What changed in this filing

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Item 7. Management’s Discussion and Analysis

2020-11-19 compared with 2019-11-22 · 96 added, 140 removed, 387 unchanged (38% of the section changed)

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Historically, we have not engaged in hedging strategies for raw material purchases.

Our results may be impacted by inventory liquidations at costs higher or lower than current prices we pay for similar items.

Our results may be impacted by inventory sales at costs higher or lower than current prices we pay for similar items.

Working Capital.

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In total, we have invested $101.5 million in acquisitions since 2018 .

Product diversification has been a core element to our growth strategy.

Prior to 2013, our Electrical Raceway offering primarily consisted of steel and copper products.

At that time, we produced PVC conduit from a single facility in Georgia, and we did not have a meaningful presence in the market.

In 2013 and 2014, we completed the acquisitions of Heritage Plastics, Liberty Plastics, Ridgeline and APPI, which significantly increased our portfolio of PVC products, including PVC conduit, fittings, elbows and sweeps.

The additional scale, which included new operations in the Northeast, Midwest, Southwest and Western United States, enabled us to more comprehensively serve our largest electrical distribution customers in this product line and significantly increased our market share and presence in the Electrical Raceway market.

These acquisitions also substantially increased our cross-selling opportunities, providing a meaningful avenue for growth going forward.

In 2015, we acquired SCI, a manufacturer of electrical fittings for steel, flexible and liquidtight conduit as well as armored cable.

SCI enhanced the breadth of our product portfolio and is representative of the opportunities we have in our fragmented markets to add complementary products that will further support our growth and customer value proposition.

On May 18, 2017, we acquired Marco Cable Management ("Marco"), a leading designer and manufacturer of wire basket cable tray, PVC trunking and aluminum power poles.

Marco's product portfolio adds value to our electrical distribution partners in the United Kingdom and expands the Company's presence in the United Kingdom and the rest of Europe.

On September 1, 2017, we acquired Flexicon Limited ("Flexicon"), a leading global manufacturer of metallic and non-metallic flexible cable protection systems that holds many international and market product approvals and serves the industrial, commercial and infrastructure sectors in more than 55 countries.

On September 29, 2017, we acquired Calpipe Industries, LLC ("Calpipe"), a market leader for electrical conduit systems for corrosive environments and bollards for high security, access control and architectural environments.

On January 8, 2018, we acquired the assets of Communications Integrators, Inc.

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After careful consideration, we streamlined our business through a combination of business divestitures, asset sales and the exit of certain product lines.

In 2012, we sold our interest in a joint venture in Saudi Arabia that represented our only investment in the Middle East because we determined that it did not provide sufficient earnings or strategic value.

During that same year, we also sold two low-margin, commodity-oriented businesses in the United States for which we had limited market presence or competitive differentiation—our hollow structural tube business based in Morrisville, Pennsylvania and our sprinkler system fabrication business.

During 2013, we further reduced our non-domestic footprint by closing one facility in Brazil, selling the remainder of our Brazilian operations and closing our Acroba subsidiary in France.

In 2015, we exited Fence and Sprinkler, two product lines that did not align with our long-term vision due to limited product differentiation, exposure to significant import competition, ongoing price pressure due to overcapacity in the market and having different channels to market than our Electrical Raceway and MP&S segments.

In conjunction with the exit from Fence and Sprinkler, we evaluated the viability of a Philadelphia, Pennsylvania manufacturing facility and determined that significant investment would be required to bring that facility to an acceptable level of operation.

Given our ability to shift ongoing production capacity from that facility to other existing facilities, we closed this facility in the first quarter of fiscal 2016.

Neither Fence nor Sprinkler constituted a component and did not require presentation as discontinued operations.

On March 30, 2018, we sold the assets of FlexHead Industries, Inc.

and SprinkFLEX, LLC (together "Flexhead").

See Note 4, ''Divestitures'' and Note 7, ''Restructuring Charges'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Foreign Currencies.

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We also target high growth end-markets that are projected to experience rapid growth and to drive demand for our products, including our framing and support products.

Based on third-party data, growth in the data center construction market in the United States is forecast to grow at a compound annual growth rate ("CAGR") of 4.2% between 2017 and 2023 and, between 2017 and 2022, the building lighting control systems market in the United States is forecast to grow at a CAGR of 5.9%, while the LED lighting market in North America is forecast to grow at a CAGR of 12% between 2018 and 2022.

