.9) % Adjusted EBITDA margin 14.0 % 14.2 % Net sales Change (%) Volume 0.4 % Average selling prices (7.4) % Other 0.4 % Net sales (6.6) % Net sales decreased by $22.8 million, or 6.6%, for the nine months ended June 26, 2020 to $322.8 million compared to $345.6 million for the nine months ended June 28, 2019. The decrease is primarily attributed to the pass-through impact of lower average input costs of steel products of $25.6 million. The decrease in net sales is partially offset by higher volume of $1.6 million primarily in the mechanical pipe product category. Adjusted EBITDA Adjusted EBITDA decreased $3.9 million, or 7.9%, to $45.0 million for the nine months ended June 26, 2020 compared to $48.9 million for the nine months ended June 28, 2019. Adjusted EBITDA decreased primarily due to a change in the mix of products sold partially offset by operational efficiencies. Other Matters Our collective bargaining agreement in Harvey, Illinois expired in April 2020. On July 14, 2020, the Company and the United Steelworkers Union reached agreement on the terms of a new collective bargaining agreement which expires in April 2024. Liquidity and Capital Resources We believe we have sufficient liquidity to support our ongoing operations and to invest in future growth and create value for stockholders. Our cash and cash equivalents were $237.3 million as of June 26, 2020, of which $43.4 million was held at non-U.S. subsidiaries. Those cash balances at foreign subsidiaries may be subject to withholding or local country taxes if the Company's intention to permanently reinvest such income were to change and cash was repatriated to the United States. 33 In general, we require cash to fund working capital investments, acquisitions, capital expenditures, debt repayment, interest payments, taxes and share repurchases. We have access to the ABL Credit Facility to fund operational needs. As of June 26, 2020, there were no outstanding borrowings under the ABL Credit Facility and $9.5 million of letters of credit issued under the ABL Credit Facility. The borrowing base was estimated to be $257.3 million and approximately $247.8 million was available under the ABL Credit Facility as of June 26, 2020. Outstanding letters of credit count as utilization of the commitments under the ABL Credit Facility and reduce the amount available for borrowings. The agreements governing the First Lien Term Loan Facility and the ABL Credit Facility (collectively, the "Credit Facilities") contain covenants that limit or restrict AII's ability to incur additional indebtedness, repurchase debt, incur liens, sell assets, make certain payments (including dividends) and enter into transactions with affiliates. AII has been in compliance with the covenants under the agreements for all periods presented. We may from time to time repurchase our debt or take other steps to reduce our debt. These actions may include open market repurchases, negotiated repurchases or opportunistic refinancing of debt. The amount of debt, if any, that may be repurchased or refinanced will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations. Our use of cash may fluctuate during the year and from year to year due to differences in demand and changes in economic conditions primarily related to the prices of commodities we purchase. Capital expenditures have historically been necessary to expand and update the production capacity and improve the productivity of our manufacturing operations. Our ongoing liquidity needs are expected to be funded by cash on hand, net cash provided by operating activities and, as required, borrowings under the ABL Credit Facility. We expect that cash provided from operations and available capacity under the ABL Credit Facility will provide sufficient funds to operate our business, make expected capital expenditures and meet our liquidity requirements for at least the next twelve months, including payment of interest and principal on our debt. Limitations on Distributions and Dividends by Subsidiaries AIG, AII, and AIH are each holding companies, and as such have no independent operations or material assets other than ownership of equity interests in their respective subsidiaries. Each company depends on its respective subsidiaries to distribute funds to it so that it may pay obligations and expenses, including satisfying obligations with respect to indebtedness. The ability of our subsidiaries to make distributions and dividends to us depends on their operating results, cash requirements and financial and general business conditions, as well as restrictions under the laws of our subsidiaries' jurisdictions. The agreements governing the ABL Credit Facility significantly restrict the ability of our subsidiaries, including AII, to pay dividends, make loans or otherwise transfer assets from AII and, in turn, to us. Further, AII's subsidiaries are permitted under the terms of the ABL Credit Facility to incur additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends or the making of loans by such subsidiaries to AII and, in turn, to us. The First Lien Term Loan Facility requires AII to meet a certain consolidated coverage ratio on an incurrence basis in connection with additional indebtedness. The ABL Credit Facility contains limits on additional indebtedness based on various conditions for incurring the additional debt. 34 The table below summarizes cash flow information derived from our statements of cash flows for the periods indicated: Nine months ended (in thousands) June 26, 2020 June 28, 2019 Cash flows provided by (used in): Operating activities $ 156,019 $ 120,179 Investing activities (24,756) (105,190) Financing activities (16,917) (40,272) Operating activities During the nine months ended June 26, 2020, the Company was provided $156.0 million by operating activities compared to $120.2 million during the nine months ended June 28, 2019. The $35.8 million increase in cash provided was primarily due to higher cash flows from reductions in working capital. Investing activities During the nine months ended June 26, 2020, the Company used $24.8 million in investing activities compared to $105.2 million during the nine months ended June 28, 2019. The decrease in cash used in investing activities is primarily due the acquisition of Vergokan and US Tray for $83.4 million during the nine months ended June 28, 2019. Financing Activities During the nine months ended June 26, 2020, the Company used $16.9 million in financing activities compared to $40.3 million used during the nine months ended June 28, 2019. The decrease in cash used in financing activities is primarily due to $24.4 million of share repurchases and $21.0 million of debt repayments during the nine months ended June 28, 2019, compared to $15.0 million