Based on third-party data, growth in the data center construction market in the United States is forecast to grow at a compound annual growth rate ("CAGR") of 7.9% to 10.0% between 2018 and 2022.

Reportable Segments

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We evaluate performance on the basis of net sales and Adjusted EBITDA.

Segment Adjusted EBITDA is the sum of income (loss) from operations before income taxes, adjusted to exclude unallocated expenses, depreciation and amortization, interest expense, net, gain (loss) on extinguishment of debt, restructuring and impairments, stock-based compensation, certain legal matters, consulting fees, transaction costs, gain on sale of joint venture and other items, such as inventory reserves and adjustments, release of indemnified uncertain tax positions, the impact of foreign exchange gains or losses and the impact from the Fence and Sprinkler exit.

Both segments use Adjusted EBITDA as the primary measure of profit and loss.

Segment Adjusted EBITDA is the income (loss) before income taxes, adjusted to exclude unallocated expenses, depreciation and amortization, interest expense, net, gain (loss) on extinguishment of debt, restructuring charges, stock-based compensation, certain legal matters, transaction costs, gain on purchase of business, gain on sale of a business 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 impacts of intercompany loans and related forward currency derivatives.

See Note 20, ''Segment Information'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

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The Company has a fiscal year that ends on September 30.

The Company's fiscal quarters end on the last Friday in December, March and June.

The Company's fiscal quarters typically end on the last Friday in December, March and June as it follows a 4-5-4 calendar.

Key Components of Results of Operations

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Interest expense, net

Loss on extinguishment of debt

Other income, net

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Foreign exchange

Acquisitions/Divestitures

Net sales for fiscal 2019 increased $81.4 million to $1,916.5 million , an increase of 4.4% , compared to $1,835.1 million for fiscal 2018 .

Net sales increased $46.8 million due to higher sales resulting from the 2019 acquisitions, net of a decrease of $9.4 million resulting from the divestiture of Flexhead.

Additionally, net sales increased $24.8 million from higher sales volumes primarily in the Electric Raceway segment.

Net sales also increased by $16.8 million due to higher average selling prices resulting from higher market prices for all product categories primarily in the Mechanical Products & Solutions segment.

Net sales for fiscal 2020 decreased $151.1 million to $1,765.4 million , a decrease of 7.9% , compared to $1,916.5 million for fiscal 2019 .

The decrease is primarily attributed to lower volume of $140.3 million predominantly due to the impacts of COVID-19.

The Company experienced volume declines in most of its product categories with the exception of 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 $37.7 million due to lower average selling prices resulting from lower input costs of steel, which was partially offset by higher average selling prices resulting from higher input costs of PVC resin and copper.

The decrease in net sales was partially offset by $28.5 million of sales from the 2019 acquisitions.

Cost of sales

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Foreign exchange

Acquisitions/Divestitures

Cost of sales

Cost of sales increased $22.3 million , or 1.6% , to $1,419.3 million for fiscal 2019 compared to $1,397.1 million for fiscal 2018 .

The increase was primarily due to additional costs of $38.3 million resulting from the 2019 acquisitions, net of the reduction of costs resulting from the FlexHead divestiture of $6.3 million .

Additionally, the increase was due to inventory adjustments related to changes in market prices of $9.8 million as well as volume increases of $17.2 million and higher freight costs of $8.0 million.

These increases were partially offset by $48.0 million of lower material input costs primarily driven by lower steel costs.

Cost of sales decreased $145.2 million , or 10.2% , to $1,274.1 million for fiscal 2020 compared to $1,419.3 million for fiscal 2019 .

The decrease was primarily due to lower volume of $103.8 million , the lower input costs of steel in excess of higher input costs of resin and copper of $54.9 million , and $10.3 million from favorable inventory adjustments related to changes in market prices.

The decrease was partially offset by incremental costs related to the 2019 acquisitions of $26.7 million .

Selling, general and administrative

Selling, general and administrative expenses increased $14.4 million , or 6.4% , to $240.7 million for fiscal 2019 compared to $226.3 million for fiscal 2018 .

The increase was primarily due to additional selling, general and administrative costs of $5.9 million resulting from the 2019 acquisitions and $4.8 million of increased spending on productivity initiatives and growth investments, partially offset by a $2.8 million decrease in stock-based compensation expense driven by higher forfeitures.

Selling, general and administrative expenses decreased $21.2 million , or 8.8% , to $219.5 million for fiscal 2020 compared to $240.7 million for fiscal 2019 .

The decrease was primarily due to cost savings as a result of COVID-19, in particular lower variable compensation of $6.0 million , reduced travel costs of $5.1 million and lower insurance costs of $3.0 million .

Additionally, due to sales volume declines associated with COVID-19, commissions expense decreased $2.4 million .

Lastly, the Company had a gain on the sale of property and equipment of $3.8 million offsetting expenses during fiscal 2020.

Intangible asset amortization

Intangible asset amortization expense increased $0.8 million , or 2.4% , to $32.9 million for fiscal 2019 compared to $32.1 million for fiscal 2018 due to the 2019 acquisitions, partially offset by the sale of the assets of FlexHead.

See Note 3, ''Acquisitions'' and Note 4, ''Divestitures'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Intangible asset amortization expense decreased $0.6 million , or 1.9% , to $32.3 million for fiscal 2020 compared to $32.9 million for fiscal 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, increased $9.8 million , or 24.0% to $50.5 million for fiscal 2019 , compared to $40.7 million for fiscal 2018 .

The increase is primarily due to our debt refinancing transactions on February 2, 2018 , which resulted in additional borrowings of $425.0 million .

Interest expense, net, decreased $10.4 million , or 20.6% to $40.1 million for fiscal 2020 , compared to $50.5 million for fiscal 2019 .

The decrease is primarily due to lower interest rates and the Company's principal payments in fiscal 2019 and 2020 resulting in a lower principal balance in fiscal 2020 from which interest expense was derived.

See Note 15, ''Debt'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Other income, net

Other income, net decreased $15.9 million , or 58.0% , to income of $11.5 million for fiscal 2019, compared to income of $27.3 million for fiscal 2018, primarily due to the prior year gain on the sale of FlexHead of $27.6 million versus the $7.4 million of income generated from a bargain purchase gain on the acquisition of Cor-Tek in fiscal 2019.

This decrease is partially offset by gains from undesignated foreign currency derivative instruments of $5.4 million in fiscal 2019 versus gains of $0.1 million in fiscal 2018.

See Note 3, ''Acquisitions'' , Note 4, ''Divestitures'' and Note 8, ''Other Income, net'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Other income, net decreased $8.7 million to income of $2.8 million for fiscal 2020, compared to income of $11.5 million for fiscal 2019, primarily due to the $7.4 million of income generated from a bargain purchase gain on the acquisition of Cor-Tek in fiscal 2019.

See Note 3, ''Acquisitions'' and Note 8, ''Other Income, net'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Income tax expense

Income tax expense increased $4.1 million to $49.7 million , compared to $45.6 million for fiscal 2019 .

The Company's income tax rate increased to 24.7% for fiscal 2019 , compared to 17.9% for fiscal 2018 .

The increase in the effective tax rate was primarily due to the increase of state income tax expense, the prior year tax benefits related to the remeasurement of the deferred tax liabilities as a result of the TCJA and the Section 199 deduction, and a larger prior year net tax benefit from the release of indemnified tax positions and exercise of stock options.

The Company's income tax rate decreased to 24.6% for fiscal 2020 , compared to 24.7% for fiscal 2019 .

The decrease in the effective tax rate was primarily due a larger benefit from the exercise of stock options.

The increase in tax expense, despite the decrease in the rate, is due to higher income before taxes.

See Note 9, ''Income Taxes'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

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Adjusted EBITDA Margin

Average selling prices

Foreign exchange

Acquisitions/Divestitures

Net sales increased $76.9 million , or 5.6% , to $1,443.5 million for fiscal 2019 compared to $1,366.6 million for fiscal 2018 .

Net sales increased by $56.2 million due to higher sales resulting from the acquisitions during fiscal 2019.

Additionally, net sales increased $26.9 million due to higher sales volumes primarily within the flexible electrical and PVC electrical conduit and fittings product categories.

Net sales decreased by $112.2 million , or 7.8% , to $1,331.3 million for fiscal 2020 compared to $1,443.5 million for fiscal 2019 .

Net sales decreased by $132.9 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.

Additionally, net sales decreased by $8.6 million as a result of lower average selling prices resulting from lower input costs of steel, partially offset by higher input costs for resin and copper.

The decrease in net sales was also partially offset by the 2019 acquisitions, which contributed $28.5 million in sales for fiscal 2020.