of share repurchases during the nine months ended June 26, 2020. Contractual Obligations and Commitments There have been no material changes in our contractual obligations and commitments since the filing of our Annual Report on Form 10-K. Change in Critical Accounting Policies and Estimates Other than as set forth below, there have been no material changes in our critical accounting policies and estimates since the filing of our Annual Report on Form 10-K. Goodwill Impairments Goodwill and other intangible assets primarily result from business acquisitions. The Company assesses the recoverability of goodwill and indefinite-lived trade names on an annual basis in accordance with Accounting Standards Codification ("ASC") 350 "Intangibles - Goodwill and Other." The measurement date is the first day of the fourth fiscal quarter, or more frequently, if events or circumstances indicate that it is more likely than not that the fair value of a reporting unit or the respective indefinite-lived trade name is less than the carrying value. The Company can elect to perform a quantitative or qualitative test of impairment. The Company considered whether the adverse economic impacts of the novel coronavirus (COVID-19) outbreak, which were developing during the three months ended March 27, 2020 and continued to develop during the three months ended June 26, 2020, would indicate whether it’s more likely than not that the fair value of its reporting units or its indefinite lived intangible assets would be below the carrying value. For a majority of the Company’s operations, the fair values of its related reporting units and indefinite lived intangible assets significantly exceeded their respective carrying values as of the most recent impairment testing period in July 2019. For these reporting units and the indefinite lived intangibles, the Company concluded that it was not more likely than not that the fair value of these reporting units or indefinite lived intangible assets was less than the carrying value and therefore there was not a triggering event requiring the performance of an impairment test as of June 26, 2020. 35 The economic impacts of the COVID-19 outbreak were more substantial for the Company’s reporting unit related to its operations in Europe, Middle East, and Africa (EMEA), due to the cross-border transactions that occur within those operations, the cross-border interactions needed to fully realize the synergies associated with recent in-region acquisitions and the COVID-19 related closing of these borders. The Company deemed the economic related developments of the outbreak to be a triggering event for the EMEA reporting unit as of March 27, 2020 and performed an updated goodwill impairment test as of that date. The Company calculated the fair value of its EMEA reporting unit considering three valuation approaches: (a) the income approach; (b) the guideline public company method; and (c) a market approach using a transaction analysis. The income approach calculates the fair value of the reporting unit using a discounted cash flow approach. Internally forecasted future cash flows, which the Company believes reasonably approximate market participant assumptions, are discounted using a weighted average cost of capital (Discount Rate) developed for the specific reporting unit. The Discount Rate is developed using market observable inputs, as well as considering whether or not there is a measure of risk related to the specific reporting unit’s forecasted performance. Fair value under the guideline public company method is determined for the reporting unit by applying market multiples for comparable public companies to the unit’s financial results. The key uncertainties in these calculations are the assumptions used in determining the reporting unit’s forecasted future performance, including revenue growth and EBITDA margins, as well as the perceived risk associated with those forecasts, along with selecting representative market multiples. Fair value under the transactional analysis is determined based on exchange prices in actual transactions and on asking prices for controlling interests in public or private companies currently offered for sale by applying market multiples for comparable public companies to the unit’s financial results. The key uncertainties in the guideline public company method and the transactional analysis calculations are the assumptions used in determining the reporting unit's comparable public companies, comparable transactions and the selection of the market multiples. The EMEA reporting unit’s impairment test as of March 27, 2020 revealed that its fair value was greater than carrying value by an amount of less than 10 %. During the three months ended June 26, 2020, the Company continued to assess information related to the current and anticipated economic impacts of COVID-19 on the EMEA reporting unit and revised its financial projections. As a result of this assessment, the Company concluded that it was not more likely than not that the fair value of the EMEA reporting unit was less than the carrying value and therefore deemed that there was not a triggering event requiring the performance of an updated impairment test. The goodwill allocated to the EMEA reporting unit as of June 26, 2020 was $ 34,836 . The impairment analysis is sensitive to changes in both business and valuation assumptions. Changes to these assumptions could result in revisions of management's estimates of the fair value of the reporting unit and could result in impairment charges in the future, which could be material to our results of operations. The Company will continue to monitor for such changes in facts or circumstances. Goodwill impairment charges may be recognized in future periods to the extent changes in facts or circumstances occur, including deterioration in the macroeconomic environment, industry, and deterioration in the Company’s performance or its future projections. Recent Accounting Standards See Note 1, ''Basis of Presentation and Summary of Significant Accounting Policies'' to our unaudited condensed consolidated financial statements. Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements and cautionary statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's beliefs and assumptions and information currently available to management. Some of the forward-looking statements can be identified by the use of forward-looking terms such as "believes," "expects," "may," "will," "shall," "should," "would," "could," "seeks," "aims," "projects," "is optimistic," "intends," "plans," "estimates," "anticipates" or other comparable terms. Forward-looking statements include, without limitation, all matters that are not historical facts. They appear in a number of places throughout this Quarterly Report on Form 10-Q and include, without limitation, statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, financial position; results of operations; cash flows; prospects; growth strategies or expectations; customer retention; the outcome (by judgment or settlement) and costs of legal, administrative or regulatory proceedings, investigations or inspections, including, without limitation, collective, representative or class action litigation; and the impact of prevailing economic conditions. 