Adjusted EBITDA

Adjusted EBITDA increased $6.9 million , or 2.4% , to $299.5 million for fiscal 2020 compared to $292.6 million for fiscal 2019 .

The increase was largely due to $15.0 million of incremental income from higher sales, operational efficiencies of $12.5 million and $7.3 million of incremental income resulting from the 2019 acquisitions.

The increase in Adjusted EBITDA was largely due to the benefit of lower material costs, operational efficiencies, and the contributions from the 2019 acquisitions, in excess of volume declines attributed to COVID-19.

Mechanical Products & Solutions

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Average selling prices

Net sales increased $4.1 million , or 0.9% , to $474.3 million for fiscal 2019 compared to $470.2 million for fiscal 2018 .

The increase was primarily due to higher average selling prices driven by higher market prices for all product categories of $16.2 million , partially offset by a reduction of $9.4 million due to the sale of FlexHead in the second quarter of fiscal 2018 as well as a reduction of $2.5 million from lower sales volumes primarily within the mechanical pipe product category.

Net sales decreased $37.6 million , or 7.9% , to $436.7 million for fiscal 2020 compared to $474.3 million for fiscal 2019 .

The decrease was primarily due to lower average selling prices driven by lower input prices for steel of $29.1 million .

Additionally, net sales decreased from lower sales volume of $7.5 million as a result of the impacts of COVID-19 for most product categories with the exception of the mechanical pipe product category.

Adjusted EBITDA

Adjusted EBITDA increased $18.7 million , or 36.4% , to $70.0 million for fiscal 2019 compared to $51.3 million for fiscal 2018 .

Adjusted EBITDA increased primarily due to higher gross profit of $15.0 million and $3.8 million of operational efficiencies, partially offset by a reduction of $1.9 million due to the sale of FlexHead in the second quarter of fiscal 2018.

Adjusted EBITDA decreased $8.9 million , or 12.7% , to $61.2 million for fiscal 2020 compared to $70.0 million for fiscal 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 the impacts of COVID-19 on volume.

Fiscal 2019 Compared to Fiscal 2018

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Interest expense, net

Loss on extinguishment of debt

Other income, net

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Foreign exchange

Acquisitions/Divestitures

Net sales for fiscal 2019 increased $81.4 million to $1,916.5 million , an increase of 4.4% compared to $1,835.1 million for fiscal 2018 .

Net sales increased by $165.6 million due to increased average market prices for the Metal and PVC electrical conduit and fittings product categories and the pass-through impact of higher average input costs of steel, copper, and freight.

Additionally, net sales increased $118.5 million due to the acquisitions of Marco, Flexicon and Calpipe during fiscal 2017 and Cii during fiscal 2018, partially offset by a decrease in net sales of $10.0 million resulting from the divestiture of Flexhead.

Lastly, net sales increased by $51.8 million due to higher volume of products primarily from the mechanical pipe and metal framing and fittings product categories sold within the Mechanical Products & Solutions segment.

Net sales increased $46.8 million due to higher sales resulting from the 2019 acquisitions, net of a decrease of $9.4 million resulting from the divestiture of Flexhead.

Additionally, net sales increased $24.8 million from higher sales volumes primarily in the Electric Raceway segment.

Net sales also increased by $16.8 million due to higher average selling prices resulting from higher market prices for all product categories primarily in the Mechanical Products & Solutions segment.

Cost of sales

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Foreign exchange

Acquisitions/Divestitures

Cost of sales

Cost of sales increased $22.3 million , or 1.6% to $1,419.3 million for fiscal 2019 compared to $1,397.1 million for fiscal 2018 .

Cost of sales primarily increased due to higher average input costs of steel and copper of $92.5 million .

Additionally, cost of sales increased $73.9 million due to the acquisitions of Marco, Flexicon, and Calpipe during fiscal 2017 and Cii during fiscal 2018, partially offset by a decrease in cost of sales of $6.6 million resulting from the divestiture of Flexhead.

Cost of sales also increased $43.7 million due to higher volume of products primarily from the mechanical pipe and metal framing and fittings product categories sold within the Mechanical Products & Solutions segment.

Lastly, cost of sales increased due to higher other cost of sales related to freight costs of $33.4 million resulting from a tighter freight market.

The increase was primarily due to additional costs of $38.3 million resulting from the 2019 acquisitions, net of the reduction of costs resulting from the FlexHead divestiture of $6.3 million .

Additionally, the increase was due to inventory adjustments related to changes in market prices of $9.8 million as well as volume increases of $17.2 million million and higher freight costs of $8.0 million .

These increases were partially offset by $48.0 million of lower material input costs primarily driven by lower steel costs.

Selling, general and administrative

Selling, general and administrative expenses increased $14.4 million , or 6.4%, to $240.7 million for fiscal 2019 compared to $226.3 million for fiscal 2018.

The Company had $26.0 million in additional expenses due to the acquisitions of Marco, Flexicon, and Calpipe during fiscal 2017 and Cii during fiscal 2018, partially offset by a decrease in expenses of $1.5 million resulting from the divestiture of Flexhead.

Incentive-based compensation and stock-based compensation expense increased $9.9 million and $1.9 million , respectively during fiscal 2018 compared to fiscal 2017 , due to stronger operating results, additional grants in fiscal 2018, and the modification of a key executive's awards.

Additionally, the Company recorded $5.0 million of higher commissions expense due to the increase in sales volume compared to the prior year.

The increase in expense is partially offset by the $7.2 million pre-tax reversal of expense related to the Antidumping Duty Order for Malleable Iron Pipe Fittings.

Intangible asset amortization

Intangible asset amortization expense increased $9.7 million , or 43.3% to $32.1 million for fiscal 2018 compared to $22.4 million for fiscal 2017 due to the acquisitions of Marco, Flexicon, and Calpipe during fiscal 2017 and Cii during fiscal 2018.

Intangible asset amortization expense increased $0.8 million , or 2.4% to $32.9 million for fiscal 2019 compared to $32.1 million for fiscal 2018 due to the 2019 acquisitions, partially offset by the sale of the assets of FlexHead.

See Note 3, ''Acquisitions'' and Note 4, ''Divestitures'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Interest expense, net

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The increase is primarily due to our debt refinancing transactions on February 2, 2018 , which resulted in additional borrowings of $425.0 million .

The Company used the proceeds to 1) repurchase approximately 17.2 million shares of common stock from CD&R Allied Holdings, L.P.

("the CD&R Investor") for a total purchase price of approximately $375 million, 2) repay $42.0 million of outstanding loans under the ABL Credit Facility and 3) pay $5.8 million in related fees and expenses.

See Note 15, ''Debt'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Loss on extinguishment of debt

The Company recorded a loss on the extinguishment of debt of $9.8 million during September 30, 2017 related to the December 22, 2016 debt refinancing transaction.

See Note 15, ''Debt'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Other income, net

On March 30, 2018, the Company sold the assets of FlexHead Industries, Inc.

and SprinkFLEX, LLC (together "Flexhead").

The Company recognized a pre-tax gain of $27.6 million .

During fiscal 2017, we recognized a pre-tax gain of $5.8 million on the sale of the minority ownership share in Abahsain-Cope Saudi Arabia Ltd.

when transfer of ownership was completed.

See Note 4, ''Divestitures'' and Note 8, ''Other Income, net'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

This decrease is partially offset by gains from undesignated foreign currency derivative instruments of $5.4 million in fiscal 2019 versus gains of $0.1 million in fiscal 2018.

See Note 3, ''Acquisitions'', Note 4, ''Divestitures'' and Note 8, ''Other Income, net'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Income tax expense

Income tax expense decreased $11.8 million , to $29.7 million , compared to $41.5 million for fiscal 2017 .

The Company's income tax rate decreased to 17.9% for fiscal 2018 , compared to 32.9% for fiscal 2017 .

The decrease in the effective tax rate was primarily due to the reduction of the federal statutory rate from 35% to 21% as a result of the enactment of new tax legislation, TCJA, on December 22, 2017, the remeasurement of the deferred tax liabilities as a result of the TCJA, and a net tax benefit from the release of indemnified tax positions.

Income tax expense increased $15.9 million , to $45.6 million , compared to $29.7 million for fiscal 2018 .

The Company's income tax rate increased to 24.7% for fiscal 2019 , compared to 17.9% for fiscal 2018 .

The increase in the effective tax rate was primarily due to the increase of the state income tax expense, the prior year tax benefits related to the remeasurement of the deferred tax liabilities as a result of the TCJA and the Section 199 deduction, and a larger prior year net tax benefit from the release of indemnified tax positions and exercise of stock options.

See Note 9, ''Income Taxes'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

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Adjusted EBITDA Margin

Average selling prices

Foreign exchange

Net sales increased $76.9 million , or 5.6% , to $1,443.5 million for fiscal 2019 compared to $1,366.6 million for fiscal 2018 .