36 Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this quarterly report. In addition, even if our results of operations, financial condition and cash flows, and the development of the market in which we operate, are consistent with the forward-looking statements contained in this quarterly report, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors, including, without limitation, the risks and uncertainties discussed or referenced under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, could cause actual results and outcomes to differ materially from those reflected in the forward-looking statements. Additional factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation: • widespread outbreak of diseases, such as the novel coronavirus (COVID-19) pandemic; • declines in, and uncertainty regarding, the general business and economic conditions in the United States and international markets in which we operate; • weakness or another downturn in the United States non-residential construction industry; • changes in prices of raw materials; • pricing pressure, reduced profitability, or loss of market share due to intense competition; • availability and cost of third-party freight carriers and energy; • high levels of imports of products similar to those manufactured by us; • changes in federal, state, local and international governmental regulations and trade policies; • changes in foreign laws and legal systems, including as a result of Brexit; • recent and future changes to tax legislation; • adverse weather conditions; • failure to generate sufficient cash flow from operations or to raise sufficient funds in the capital markets to satisfy existing obligations and support the development of our business; • increased costs relating to future capital and operating expenditures to maintain compliance with environmental, health and safety laws; • reduced spending by, deterioration in the financial condition of, or other adverse developments with respect to, one or more of our top customers; • increases in our working capital needs, which are substantial and fluctuate based on economic activity and the market prices for our main raw materials, including as a result of failure to collect, or delays in the collection of, cash from the sale of manufactured products; • work stoppage or other interruptions of production at our facilities as a result of disputes under existing collective bargaining agreements with labor unions or in connection with negotiations of new collective bargaining agreements, as a result of supplier financial distress, or for other reasons; • challenges attracting and retaining key personnel or high-quality employees; • changes in our financial obligations relating to pension plans that we maintain in the United States; • reduced production or distribution capacity due to interruptions in the operations of our facilities or those of our key suppliers; • loss of a substantial number of our third-party agents or distributors or a dramatic deviation from the amount of sales they generate; • security threats, attacks, or other disruptions to our information systems, or failure to comply with complex network security, data privacy and other legal obligations or the failure to protect sensitive information; • possible impairment of goodwill or other long-lived assets as a result of future triggering events, such as declines in our cash flow projections or customer demand and changes in our business and valuation assumptions; • safety and labor risks associated with the manufacture and in the testing of our products; • product liability, construction defect and warranty claims and litigation relating to our various products, as well as government inquiries and investigations, and consumer, employment, tort and other legal proceedings; • our ability to protect our intellectual property and other material proprietary rights; • risks inherent in doing business internationally; • our inability to introduce new products effectively or implement our innovation strategies; • the inability of our customers to pay off the credit lines extended to them by us in a timely manner and the negative impact on customer relations resulting from our collections efforts with respect to non-paying or slow-paying customers; • our inability to continue importing raw materials, component parts and/or finished goods; 37 • the incurrence of liabilities and the issuance of additional debt or equity in connection with acquisitions, joint ventures or divestitures and the failure of indemnification provisions in our acquisition agreements to fully protect us from unexpected liabilities; • failure to manage acquisitions successfully, including identifying, evaluating, and valuing acquisition targets and integrating acquired companies, businesses or assets; • the incurrence of liabilities in connection with violations of the FCPA and similar foreign anti-corruption laws; • the incurrence of additional expenses, increase in complexity of our supply chain and potential damage to our reputation with customers resulting from regulations related to "conflict minerals"; • disruptions or impediments to the receipt of sufficient raw materials resulting from various anti-terrorism security measures; • restrictions contained in our debt agreements; • failure to generate cash sufficient to pay the principal of, interest on, or other amounts due on our debt; and • other risks and factors described in this report and from time to time in documents that we file with the SEC. You should read this Quarterly Report on Form 10-Q completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements attributable to us or persons acting on our behalf that are made in this quarterly report are qualified in their entirety by these cautionary statements. These forward-looking statements are made only as of the date of this Quarterly Report on Form 10-Q, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, and changes in future operating results over time or otherwise. Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data. Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to the quantitative and qualitative disclosures about market risks previously disclosed in our Annual Report on Form 10-K.