The increase was primarily due to increased average market prices for Metal and PVC electrical conduit and fittings product categories and the pass-through impact of higher average input costs of steel, copper, and freight of $142.3 million .

Additionally, net sales increased $118.5 million resulting from acquisitions during fiscal 2018 and fiscal 2017.

Net sales increased by $56.2 million due to higher sales resulting from the acquisitions during fiscal 2019.

Additionally, net sales increased $26.9 million due to higher sales volumes primarily within the flexible electrical and PVC electrical conduit and fittings product categories.

Adjusted EBITDA

Adjusted EBITDA increased $37.3 million , or 14.6% , to $292.6 million for fiscal 2019 compared to $255.3 million for fiscal 2018 .

The increase in Adjusted EBITDA was largely due to higher gross profit from increased average market prices for the Metal and PVC electrical conduit and fittings product categories and incremental Adjusted EBITDA resulting from acquisitions.

The increase in Adjusted EBITDA was partially offset by an increase in freight costs and selling, general and administrative expenses attributed to acquisitions in fiscal 2018 and 2017.

The increase was largely due to $15.0 million of incremental income from higher sales, operational efficiencies of

$12.5 million and $7.3 million of incremental income resulting from the 2019 acquisitions.

Mechanical Products & Solutions

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Net sales increased $4.1 million , or 0.9% , to $474.3 million for fiscal 2019 compared to $470.2 million for fiscal 2018 .

The increase in net sales was primarily due to $46.2 million of higher volume of products sold within the mechanical pipe and metal framing and fittings product categories as well as higher average selling prices of $23.3 million , partially offset by a decrease in net sales of $10.0 million resulting from the Flexhead divestiture.

The increase was primarily due to higher average selling prices driven by higher market prices for all product categories

of $16.2 million , partially offset by a reduction of $9.4 million due to the sale of FlexHead in the second quarter of fiscal 2018

as well as a reduction of $2.5 million from lower sales volumes primarily within the mechanical pipe product category.

Adjusted EBITDA

Adjusted EBITDA decreased $12.3 million , or 19.4% , to $51.3 million for fiscal 2018 compared to $63.7 million for fiscal 2017 .

Adjusted EBITDA decreased due to an increase in average input costs, which exceeded the increase in average selling prices, and a decrease attributed to the sale of Flexhead, partially offset by higher volume of product categories sold.

Adjusted EBITDA increased $18.7 million , or 36.4% , to $70.0 million for fiscal 2019 compared to $51.3 million for fiscal 2018 .

Adjusted EBITDA increased primarily due to higher gross profit of $15.0 million and $3.8 million of operational

efficiencies, partially offset by a reduction of $1.9 million due to the sale of FlexHead in the second quarter of fiscal 2018.

Liquidity and Capital Resources

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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.

Our cash and cash equivalents decreased $3.2 million from September 30, 2018 , primarily as a result of the increase in acquisitions and debt repayments, partially offset by cash flows from operations.

Our cash and cash equivalents increased $161.1 million from September 30, 2019 , primarily due to cash provided from operating activities, partially offset by debt repayments, capital expenditures and share repurchases.

In general, we require cash to fund working capital investments, acquisitions, capital expenditures, debt repayment, interest payments, taxes and share repurchases.

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During fiscal 2020 , operating activities provided $248.8 million of cash, compared to $209.7 million during fiscal year 2019 .

The $64.0 million increase was primarily due to improved operating income of $44.0 million and working capital improvements of $31.0 million , see "Results of Operations," as well as lower spending on working capital driven by improved collections as well as reduced purchases of inventory at lower prices.

The $39.1 million increase was primarily due to lower spending on working capital of $19.2 million driven by improved collections and reduced purchases of inventory at lower prices as well as improved operating income of $15.9 million , see "Results of Operations."

Investing activities

During fiscal 2019 , we used $133.1 million of cash for investing activities compared to $2.5 million provided by investing activities during fiscal 2018 .

The $135.6 million increase in cash used by investing activities is due primarily to $98.0 million in cash used for acquisitions in fiscal 2019 compared to $3.5 million in fiscal 2018 as well as the cash received from the sale of a business in fiscal 2018 of $42.6 million .

During fiscal 2020 , we used $27.5 million of cash for investing activities compared to $133.1 million during fiscal 2019 .

The $105.6 million decrease in cash used by investing activities is due primarily $98.0 million in cash used for acquisitions in fiscal 2019 as well as the cash received from the sale of a property, plant and equipment in fiscal 2020 of $3.9 million .

Financing Activities

During fiscal 2020 , we used $61.2 million for financing activities compared to $78.2 million during fiscal 2019.

The $12.2 million increase was due to the decrease in borrowings net of repayments of $392.8 million , which includes the voluntary accelerated prepayment of $40.0 million on our First Lien Term Loan Facility in the fourth quarter of fiscal 2019.

Additionally, there was the incremental decrease in issuance of common stock of $12.7 million in fiscal 2019 compared to fiscal 2018, partially offset by a decrease in share repurchases of $387.4 million in fiscal 2019 compared to fiscal 2018.

Financing activities decreased $17.0 million due to a reduction in debt repayments of $21.0 million compared to fiscal 2019.

The table below summarizes cash flow information derived from our statements of cash flows for the fiscal years ended September 30, 2019 and September 30, 2018 .

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During fiscal 2019 , operating activities provided $209.7 million of cash, compared to $145.7 million during fiscal year 2018 .

The $24.0 million increase was primarily due to improved operating income of $23.7 million , see "Results of Operations".

The $64.0 million increase was primarily due to improved operating income of $44.0 million and working capital improvements $31.0 million , see "Results of Operations." as well as lower spending on working capital driven by improved collections as well as reduced purchases of inventory at lower prices.

Investing activities

During fiscal 2018 , investing activities provided $2.5 million compared to $205.8 million during fiscal 2017 .

The $208.3 million increase in cash used for investing activities is due primarily to a reduction of $180.5 million in cash used in acquisitions in fiscal 2018 compared to 2017, and the cash received for the sale of the assets of Flexhead of $42.6 million in fiscal 2018 compared to fiscal 2017, and partially offset by the increase of $13.4 million in capital expenditures in fiscal 2018 compared to fiscal 2017 .

Capital expenditures represent enhancements to our IT infrastructure, manufacturing and distribution operations as well as replacement of our existing equipment and facilities.

During fiscal 2019 , we used $133.1 million of cash of investing activities compared to $2.5 million provided by investing activities during fiscal 2018 .

Financing Activities

During fiscal 2019 , we used $78.2 million for financing activities compared to $65.9 million in fiscal 2018 .

The $1.8 million increase was due to the increase in borrowings net of repayments of $393.4 million in fiscal 2018 and the incremental issuance of common stock of $7.9 million fiscal 2018 compared to fiscal 2017 , partially offset by our incremental share repurchase of $397.8 million in fiscal 2018 compared to fiscal 2017 .

The $12.2 million increase was due to the decrease in borrowings net of repayments of $392.8 million in fiscal 2019 which includes the voluntary accelerated prepayment of $40.0 million on our First Lien Term Loan Facility in the fourth quarter of fiscal 2019.

Contractual Obligations

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Purchase commitments (b)

Operating lease obligations

(a) Interest expense is estimated based on outstanding loan balances assuming principal payments are made according to the payment schedule and interest rates as of September 30, 2020 (3.75% for the First Lien Term Loan Facility).

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therefore, such amounts have been excluded from the above contractual obligations table.

The ABL Credit Facility provides for a five-year senior secured revolving credit facility of up to $325.0 million .

The ABL Credit Facility provides for a three-year senior secured revolving credit facility of up to $325.0 million .

As of September 30, 2020 , there were no borrowings under the ABL Credit Facility.

We have the ability to continually refinance amounts drawn on the ABL Credit Facility through its maturity on December 22, 2021, subject to borrowing base limitations.

We have the ability to continually refinance amounts drawn on the ABL Credit Facility through its maturity on August 28, 2023 , subject to borrowing base limitations.

The projected company pension contributions for fiscal 2021 is $1.9 million .

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Off-Balance Sheet Arrangements

With the exception of operating leases, we do not have any off-balance sheet financing arrangements that we believe are reasonably likely to have a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

We do not have any off-balance sheet financing arrangements that we believe are reasonably likely to have a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Use of Estimates

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We recognize potential liabilities and record tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due.

These tax liabilities are reflected net of related tax loss carry-forwards.

These tax liabilities are reflected net of related tax loss carryforwards.

We adjust these reserves in light of changing facts and circumstances;

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(in millions)

50 Basis Point Change

Operating Income

Discount rate

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See Note 5, ''Postretirement Benefits'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Long-Lived Asset, Indefinite-Lived Intangible Assets and Goodwill Impairments

Indefinite-Lived Intangible Assets and Goodwill Impairments

Goodwill and other intangible assets primarily result from business acquisitions.

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The Company can elect to perform a quantitative or qualitative test of impairment.

For fiscal 2019 and fiscal 2018, the Company performed a quantitative impairment assessment for goodwill.

For fiscal 2020, 2019 and 2018 Company performed a quantitative impairment assessment for goodwill.

Additionally, 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 interim goodwill impairment test as of that date.

The Company calculated the fair value of its six reporting units considering three valuation approaches:

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(b) the guideline public company method;

and (c) a market approach using a transaction analysis.

and (c) the comparable transaction method.

The income approach calculates the fair value of the reporting unit using a discounted cash flow approach.

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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 each 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 guideline public company method is determined for each unit by applying market multiples for comparable public companies to the unit’s financial results.

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.

For fiscal 2017, the Company determined through qualitative assessment ("Step 0") that it was not “more likely than not” that the fair values of its reporting units were less than their carrying values;

as a result, the Company was not required to perform the quantitative impairment test.

Fair value under the guideline public company method is determined for each reporting unit by applying market multiples for comparable public companies to the reporting unit’s financial results.

Fair value under the comparable transaction method 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 comparable transaction method calculations are the assumptions used in determining the reporting unit's comparable public companies, comparable transactions and the selection of the market multiples.

The Company did not record any goodwill impairments in fiscal 2020, 2019 or 2018.

As of September 30, 2020, the fair values of the reporting units exceeded their respective carrying amount by 10% or more.

A 10% decrease in the discounted cash flows utilized in Step 1 for each of the reporting units would not have changed our determination that the fair value of each reporting unit was in excess of its carrying value.

A 10% decrease in the discounted cash flows utilized in quantitative impairment assessment for each of the reporting units would not have changed our determination that the fair value of each reporting unit was in excess of its carrying value.

As noted above, ASC 350 also requires that the Company test the indefinite-lived intangible assets for impairment at least annually.

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Other inventories, consisting mostly of foreign inventories, are measured using first-in, first-out ("FIFO") costing methods.

Inventory cost, regardless of valuation method, includes direct material, direct labor and overhead costs.

Inventory cost, regardless of valuation method, includes direct material, direct labor and manufacturing overhead costs.

In circumstances where inventory levels are in excess of anticipated market demand, where inventory is deemed technologically obsolete or not marketable due to its condition or where the inventory cost for an item exceeds its market value, we record a charge to cost of goods sold and reduce the inventory to its market value.

Product Liability

We are partially self-insured for product liability matters.

We utilize third-party actuaries to assist us with measuring our exposure for these matters.

Our product liability reserves represent both reported claims as well as an estimate for incurred but not reported claims.

After a claim is filed, liability is estimated as facts associated with the claim become known.

The establishment and update of liabilities for unpaid claims, including claims incurred but not reported, is based on the assessment by our claim administrator of each claim, an independent actuarial valuation of the nature and severity of total claims, and management's best estimate.

We utilize a third-party claims administrator to pay claims, track and evaluate actual claims experience, and ensure consistency in the data used in the actuarial valuation.

We assess product liability exposures for two different types of matters.

The first type are claims and lawsuits alleging that the ABF and ABF II antimicrobial coating on our steel sprinkler pipe causes stress cracking in chlorinated polyvinyl pipe, or "CPVC," when the two types of pipe are installed in the same system.

The second are product liability exposures unrelated to ABF.

See Note 17, ''Commitments and Contingencies'' to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Recent Accounting Pronouncements

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weakness or another downturn in the United States non-residential construction industry;

widespread outbreak of diseases, such as the novel coronavirus (COVID-19) pandemic;

changes in prices of raw materials;

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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;

reduced spending by, deterioration in the financial condition of, or other adverse developments, including inability or unwillingness to pay our invoices on time, 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;

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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;

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;

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risks inherent in doing business internationally;

changes in foreign laws and legal systems, including as a result of Brexit;

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;

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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";

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failure to generate cash sufficient to pay the principal of, interest on, or other amounts due on our debt;

challenges attracting and retaining key personnel or high-quality employees;

future changes to tax legislation;

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;

other risks and factors described in this report and from time to time in documents that we file with the SEC.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis