What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2020-11-19 compared with 2019-11-22 · 239 added, 264 removed, 1014 unchanged (33% of the section changed)

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 19, 2020, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for leases in 2020 due to the adoption of Financial Accounting Standards Board Accounting Standards Codification 842, Leases , using the modified retrospective method.

Basis for Opinion

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

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The Company’s goodwill balance was $188 million as of September 30, 2020.

The Company considers the income approach, the guideline public company method, and a market approach to estimate the fair value of its reporting units.

With respect to the income approach, management makes significant estimates and assumptions related to forecasts of future performance, including revenue growth, earnings before interest, income taxes, depreciation, and amortization (EBITDA) margins, and discount rates.

The Company considers three valuation approaches:

(a) the income approach;

(b) the guideline public company method;

and (c) the comparable transaction

method to estimate the fair value of its reporting units.

With respect to the income approach, management makes significant estimates and assumptions related to forecasts of future cash flows, including revenue growth, earnings before interest, income taxes, depreciation, and amortization (EBITDA) margins, and discount rates.

The fair value of all reporting units exceeded their respective carrying values and, therefore, no impairment was recognized for the year ended September 30, 2020.

We identified goodwill for one of the Company’s reporting units as a critical audit matter because of the significant estimates and assumptions management makes to estimate the fair value of this reporting unit, specifically the impact of recent acquisitions on these assumptions.

management’s estimates and assumptions related to forecasts of revenue growth, EBITDA margins, and the selection of the discount rate.

We identified goodwill for the Company’s Europe, Middle East, and Africa reporting unit as a critical audit matter because the excess fair value over carrying value is low and minor changes to management’s estimates and assumptions could result in an impairment being recognized.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to forecasts of revenue growth, EBITDA margins, and the selection of the discount rate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of revenue growth and EBITDA margins (“forecasts”), and the selection of discount rate for this reporting unit included the following, among others:

We tested the design and operating effectiveness of controls over the annual goodwill impairment assessment, including those over the forecasts and the selection of the discount rate.

Our audit procedures related to the forecasts of revenue growth and EBITDA margins (“forecasts”), and the selection of the discount rate for this reporting unit included the following, among others:

· We tested the design and operating effectiveness of controls over the annual and interim goodwill impairment assessments, including those over the forecasts and the selection of the discount rate.

· We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.

We evaluated the impact of recent acquisitions on the reporting unit’s current and forecasted EBITDA margins.

· We performed inquiries of the Company’s executives and those outside of the accounting and finance functions to evaluate the forecasts.

· We evaluated the reasonableness of management’s forecasts by comparing the forecasts to:

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Change in foreign currency translation adjustment

Change in unrecognized (loss) income related to pension benefit plans, net of tax benefit (expense) of $5,253, ($1,362) and ($3,356), respectively

Change in unrecognized (loss) income related to pension benefit plans

Total other comprehensive (loss) income

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Intangible assets, net

Right-of-use assets, net

Deferred income taxes

Non-trade receivables

Other long-term assets

Liabilities and Equity

Current Liabilities:

Short-term debt and current maturities of long-term debt

Accounts payable

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Customer liabilities

Lease obligations

Other current liabilities

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Long-term debt

Long-term lease obligations

Deferred income taxes

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Stock-based compensation expense

Amortization of right-of-use assets

Loss on disposal of property, plant & equipment, net

Gain on purchase of business

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Capital expenditures

Insurance proceeds for properties, plant and equipment

Proceeds from sale of properties, plant and equipment

Proceeds from divestiture of business

Proceeds from sale of assets held for sale

Acquisitions of businesses, net of cash acquired

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Repayments of long-term debt

Issuance of common stock

Issuance of common stock, net of taxes withheld

Repurchase of common stock

Payments for debt financing costs and fees

Fiscal year ended

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September 30, 2018

Payments for debt financing costs and fees

Net cash used for financing activities

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Other comprehensive income

Reclassification of stranded tax benefits (1)

Stock-based compensation

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Other comprehensive loss

Reclassification of stranded tax benefits (1)

ASU 2016-2 modified retrospective adoption

Stock-based compensation

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("AIH"), which in turn is the sole stockholder of Atkore International, Inc.

The Transactions — On November 9, 2010, Tyco announced that it had entered into an agreement to sell a majority interest in TEMP to CD&R Allied Holdings, L.P.

(the "CD&R Investor"), an affiliate of the private equity firm Clayton Dubilier & Rice, LLC ("CD&R").

On December 22, 2010, the transaction was completed and CD&R acquired shares of a newly created class of cumulative convertible preferred stock (the "Preferred Stock") of the Company.

The Preferred Stock initially represented 51 % of the Company’s outstanding capital stock (on an as-converted basis).

The preferred stock is entitled to a 12 % fixed, cumulative dividend paid quarterly ("Preferred Dividends") and dividends on an as-converted basis when declared on common stock ("Participating Dividends").

On December 22, 2010, the Company also issued common stock (the "Common Stock") to Tyco’s wholly owned subsidiary, Tyco International Holding S.à.r.l.

("Tyco Seller"), that initially represented the remaining 49 % of the Company’s outstanding capital stock.

Subsequent to December 22, 2010, the Company has operated as an independent, stand-alone entity.

The aforementioned transactions described in this paragraph are referred to herein as the "Transactions."

On March 6, 2014, the Company entered into a non-binding letter of intent (the "Letter of Intent") with Tyco for the acquisition (the "Acquisition") of 40.3 million shares of Common Stock held by Tyco Seller.

On April 9, 2014, the Company paid $ 250,000 to Tyco Seller to redeem the shares, which were subsequently retired.

The Company paid $ 2,000 of expenses related to the share redemption.

In a separate transaction on the same date, the CD&R Investor converted its Preferred Stock and accumulated Preferred Dividends into Common Stock.

As of September 26, 2014, Common Stock is the Company’s sole issued and outstanding class of securities.

Initial Public Offering — On June 9, 2016 , the Company's Registration Statement on Form S-1 relating to an initial public offering ("IPO") of its common stock was declared effective by the United States Securities and Exchange Commission ("SEC") and on June 15, 2016 , we completed the IPO at a price to the public of $ 16.00 per share.

In connection with the IPO, the CD&R Investor, an affiliate of CD&R, sold an aggregate of 12,000,000 shares of its common stock.

In a series of secondary offerings during fiscal 2017, the CD&R Investor sold an aggregate 19,550,000 shares of the Company's common stock.

The CD&R Investor received all of the net proceeds and bore all commissions and discounts from the sale of our common stock.

The Company did not receive any proceeds from the IPO or any of the secondary offerings.

Holders of common stock are entitled to cast one vote for each share held of record on all matters submitted to a vote of the stockholders.

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Share Repurchase Program — In August 2017, the Company's board of directors approved a share repurchase program, under which the Company may repurchase up to an aggregate amount of $ 75.0 million of its outstanding stock.

Share repurchases will be conducted under the program in the open market and through broker negotiated purchases in compliance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended, and subject to market conditions, applicable legal requirements, and other relevant factors.

This share repurchase program does not obligate the Company to acquire any particular amount of common stock, and it may be terminated at any time at the Company's discretion.

In January 2018, the Company announced a stock repurchase transaction whereby the Company agreed to repurchase from the CD&R Investor, a related party, approximately 17.2 million shares of the Company's common stock, par value $0.01 per share, at a per share price equal to $21.77, for a total purchase price of $375 million, subject to the terms and conditions set forth in the stock purchase agreement.

Following the stock repurchase transaction in January 2018 and secondary offerings of the Company's common stock in February 2018 and May 2018, the CD&R Investor completed its exit from its investment in the Company, and, as of September 30, 2018, no longer owned any of the Company's common stock.

As of December 28, 2018, there were no authorized repurchases remaining under the August 2017 repurchase program.

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Fiscal Periods — 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.

Use of Estimates — The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclose contingent assets and liabilities at the date of the consolidated financial statements and report the associated amounts of revenues and expenses.

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The Company has certain arrangements that require it to estimate at the time of sale the amounts of variable consideration that should not be recorded as revenue as certain amounts are not expected to be collected from customers, as well as an estimate of the value of products to be returned.

The Company principally relies on historical experience, specific customer agreements, and anticipated future trends to estimate these amounts at the time of sale and to reduce the transaction price.

The Company principally relies on historical experience, specific

customer agreements, and anticipated future trends to estimate these amounts at the time of sale and to reduce the transaction price.

These arrangements include sales discounts and allowances, volume rebates, and returned goods.

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Cost of Sales — The Company includes all costs directly related to the production of goods for sale in cost of sales in the statement of operations.

These costs include direct material, direct labor, production related overheads, excess and

obsolescence costs, lower of cost or market provisions, freight and distribution costs, and the depreciation and amortization of assets directly used in the production of goods for sale.

These costs include direct material, direct labor, production related overheads, excess and obsolescence costs, lower of cost or market provisions, freight and distribution costs, and the depreciation and amortization of assets directly used in the production of goods for sale.

Selling, General and Administrative Expenses — These amounts primarily include payroll-related expenses for both administrative and selling personnel, compensation expense from stock-based awards, restructuring-related charges, third-party professional services and transactional gains or losses for foreign currency transactions, excluding the foreign exchange exposure for intercompany loan transactions, which is included in Other income, net .

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3 to 20 years

Machinery and production equipment

1 to 20 years

Support and testing machinery and equipment

Machinery and equipment

1 to 20 years

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

In the fourth quarter of 2017, the Company adopted Accounting Standards Update ("ASU") 2017-04, "Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment." This guidance eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment.

Under the amendments in the new guidance, the quantitative goodwill impairment testing is performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value.

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.

The Company did not record any goodwill impairments in fiscal 2019, 2018 or 2017.

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 no t record any goodwill impairments in fiscal 2020, 2019 or 2018.

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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The royalty rate used in the analysis is based on an analysis of empirical, market-derived royalty rates for guideline intangible assets.

The net after tax cost savings are discounted using the Discount Rate.

The net after tax cost savings are discounted using the Discount

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 indefinite lived intangible assets' forecasted performance.

The key uncertainties in these calculations are the assumptions used in determining the revenue associated with each indefinite-lived intangible asset and the royalty rate.

The Company did no t record any indefinite-lived asset impairments in fiscal 2020, 2019 or 2018.

Fair Value Measurements — Authoritative guidance for fair value measurements establishes a three-level hierarchy that ranks the quality and reliability of information used in developing fair value estimates.

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See Note 9, ''Income Taxes.''

Leases — All leases that are determined not to meet any of the capital lease criteria are classified as operating leases.

Leases — For fiscal 2019 and 2018, under ASC 840, all leases that are determined not to meet any of the capital lease criteria are classified as operating leases.

Operating lease payments are recognized as an expense in the statement of operations on a straight-line basis over the lease term.

For fiscal 2020, as a result of the adoption of ASC 842, the Company recognizes if an arrangement is a lease at the inception of the contract.

The Company determines which party has the right to control an asset during the contract term and recognizes a Right of Use ("ROU") asset and lease obligations based on the present value of the future minimum lease payments over the term of the lease.

Refer to Note 2 for further discussion of the Company’s accounting policy for leases.

Translation of Foreign Currency — For the Company's non-U.S.

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Adoption Date

2014-09 Revenue from Contracts with Customers and subsequent amendments

The Accounting Standards Update ("ASU") provides guidance for revenue recognition.

The update's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

In doing so, companies will need to use more judgment and make more estimates than under current guidance.

Examples of the use of judgments and estimates may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

The update 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.

The update provides for two transition methods to the new guidance:

a full retrospective approach and a modified retrospective approach.

2016-02 Leases (Topic 842)

The ASU requires companies to use a "right of use" lease model that assumes that each lease creates an asset (the lessee's right to use the leased asset) and a liability (the future rent payment obligations), which should be reflected on a lessee's balance sheet to fairly represent the lease transaction and the lessee's related financial obligations with terms of more than 12 months.

The Company adopted the guidance in the first quarter of 2020 using the modified retrospective method.

See Note 2, "Revenue from Contracts with Customers" for further detail.

2018-02 Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

The ASU provided entities with the option to reclassify tax effects stranded in accumulated other comprehensive income as a result of the "H.R.1", also known as the "Tax Cuts and Jobs Act" ("TCJA") to retained earnings.

The Company elected to adopt the guidance early in the quarter ended March 29, 2019.

As a result of adoption of the ASU, the Company reclassified $2,333 of stranded tax benefits related to its pension plans out of Accumulated other comprehensive loss and into Accumulated deficit for the quarter ended March 29, 2019.

The Company's policy is to release the tax effects as the related amounts in other comprehensive income are recognized in net income.

2018-07 Improvements to Nonemployee Share-Based Payment Accounting.

The ASU simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions.

The Company elected to adopt the guidance early in the quarter ended June 28, 2019.

There was no material impact to the consolidated financial statements as a result of the adoption of ASU 2018-07.

2018-13 Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement

The ASU amends ASC 820 to add, remove and clarify disclosure requirements related to fair value measurements.

The Company elected to adopt the guidance early in the quarter ended June 28, 2019.

See Note 2, "Leases" for further detail.

2018-14 Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans

The ASU amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans.

The Company elected to adopt the guidance early in the quarter ended September 30, 2020.

There was no material impact to the consolidated financial statements as a result of the adoption of ASU 2018-14.

See Note 5, "Post Retirement Benefits" for further detail.

A summary of guidance not yet adopted are as follows:

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Effective Date

2016-02 Leases (Topic 842)

The Company will adopt the new lease guidance in the first quarter of fiscal 2020 utilizing the modified retrospective transition method and will not restate comparative periods.

We plan to elect the package of practical expedients permitted under the transition guidance within the ASU, which allows us to carry forward prior conclusions about lease identification, classification and initial direct costs for leases entered into prior to adoption.

The new standard also provides practical expedients for an entity’s ongoing accounting.

For leases with a term of 12 months or less, we plan to elect the short-term lease exemption, which allows us to not recognize right-of-use assets or lease liabilities for qualifying leases existing at transition and new leases we may enter into in the future.

To assist with the ongoing accounting under ASC 842, we have implemented a new lease accounting system.

The Company is continuing to assess the impact of the ASU on our consolidated financial statements, required disclosures, and changes to internal controls.

Based on the work completed, the Company expects to recognize lease liabilities ranging from $42 million to $52 million, with corresponding right-of-use assets of the same amount.

2016-13 Financial Instruments - Credit Losses (Topic 326)

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Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses.

The Company adopted this standard in the first quarter of 2021.

The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

The Company implemented the appropriate changes to business processes and controls to support recognition and disclosure under the new standard.

2019-12, Simplifying the accounting for income taxes (Topics 740)

The ASU eliminates certain existing exceptions related to the general approach in ASC 740 relating to franchise taxes, reducing complexity in the interim period accounting for year to date loss limitations and changes in tax laws, and clarifying the accounting for transactions outside of business combination that result in a step up in the tax basis of goodwill.

Under evaluation.

2018-14 Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans

The ASU amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans.

Based on procedures performed to date, the Company does not anticipate the adoption of this ASU to be material to the financial statements.

2020-04, Reference rate reform Topic 848:

Facilitation of the effects of reference rate reform on financial reporting

The ASU addresses constituents’ concerns about certain accounting consequences that could result from the global markets’ anticipated transition away from the use of the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates.

Under evaluation.

REVENUE FROM CONTRACTS WITH CUSTOMERS

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016, and December 2016 within ASU 2015-14, ASU 2016-08, ASU 2016-10 and ASU 2016-20, respectively.

The core principle of this new revenue recognition guidance is that a company will recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The new guidance defines a five-step process to implement this core principle.

The new guidance 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.

The new guidance provides for two transition methods, a full retrospective approach and a modified retrospective approach.

The Company adopted the new guidance on October 1, 2018 utilizing the modified retrospective

method of adoption for contracts not completed at the adoption date and determined there were no changes required to its historical reported revenues and earnings as a result of the adoption.

The impacts to the consolidated financial statements consist of balance sheet reclassifications including amounts associated with the changes in the classification of reserves related to volume rebates and returns reserves.

The Company has also enhanced its disclosures of revenue to comply with the new guidance.

The impact to the Company’s financial statements as of September 30, 2019 was as follows:

As of September 30, 2019

Balance Sheet

Balances before adoption of ASC 606

Effect of Adoption

Higher/(Lower)

Accounts Receivable, net

Customer liabilities

The Company typically receives payment 30 to 60 days from the point it has satisfied the related performance obligation.

See Note 20, ''Segment Information'' for revenue disaggregated by geography and product categories.

On October 1, 2019, we adopted Topic 842 using the modified retrospective transition method.

Topic 842 requires the recognition of lease assets and liabilities for operating leases, in addition to the finance lease assets and liabilities previously recorded on our consolidated balance sheets.

Beginning on October 1, 2019, our consolidated financial statements are presented in accordance with the revised policies, while prior period amounts are not adjusted and continue to be reported in accordance with our historical policies.

The modified retrospective transition method required the cumulative effect, if any, of initially applying the guidance to be recognized as an adjustment to our accumulated deficit as of our adoption date.

As a result of adopting Topic 842 , we recognized additional operating lease assets and liabilities of $ 45,519 and $ 46,941 as of October 1, 2019.

The discount rate primarily used to calculate that adjustment was the Company's incremental borrowing rate as of the adoption date, October 1, 2019, as a rate implicit in most contracts was not readily determinable.

The Company recorded a cumulative effect adjustment of $ 1,053 to accumulated deficit, net of tax, as a result of the adoption.

The Company elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed us to carry forward prior conclusions about lease identification, classification and initial direct costs for leases entered into prior to adoption of Topic 842.

Additionally, for leases with a term of 12 months or less, the Company elected the short-term lease exemption, which allowed us to not recognize ROU assets or lease liabilities for qualifying leases existing at transition and new leases we may enter into in the future.

Leases with an initial term of 12 months or less are classified as short-term leases and are not recorded on the consolidated balance sheets.

The lease expense for short-term leases is recognized on a straight-line basis over the lease term.

The Company engages in leasing transactions to meet the needs of the business.

The Company leases certain manufacturing facilities, warehouses and distribution centers, office space, forklifts, vehicles and other machinery and equipment.

The determination to lease, rather than purchase, an asset is primarily contingent upon capital requirements, duration of the forecasted business investment, and asset availability.

The Company determines if an arrangement is a lease at inception and all arrangements deemed to be leases are subject to an assessment to determine the classification between finance and operating leases.

The Company's significant assumptions and judgments in determining whether a contract is or contains a lease include establishing whether the supplier has the ability to use other assets to fulfill its service or whether the terms of the agreement enable the Company to control the use of a dedicated property, plant and equipment asset during the contract term.

In the majority of the Company's contracts where it must identify whether a lease is present, it is readily determinable that the Company controls the use of the assets and obtains substantially all of the economic benefit during the term of the contract.

In those contracts where identification is not readily determinable, the Company has determined that the supplier has either the ability to use another asset to provide the service or the terms of the contract give the supplier the rights to operate the asset at its discretion during the term of the contract, in which case the arrangement would not constitute a lease.

Right-of-use assets and lease obligations are recognized based on the present value of the future minimum lease payments over the lease term as of the commencement date.

The Company’s lease agreements have terms that include both lease and non-lease components.

Lease component fees are included in the present value of future minimum lease payments.

Conversely, non-lease components are not subject to capitalization and are expensed as incurred.

Per Topic 842, the contractual interest rate is used to calculate the present value of the future minimum lease payments.

However, the majority of the Company’s leases do not provide an implicit rate.

Therefore, the Company's significant assumption and judgments in determining the discount rate include determining the incremental borrowing rate.

The Company’s incremental borrowing rates are based on the term of the lease, the economic environment of the lease and the effect of collateralization.

The valuation of the ROU asset also includes lease payments made in advance of the lease commencement date and initial direct costs incurred to secure the lease and is reduced for lease incentives.

The lease terms include options to extend or terminate the lease when it is reasonably certain the Company will exercise the options.

The Company has certain leasing agreements, related to leased vehicles available to our sales personnel, that contain guaranteed residual value terms, which are not expected to be triggered.

The Company’s leasing portfolio does not contain any material restrictive covenants.

(in thousands)

September 30, 2020

Operating lease assets

Finance lease assets

Total right-of-use assets, gross

accumulated amortization

Right-of-use assets, net

Current liabilities:

Current portion of operating lease liabilities

Current portion of finance lease liabilities

Lease obligations

Noncurrent liabilities:

Operating lease liabilities

Finance lease liabilities

Long-term lease obligations

Total lease obligations

The following table summarizes lease costs by type of cost for the fiscal year ended September 30, 2020 .

In the consolidated statements of operations, cost of sales and selling, general and administrative expenses included lease costs of $ 14,295 and $ 2,714 respectively.

(in thousands)

Fiscal year ended September 30, 2020

Consolidated Statement of Operations Classification

Amortization of right-of-use assets

Interest on lease liabilities

Variable lease costs

Short term lease costs

Total lease costs

Maturity of Lease Liabilities

The Company's maturity analysis of its lease liabilities as of fiscal year ended September 30, 2020 is as follows:

(in thousands)

Financing Leases

Operating Leases

2026 and after

Total lease payments

Present value of lease liabilities

Total rental expense on all operating leases was $ 17,077 and $ 17,403 in fiscal 2019 , and 2018 , respectively.

The following represents the Company's future minimum rental payments at September 30, 2019 , for agreements classified as operating leases under ASC 840 with non-cancelable terms in excess of one year:

2025 and thereafter

Lease Term and Discount Rate

Fiscal year ended September 30, 2020

Weighted-average remaining lease term (years)

Operating leases

Finance leases

Weighted-average discount rate

Operating leases

Finance leases

Other Information

(in thousands)

Fiscal year ended September 30, 2020

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

From time to time, the Company enters into strategic acquisitions in an effort to better service existing customers and to attain new customers.

The Company had no acquisitions in the year ended September 30, 2020.

On August 21, 2019, Atkore Plastic Pipe Corporation, a wholly-owned subsidiary of the Company acquired the assets of Rocky Mountain Pipe ("Cor-Tek"), a manufacturer of PVC conduit for electrical applications, and considered a leading innovator in cellular core extrusion technology for a purchase price of $ 14,835 .

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The consolidated financial statements include the results of the acquired company from the acquisition date.

Net sales and net income of the acquired company included in the condensed consolidated statement of operations for fiscal 2019 were insignificant.

Net sales and net income of the acquired company included in the consolidated statement of operations for fiscal 2019 were insignificant.

As a result of the acquisition, the Company recognized $ 7,295 of goodwill, $ 14,800 of identifiable intangible assets and $ 3,412 of working capital and other net other tangible assets.

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The Cii acquisition complements Atkore's existing modular and prewired products within the Electrical Raceway segment.

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

The Calpipe acquisition expanded the Company's product portfolio by adding stainless steel and PVC coated conduit systems, introduced security bollards to the Company's offerings and further complemented the Company's existing Electrical Raceway product offerings.

On September 1, 2017, Unistrut, Ltd, a wholly-owned indirect subsidiary of the Company, acquired all of the outstanding stock of Flexicon Limited ("Flexicon"), a leading global manufacturer of metallic and non-metallic flexible cable protection systems that carries many international and market product approvals and serves the industrial, commercial and infrastructure sectors in more than 55 countries.

On May 18, 2017, Unistrut, Ltd, a wholly-owned indirect subsidiary of the Company acquired all of the outstanding stock of 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 the Company's electrical distribution partners in the U.K.

and expands the Company's presence in the U.K.

and the rest of Europe.

The acquisitions of Marco and Flexicon were funded using cash-on-hand.

The acquisition of Calpipe was partially funded using borrowings from the ABL Credit Facility.

The Company incurred approximately $ 558 and $ 1,676 for fiscal 2017 acquisition-related expenses, which were recorded as a component of selling, general and administrative expenses for the years ended September 30, 2018 and September 30, 2017 , respectively.

Purchase Price Allocations

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Total intangible assets

As of September 30, 2019, with the exception of Vergokan, the purchase price allocation for the remaining acquisitions has not been finalized as the Company is refining its fair value estimates for working capital, intangible assets and fixed assets.

The following table summarizes the Level 3 fair values assigned to the net assets acquired and liabilities assumed as of the acquisition date for fiscal 2017:

(in thousands)

Fair value of consideration transferred:

Cash consideration

Working capital adjustment

Purchase price payable

Settlement of pre-existing relationship

Total consideration transferred

Fair value of assets acquired and liabilities assumed:

Accounts receivable

Intangible assets

Accounts payable

Net assets acquired

Excess purchase price attributed to goodwill acquired

From the date of the Company's preliminary purchase price allocation for the 2017 acquisitions through September 30, 2018, the Company recorded adjustments based on our valuation procedures for our acquisitions that resulted in an increase to goodwill of $ 24,527 .

The adjustments were primarily attributable to a decrease of $ 18,793 in the value allocated to acquired assets, primarily intangible assets and working capital, partially offset by an increase in the value of property, plant and equipment of $ 2,536 .

Additionally, an adjustment of $ 8,270 was recorded for deferred tax liabilities as a result of the purchase accounting adjustments.

Goodwill recognized from the Calpipe acquisition is tax-deductible and is amortized over 15 years for income tax purposes.

Goodwill recognized from the other acquisitions was non-deductible for tax purposes.

The goodwill consists largely of the synergies and economies of scale from integrating these companies with existing businesses.

See Note 14, ''Goodwill and Intangible Assets'' .

The following table summarizes the fair value of intangible assets acquired in fiscal 2017 as of the acquisition dates:

($ in thousands)

Weighted Average Useful Life (Years)

Customer relationships

Total intangible assets

The following table presents unaudited pro forma results of operations for the fiscal year ended September 30, 2017 as if the Calpipe acquisition had occurred as of the first day of the fiscal 2017 period:

Fiscal Year Ended

(in thousands)

September 30, 2017

Pro forma net sales

Pro forma net income

The pro forma condensed financial information is presented for illustrative purposes only and does not indicate the actual financial results of the Company if the closing of the Calpipe acquisition had been completed on September 26, 2015, nor is it indicative of the results of operations in future periods.

Included in the unaudited pro forma financial information for the fiscal year ended September 30, 2017 were pro forma adjustments to reflect the results of operations of Calpipe as well as the impact of amortizing certain acquisition accounting adjustments such as the nonrecurring inventory step up adjustment of $ 2,159 .

The pro forma financial information neither indicates the impact of possible business model changes nor considers any potential impact of current market conditions, expense efficiencies or other factors.

Net sales and net income of the other companies acquired during fiscal 2019 and 2018 are included in the consolidated statement of operations for fiscal 2019 and fiscal 2018 for the post-acquisition periods.

Net sales and net income of the companies acquired during fiscal 2019 and 2018 are included in the consolidated statement of operations for fiscal 2019 and fiscal 2018 for the post-acquisition periods.

Due to the immaterial nature of these acquisitions, both individually, and in the aggregate, the Company did not include the full year pro forma results of operations for the acquisition year or previous years.

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Interest cost

Actuarial gain

Actuarial loss

Benefits and administrative expenses paid

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Amounts recognized in the consolidated balance sheets consist of:

Pension assets

Pension liabilities

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Rate of compensation increase

The Company elected to adopt the ASU 2018-14 early in the quarter ended September 30, 2020, which requires a narrative description of the reasons for significant gains and losses affecting the benefit obligation for the period.

For the fiscal year ended 2020, the reduction in the discount rate from fiscal year 2019 to 2020 is the primary driver of the change in benefit obligations.

The following table summarizes the defined benefit pension plans with accumulated benefit obligations in excess of plan assets:

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STOCK INCENTIVE PLAN

On June 10, 2016, the Company's board of directors adopted the Atkore International Group Inc.

2016 Omnibus Incentive Plan (the " Omnibus Incentive Plan ").

On November 21, 2019, the Company's board of directors approved the Atkore International Group Inc.

2020 Omnibus Incentive Plan (the "2020 Omnibus Incentive Plan"), which was subsequently approved by the Company’s shareholders on January 30, 2020.

The 2020 Omnibus Incentive Plan provides for stock purchases and grants of other equity awards, including non-qualified stock options, stock purchase rights, restricted stock, restricted stock units ("RSUs"), performance shares, performance stock units ("PSUs"), stock appreciation rights, dividend equivalents and other stock-based awards to directors, officers, other employees and consultants.

The 2020 Omnibus Incentive Plan replaces and succeeds the Atkore International Group Inc.

Stock Incentive Plan (the "Stock Incentive Plan").

The Company no longer grants awards from the Stock Incentive Plan.

Awards previously granted under the Stock Incentive Plan were unaffected by the termination.

A maximum of 1.6 million shares of common stock is reserved for issuance under the Omnibus Incentive Plan.

2016 Omnibus Incentive Plan (the "2016 Omnibus Incentive Plan").

The Company no longer grants awards from the 2016 Omnibus Incentive Plan.

Awards previously granted under the 2016 Omnibus Incentive Plan were unaffected by the termination.

A maximum of 1.1 million shares of common stock is reserved for issuance under the 2020 Omnibus Incentive Plan, plus the number of shares of common stock remaining available for issuance under the 2016 Omnibus Incentive Plan as of the date of the Company’s 2020 Annual Meeting of Stockholders.

All awards have a ten year life.

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Stock Options

In accordance with ASC Topic 718 "Compensation - Stock Compensation" , stock compensation expense is recorded on a straight-line basis over the requisite service period (generally the vesting period), net of actual forfeitures based on the grant-date fair value of the option under the equity accounting method.

The assumptions used in the Black-Scholes option pricing model to value the options granted and modified were as follows:

In accordance with ASC 718 Compensation - Stock Compensation, stock compensation expense is recorded on a straight-line basis over the requisite service period (generally the vesting period), net of actual forfeitures based on the grant-date fair value of the option under the equity accounting method.

The assumptions used in the Black-Scholes option pricing model to value the options granted were as follows:

Fiscal Year Ended

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Dividends are not paid on the Company's common stock.

Expected volatility is based on historical volatilities of comparable companies.

For grants during fiscal year ended 2020, the expected volatility is based on the Company's stock price volatility.

For grants and modifications during fiscal years ended 2019 and 2020, expected volatility is based on historical volatilities of comparable companies.

The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of the grant for periods corresponding with the expected life of the options.

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The grant-date fair value for the market condition based awards was determined using the Monte-Carlo method.

The assumptions used in the Monte-Carlo method to value the performance share awards granted and modified during the fiscal year ended September 30, 2019 were as follows:

The assumptions used in the Monte-Carlo method to value the performance share awards granted during the fiscal year ended September 30, 2020 were as follows:

September 30, 2020

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17.21 - 79.15

17.55 - 75.55

Risk free interest rates

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Nonvested as of September 30, 2019

Adjustment for achieved performance upon issuance

Nonvested as of September 30, 2020

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Severance (a)

Balance as of September 30, 2017

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Balance as of September 30, 2018

Exchange rate effects

Balance as of September 30, 2019

Exchange rate effects

Balance as of September 30, 2020

(a) Primarily related to Atkore's commitment to close and consolidate certain facilities as part of its continuing effort to realign its strategic focus.

(a) Fiscal 2020 charges are primarily related to a reduction in force implemented as part of adjusting to the macroeconomic impacts related to the outbreak of the novel coronavirus (COVID-19).

Fiscal 2019 and 2018 charges are primarily related to Atkore's commitment to close and consolidate certain facilities as part of its continuing effort to realign its strategic focus.

(b) Primarily related to Atkore's commitment to close and consolidate certain facilities as part of its continuing effort to realign its strategic focus.

The Company expects to utilize all restructuring accruals as of September 30, 2020 within the next twelve months.

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Gain on sale of a business

Gain on sale of joint venture

Undesignated foreign currency derivative instruments

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Other income, net

On March 27, 2020, President Trump signed into U.S.

federal law the Coronavirus Aid, Relief and Economic Security ("CARES") Act, which is aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S.

The CARES Act, among other things, includes provisions related to refundable payroll tax credits, deferment of the employer portion of social security payments, net operating loss carry back periods, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property.

There is no material impact to our consolidated financial statements as a result of this legislation.

On December 22, 2017, "H.R.1," also known as the Tax Cuts and Jobs Act ("TCJA") was signed into law.

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The legislation also adopts a new quasi-territorial tax regime and imposes a one-time transition tax on deemed repatriated earnings of certain foreign subsidiaries.

The value of the Company’s net deferred tax liability on the balance sheet decreased as a result of the newly enacted tax rates creating a one-time tax benefit to the Company;

the preliminary analysis of the impact, using December 29, 2017 values, was an estimated decrease to the net deferred tax liability of $ 4,758 , which was recognized in the first quarter of fiscal 2018.

The SEC Staff Accounting Bulletin No.

118 allowed for a measurement period of up to one year from the date of enactment;

during the course of the fiscal year ended September 30, 2018, the Company recorded an adjustment to the re-measurement of deferred tax liabilities of an additional $ 708 benefit as a result of updated estimates.

For the period ended December 28, 2018, the Company finalized the re-measurement with no additional adjustments.

The Company has an accumulated earnings and profits deficit in the foreign jurisdictions in which it operates.

The Company completed its calculation and did not have an income tax liability from the one-time transition tax on the deemed repatriation of its foreign earnings.

The GILTI provision of TCJA requires certain income earned by controlled foreign corporations ("CFCs") to be included currently in the gross income of the CFC's controlling U.S.

As part of the enactment of TCJA, the Company recorded a global intangible low-taxed income ("GILTI") provision for the first time beginning in fiscal 2019.

The GILTI provision of TCJA requires certain income earned by controlled foreign corporations ("CFCs") to be included currently in the gross income of the CFCs controlling U.S.

In accordance with accounting standards applicable to income taxes, there is allowed an accounting policy choice of either (1) treating taxes due on U.S.

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Effective income tax rate

The Company's effective tax rate for fiscal 2020 differs from the statutory rate primarily due to state income taxes of $ 7,690 , current year valuation allowance expense of $ 2,099 and limitations on executive compensation of $ 1,243 partially offset by $ 4,203 of excess tax benefit associated with the exercise of stock options.

The Company's effective tax rate for fiscal 2019 differs from the statutory rate primarily due to state income taxes of $ 7,566 , along with GILTI provisions of $ 953 and withholding taxes of $ 635 , offset by the disallowed gain on the purchase of Cor-Tek of $ 1,551 and $ 1,537 of excess tax benefit associated with the exercise of stock options.

The Company's effective tax rate for fiscal 2018 differs from the statutory rate due to a $ 5,466 benefit from the remeasurement of the deferred tax liabilities as a result of the TCJA, a $ 4,091 excess tax benefit associated with the exercise of stock options, a net tax benefit of $ 3,977 from the release of indemnified tax positions and a benefit of $ 3,309 for the domestic manufacturing deduction, partially offset by $ 5,675 of state income tax expense.

The Company's effective tax rate for fiscal 2017 differs from the statutory rate primarily due to a $ 3,589 excess tax benefit associated with the exercise of stock options, a $ 2,761 tax benefit for domestic manufacturing deduction, partially offset by $ 3,459 of state income tax expense.

Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes.

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Postretirement benefits

Lease obligations

Deferred tax liabilities:

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Loss on investment

Right-of-use assets, net

Net deferred tax liability before valuation allowance

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(in thousands)

For the period from September 30, 2017 to September 30, 2020

Balance as of September 30, 2017

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Additions based on tax positions related to prior years

Additions based on tax positions related to current year

Balance as of September 30, 2020

During fiscal 2019 , the balance of unrecognized tax benefits decreased by $ 814 as a result of completing state tax audits and the expiration of the statute of limitations in federal and various state jurisdictions, partially offset by an increase of $ 244 , primarily related to various state jurisdiction's uncertain tax positions.

The related accrued penalties and interest for uncertain tax positions decreased by $ 25 .

During fiscal 2018 , the balance of unrecognized tax benefits decreased by $ 3,107 as a result of Tyco completing tax audits and the expiration of the statute of limitations in various state jurisdictions, partially offset by an increase of $ 893 , primarily related to various state jurisdiction's uncertain tax positions.

During fiscal 2020, the balance of unrecognized tax benefits increased by $ 1,047 as a result of federal and various state jurisdictions' uncertain tax positions, partially offset by a decrease of $ 227 as result of completing tax audits and the expiration of the statute of limitations in various state jurisdictions.

The related accrued penalties and interest for uncertain tax positions increased by $ 134 .

The related accrued penalties and interest for uncertain tax positions decreased by $ 25 .

During fiscal 2017 , the balance of unrecognized tax benefits decreased by $ 288 as a result of Tyco completing tax audits and the expiration of the statute of limitations in various state jurisdictions.

The related accrued penalties and interest for uncertain tax positions decreased by $ 3,139 .

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The Company may still be liable for foreign taxes, such as withholding taxes, if earnings are repatriated.

For the fiscal year ended September 30, 2019 , the Company recorded a $ 635 provision for withholding taxes on the planned distribution of income from one of its Europe subsidiaries.

The Company did not record income tax or non-income tax expense related to the remaining foreign earnings, and did not record any deferred tax liabilities for any basis differences in investments in subsidiaries as the earnings are expected to be indefinitely reinvested, the investments are essentially permanent in duration, or the Company has concluded that there will be no additional tax liability as a result of the distribution of the income.

For the fiscal years ended September 30, 2018 and September 30, 2017 , the Company made no additional provision for United States or non-U.S.

For the fiscal year ended September 30, 2020 , the Company recorded no additional liability for United States or non-U.S.

income taxes on the undistributed income of subsidiaries or for unrecognized deferred tax liabilities for temporary differences related to basis differences in investments in subsidiaries, as such income is expected to be indefinitely reinvested, the investments are essentially permanent in duration, or the Company has concluded that no additional tax liability will arise as a result of the distribution of such income.

For the fiscal year ended September 30, 2019 , the Company recorded a liability of $ 635 , for withholding taxes on the planned distribution of income from one of its Europe subsidiaries.

As of September 30, 2020 , certain subsidiaries had approximately $ 59,719 of undistributed income that the Company intends to permanently reinvest.

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The Company adjusts these reserves in light of changing facts and circumstances.

However, due to the complexity of some of these

uncertainties, the ultimate resolution may result in a payment that is materially different from the Company's current estimate of the tax liabilities.

For uncertain tax liabilities (including penalties and interest) arising in the periods prior to the Transactions that are resolved in a future period, the Company plans to seek repayment from Tyco under the terms of an investment agreement.

Due to the statute of limitations expiring for the fiscal year ended September 30, 2019 , the Company has released all of those liabilities and the offsetting receivable due from Tyco.

However, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company's current estimate of the tax liabilities.

Under the terms of an investment agreement between the Company and Tyco, Tyco has agreed to indemnify and hold harmless the Company and its subsidiaries and their respective affiliates from and against any taxes of the Company with respect to any tax period ending on or before the closing of the Transactions, as well as all tax liabilities relating to events or transactions occurring on or prior to the closing date of the Transactions.

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Diluted earnings per common share is calculated by dividing net earnings allocated to common stock by the weighted-average number of shares outstanding for the period, as adjusted for the potential dilutive effect of non-participating share-based awards.

Prior to fiscal 2018, earnings per share under the two-class method and the treasury method was the same, as net income allocated to participating securities was immaterial.

The following table sets forth the computation of basic and diluted earnings per share:

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Balance as of September 30, 2018

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive loss

Net current period other comprehensive income (loss)

Balance as of September 30, 2018

Other comprehensive loss before reclassifications

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Balance as of September 30, 2019

(1) Due to the adoption of ASU 2018-02.

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive loss

Net current period other comprehensive income (loss)

Balance as of September 30, 2020

(1) Due to the adoption of ASU 2018-02 stranded tax benefits related to its pension plans were reclassified from Accumulated other comprehensive loss and into Accumulated deficit

The following is a summary of the amounts reclassified from accumulated other comprehensive loss to net income :

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Net reclassifications for the period

The estimated net actuarial loss for pension benefit plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year is expected to be approximately $ 888 .

INVENTORIES, NET

A majority of the Company records inventory at the lower of cost or market (primarily last in, first out, or "LIFO").

A majority of the Company records inventory at the lower of cost (primarily last in, first out, or "LIFO") or market or net realizable value, as applicable.

Approximately 73 % and 72 % of the Company's inventories are valued at the lower of LIFO cost or market at September 30, 2020 and September 30, 2019 , respectively.

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Inventories, net

Total inventories would be $ 3,138 and $ 26,340 higher than reported as of September 30, 2019 and September 30, 2018 , respectively, if the first-in, first-out method was used for all inventories.

Total inventories would be $ 4,418 lower and $ 3,138 higher than reported as of September 30, 2020 and September 30, 2019 , respectively, if the first-in, first-out method was used for all inventories.

During the year ended September 30, 2020, inventory quantities were reduced.

This reduction resulted in a liquidation of LIFO inventory quantities carried at net lower costs prevailing in prior years as compared with the cost of 2020 purchases, the effect of which decreased cost of goods sold and increased operating income by approximately $ 1,837 .

As of September 30, 2020 and September 30, 2019 , the excess and obsolete inventory reserve was $ 14,533 and $ 14,295 , respectively.

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Balance as of September 30, 2018

Goodwill divested during year

Goodwill acquired during year

Purchase price adjustments

Exchange rate effects

Balance as of September 30, 2019

Goodwill acquired during year

Exchange rate effects

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During the three months ended September 30, 2019, the Company made a voluntary prepayment of $ 40,000 of principal on the First Lien Loan.

This voluntary prepayment resulted in the removal of all principal payment requirements until the contractual maturity of the debt in fiscal 2024.

During the three months ended September 30, 2020, the Company made a voluntary prepayment of $ 40,000 of principal on the First Lien Loan.

The voluntary prepayments in the past two years resulted in the removal of all principal payment requirements until the contractual maturity of the debt in fiscal 2024.

As of September 30, 2020 , future contractual maturities of long-term debt are as follows (in thousands) :

2026 and thereafter

Term Loan Facilities — On April 9, 2014, AII entered into a credit agreement (the " Initial Credit Agreement ") for a $ 420,000 First Lien Term Loan Facility (the " Initial First Lien Term Loan Facility ") and a credit agreement for a $ 250,000 Second Lien Term Loan Facility (the " Second Lien Term Loan Facility ." The Initial First Lien Term Loan Facility was priced at 99.50 % and carried an interest rate of LIBOR plus 3.50 % with a LIBOR floor of 1.00 % .

Term Loan Facility — On April 9, 2014, AII entered into a credit agreement (the "Initial Credit Agreement") for a $ 420,000 First Lien Term Loan Facility (the "Initial First Lien Term Loan Facility") and a credit agreement for a $ 250,000 Second Lien Term Loan Facility (the "Second Lien Term Loan Facility." The Initial First Lien Term Loan Facility was priced at 99.50 % and carried an interest rate of LIBOR plus 3.50 % with a LIBOR floor of 1.00 % .

The Second Lien Term Loan Facility was priced at 99.00 % and carried an interest rate of LIBOR plus 6.75 % with a LIBOR floor of 1.00 % .

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The First Lien Term Loan Facility amortizes at a rate of 1.00 % per annum and was priced at 99.75 % .

AII used proceeds from the First Lien Term Loan Facility and approximately $ 155 million of available cash to (i) repay all outstanding loans under the Initial First Lien Term Loan Facility and the Second Lien Term Loan Facility and (ii) pay related fees and expenses, including accrued interest.

For the fiscal year ended September 30, 2017 , the Company recorded a $ 9,805 loss on the extinguishment of the Initial First Lien Term Loan Facility and the Second Lien Term Loan Facility.

On February 2, 2018 , AII entered into the (i) First Amendment to the Amended and Restated First Lien Credit Agreement, by and among AII, Deutsche Bank AG New York Branch, as administrative agent and collateral agent, and the other financial institutions party thereto to, among other things, decrease the interest margins applicable to the ABR Loans to 1.75 % and Eurodollar Loans to 2.75 % , and (ii) Increase Supplement (the "Increase Supplement") to, among other things, incur incremental first lien secured term loans in aggregate principal amount of $ 425.0 million .

The Company used the proceeds from the Increase Supplement to 1) repurchase approximately 17.2 million shares of common stock from the CD&R Investor for a total purchase price of approximately $ 375.0 million , 2) repay $ 42.0 million of outstanding loans under the ABL Credit Facility (as defined below) and 3) pay $ 5.8 million in related fees and expenses.

AII used proceeds from the First Lien Term Loan Facility and approximately $ 155,000 of available cash to (i) repay all outstanding loans under the Initial First Lien Term Loan Facility and the Second Lien Term Loan Facility and (ii) pay related fees and expenses, including accrued interest.

The Company used the proceeds from the Increase Supplement to 1) repurchase approximately 17.2 million shares of common stock from the CD&R Investor for a total purchase price of approximately $ 375,000 , 2) repay $ 42,000 of outstanding loans under the ABL Credit Facility (as defined below) and 3) pay $ 5,800 in related fees and expenses.

The revisions to the First Lien Term Loan were accounted for as a debt modification, resulting in immediate expensing of related financing costs of $ 892 within other income, net on the consolidated statements of operations for the year ended September 30, 2018.

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The amendment, among other things, extended the maturity of the facility to December 22, 2021, decreased the interest rate margins applicable to loans under the facility to (i) in the case of United States dollar-denominated loans, either (x) LIBOR plus an applicable margin ranging from 1.25 % to 1.75 % , or (y) an alternate base rate plus an applicable margin ranging from 0.25 % to 0.75 % or (ii) in the case of Canadian dollar-denominated loans, either (x) the BA rate plus an applicable margin ranging from 1.25 % to 1.75 % or (y) a Canadian prime rate plus an applicable margin ranging from 0.25 % to 0.75 % and decreased the fee payable with respect to unutilized availability under the facility from 0.25 % to 0.375 % depending on the remaining availability under the facility.

The ABL Credit Facility has aggregate commitments of $ 325,000 and is guaranteed by AIH and the United States subsidiaries owned directly or indirectly by AII.

On August 28 2020, AII amended the ABL Credit Facility (the "Amended ABL Facility").

The amendment, among other things, extended the maturity of the facility to August 28, 2023 , and increased the interest rate margins applicable to loans under the facility to (i) in the case of United States dollar-denominated loans, either (x) LIBOR plus an applicable margin ranging from 1.75 % to 2.25 % , or (y) an alternate base rate plus an applicable margin ranging from 0.75 % to 1.25 % , each based on available loan commitments or (ii) in the case of Canadian dollar-denominated loans, either (x) the BA rate plus an applicable margin ranging from 1.75 % to 2.25 % or (y) a Canadian prime rate plus an applicable margin ranging from 0.75 % to 1.25 % , each based on available loan commitments.

The Amended ABL Credit Facility bears a commitment fee, payable quarterly in arrears, of 0.375 % per annum.

The Amended ABL Credit Facility also bears customary letter of credit fees.

The revisions to the ABL Credit Facility were accounted for as a debt extinguishment, resulting in immediate expensing of unamortized financing costs of $ 273 for the year ended September 30, 2020.

In connection with AII causing Columbia-MBF to become a subsidiary guarantor for the Amended ABL Credit Facility, AII also caused Columbia-MBF to become a subsidiary guarantor for the First Lien Term Loan Facility.

The Amended ABL Credit Facility has aggregate commitments of $ 325,000 and is guaranteed by AIH, the United States subsidiaries owned directly or indirectly by AII and certain other restricted subsidiaries of AII that AII causes to be a subsidiary guarantor from time to time including as of the closing date for the Amended ABL Credit Facility, Columbia-MBF, Inc., a corporation formed by amalgamation under the laws of Canada ("Columbia-MBF").

AII's availability under the ABL Credit Facility was $ 265,899 and $ 301,882 as of September 30, 2020 and September 30, 2019 , respectively.

Availability under the ABL Credit Facility is subject to a borrowing base equal to the sum of 85 % of eligible accounts receivable plus the lesser of (i) 80 % of eligible inventory of each borrower and guarantor and (ii) 85 % of the net orderly liquidation value of eligible inventory, subject to certain limitations.

Availability under the ABL Credit Facility is subject to a borrowing base equal to the sum of 85 % of eligible accounts receivable plus the lesser of (i) 80 % of eligible inventory of each borrower and guarantor, valued at the lower of cost and fairmarket value and (ii) 85 % of the net orderly liquidation value of eligible inventory, subject to certain limitations.

There were no borrowings outstanding under the ABL Credit Facility as of September 30, 2020 and September 30, 2019 , respectively.

The company paid a fee of 0.50 % on unutilized availability in fiscal 2016 and until December 22, 2016, and a fee of 0.375 % for the period from December 22, 2016 through September 30, 2019 .

The ABL Credit Facility contains customary representations and warranties and customary affirmative and negative covenants.

The Amended ABL Credit Facility contains customary representations and warranties and customary affirmative and negative covenants.

Affirmative covenants include, without limitation, the timely delivery of quarterly and annual financial statements, certifications to be made by AIH, AII and each of its restricted subsidiaries, payment of obligations, maintenance of corporate existence and insurance, notices, compliance with environmental laws, and the grant of liens.

The negative covenants include, without limitation:

limitations on indebtedness, dividends and distributions, investments, prepayments or redemptions of subordinated indebtedness, amendments of subordinated indebtedness, transactions with affiliates, asset sales, mergers, consolidations and sales of all or substantially all assets, liens, negative pledge clauses, changes in fiscal periods, changes in line of business and changes in charter documents.

Additionally, if the availability under the ABL Credit Facility falls below certain levels, AII would subsequently be required to maintain a minimum fixed charge coverage ratio.

AII has not been subject to the minimum fixed charge coverage ratio during any period subsequent to the establishment of the ABL Credit Facility.

The negative covenants are limited to the following:

limitations on indebtedness, dividends and distributions, investments, acquisitions, prepayments or redemptions of subordinated indebtedness, amendments of subordinated indebtedness, transactions with affiliates, asset sales, mergers, consolidations and sales of all or substantially all assets, liens, negative pledge clauses, changes in line of business, changes in charter documents, hedging transactions and maintaining Canadian defined benefit pension plans.

The negative covenants are subject to customary exceptions and also permit the payment of dividends and distributions, investments, permitted acquisitions, payments or redemptions of subordinated indebtedness, asset sales and consolidations and sales of all or substantially all assets upon satisfaction of a payment condition.

There are no financial covenants included in the Amended ABL Credit Agreement, other than a springing minimum fixed charge coverage ratio of at least 1.0 to 1.0, which will be tested only when specified availability (as defined above) is less than the greater of (A) $ 22,000 and (B) 10.0 % of the lesser of (x) the then applicable borrowing base and (y) the then effective commitments under the Amended ABL Credit Facility, and continuing until such time as specified availability shall have been in excess of such threshold for a period of 30 consecutive days.

The First Lien Term Loan Facility and the ABL Credit Facility are secured by all of the assets of the U.S.

subsidiaries of the Company.

The First Lien Term Loan Facility has priority over all real property, plant and equipment, intellectual property and capital stock of any US subsidiary and any documents or instruments evidencing the foregoing assets.

subsidiaries of the Company and, as of the closing date for the Amended ABL Credit Facility, Columbia-MBF.

The First Lien Term Loan Facility has priority over all real property, plant and equipment, intellectual property and capital stock of any U.S.

subsidiary and Columbia-MBF and any documents or instruments evidencing the foregoing assets.

The ABL Credit Facility has first priority over cash and cash equivalents, accounts receivable, inventory and other documents and instruments evidencing the foregoing assets.

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The Company uses forward currency contracts to hedge the effects of foreign exchange relating to certain of the Company's intercompany receivables denominated in a foreign currency.

These derivative instruments are not formally designated as hedges by the Company and the terms of these instruments range from six months to five years .

These derivative instruments are not formally designated as hedges by the Company and the terms of these instruments range from six months to two years .

Short-term forward currency contracts are recorded in prepaid expenses and other current assets or other current liabilities and long-term forward currency contracts are recorded in non-trade receivables or other long-term liabilities in the consolidated balance sheets .

1 unchanged sentence

See Note 8, ''Other Income, net'' for further detail.

The total notional amounts of undesignated forward currency contracts were £ 45.0 million and £ 49.1 million as of September 30, 2019 and September 30, 2018 , respectively.

There were no undesignated forward currency contracts as of September 30, 2017 .

The total notional amounts of undesignated forward currency contracts were £ 43.3 million, £ 45.0 million and £ 49.1 million as of September 30, 2020 , September 30, 2019 and September 30, 2018 .

Cash flows associated with derivative financial instruments are recognized in the operating section of the consolidated statements of cash flows .

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Forward currency contracts

In addition to the recurring assets and liabilities measured at fair value, the Company had a contingent consideration liability of $ 650 as of September 30, 2018 measured at fair value related to the Cii acquisition.

This was settled in the second

quarter of fiscal 2019.

The liability was valued using significant unobservable inputs (Level 3) based on the probability of achievement of first year earnings post acquisition.

See Note 3, ''Acquisitions'' for further detail.

The Company's remaining financial instruments consist primarily of cash, accounts receivable and accounts payable whose carrying value approximate their fair value due to their short-term nature.

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These amounts represent open purchase orders for materials used in production.

The Company leases certain facilities and equipment under operating leases.

Total rental expense on all operating leases was $ 17,077 , $ 17,403 and $ 12,941 in fiscal 2019 , 2018 , and 2017 , respectively.

At September 30, 2019 , minimum future operating lease payments for leases with terms in excess of one year are presented in the table below as follows (in thousands):

2025 and thereafter

Insurable Liabilities — The Company maintains policies with various insurance companies for its workers' compensation, product, property, general, auto, and executive liability risks.

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As of September 30, 2020 , the Company believes that the range of reasonably possible losses for Special Products Claims and other product liabilities is between $ 1,000 and $ 8,000 .

During fiscal 2019, Tyco and the Company agreed with a plaintiff to settle one Special Products claim that was to go to trial.

During fiscal 2019, after a court judgment was issued in one case between the Company and Tyco regarding the indemnification of expenses, fees and settlement amounts relating to the incompatibility issue, the Company and Tyco entered into a global settlement regarding the issue.

The Company agreed to fund the total settlement in exchange for Tyco's agreement to cap the Company's Special Products Claim deductible at $ 12,000 , as opposed to the $ 13,000 cap negotiated within the original indemnity agreement.

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Department of Commerce did not appeal the ruling by the Court of International Trade by the October 2, 2018 deadline and in fiscal 2018, the Company reversed $ 7,171 of the related accrual established during the second quarter of fiscal 2017.

During the year ended September 30, 2020, one of the Company’s manufacturing facilities experienced a flood which resulted in damages to certain property, plant and equipment.

This facility is covered under the Company’s property and casualty loss and business interruption insurance policies.

The Company has recorded an expense of $ 6,046 for losses related to fully written off property, plant and equipment, with a related insurance recovery of $ 5,046 within selling, general and administrative expenses in its consolidated statements of operations for the year ended September 30, 2020.

The Company has begun to receive reimbursement and believes that, other than the $ 1,000 deductible expense under the related insurance claim, it will be reimbursed for substantially all other property, plant and equipment losses in connection with the event under its current insurance policies.

In addition to the matters discussed above, from time to time, the Company is subject to a number of disputes, administrative proceedings and other claims arising out of the ordinary conduct of the Company's business.

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In disposing of assets or businesses, the Company often provides representations, warranties and indemnities to cover various risks including unknown damage to the assets, environmental risks involved in the sale of real estate, liability to investigate and remediate environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities and legal fees related to periods prior to disposition.

The Company does not have the ability to estimate the potential liability from such indemnities because they relate to unknown conditions.

The Company does not have the ability to estimate the

potential liability from such indemnities because they relate to unknown conditions.

However, the Company has no reason to believe that these uncertainties would have a material adverse effect on the Company's business, financial condition, results of operations or cash flows.

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RELATED PARTY TRANSACTIONS

In December 2010, the CD&R Investor acquired a majority stake in the Company (the "CD&R Acquisition").

In December 2010, CD&R Allied Holdings, L.P.

(the "CD&R Investor") acquired a majority stake in the Company (the "CD&R Acquisition").

In connection with the CD&R Acquisition, the Company, AIH and AII entered into a consulting agreement (the "Consulting Agreement") with CD&R.

The fees related to the Consulting Agreement were paid quarterly, in advance and recorded as a component of selling, general and administrative expenses in the Company's consolidated statement of operations.

In connection with the IPO on June 15, 2016, the Company entered into an agreement with CD&R to terminate the Consulting Agreement, including the ongoing consulting fees and paid CD&R a fee of $ 12,800 .

The consulting and termination fees were $ 15,425 for the fiscal year ended September 30, 2016.

On January 22, 2018, the Company announced a stock repurchase transaction whereby the Company agreed to repurchase from the CD&R Investor, a related party, approximately 17.2 million shares of the Company's common stock, par value $ 0.01 per share, at a per share price equal to $ 21.77 , for a total purchase price of $ 375,000 , subject to the terms and conditions set forth in the stock purchase agreement.

Following the stock repurchase transaction in January 2018 and secondary offerings of the Company's common stock in February 2018 and May 2018, the CD&R Investor did not own any of the Company's common stock on September 30, 2019.

Prior to the CD&R Investor selling all of its remaining shares of the Company in May 2018, transactions between the Company, CD&R and affiliates of CD&R were considered to be between related parties.

In addition to the consulting fees referenced above, affiliates of CD&R own equity positions in one of the Company's customers.

Net sales during fiscal 2018 and 2017 to this customer were $ 6,000 and $ 8,300 , respectively.

Net sales during fiscal 2018 to this customer were $ 6,000 .

SEGMENT INFORMATION

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

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.

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.

Intersegment transactions primarily consist of product sales at designated transfer prices on an arm's-length basis.

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Gain on sale of a business

Gain on sale of joint venture

Income before income taxes

(a) Represents unallocated selling, general and administrative activities and associated expenses including, in part, executive, legal, finance, human resources, information technology, business development and communications, as well as certain costs and earnings of employee-related benefits plans, such as stock-based compensation and a portion of self-insured medical costs.

(b) Represents other items, such as inventory reserves and adjustments, release of indemnified uncertain tax positions and the impact of foreign exchange gains or losses.

(b) Represents 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.

The Company's long-lived assets and net sales by geography were as follows:

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PVC Electrical Conduit & Fittings

Cable Tray & Cable Ladders

Other raceway products

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Although the Company generally does not require collateral, the Company performs ongoing credit evaluations of customers and maintains reserves for potential credit losses.

As of September 30, 2020, one customer, Sonepar Management US, Inc., represented 11% of the Company's accounts receivable balance due to increased sales in the last 60 days of the year.

As of September 30, 2019, no single customer represented more than 10% of the Company's accounts receivable balance.

As of September 30, 2018, one customer, Sonepar Management US, Inc., represented 11% of the Company's accounts receivable balance.

As of November 28, 2018, all amounts outstanding as of September 30, 2018, that are due to be paid from Sonepar Management US, Inc., have been received.

In fiscal 2017, no single customer accounted for more than 10 % of sales or accounts receivable.

For fiscal 2020, 2019 and 2018, no single customer accounted for more than 10% of sales.

Concentration of Employees — As of September 30, 2020 , approximately 24 % of the Company's employees were represented by a union under a collective bargaining agreement.

All unions are either located in the United States or Canada with no unions or Worker's Councils at any of the other locations abroad.

Our Harvey, Illinois Special Metal Processing Facility agreement with the United Steelworkers Union, involving a bargaining unit of 15 employees, expired on November 11, 2018 and we successfully negotiated a new agreement which now expires in November 2022.

Our Harvey, Illinois collective bargaining agreement with the United Steelworkers involves nearly 400 represented employees, is set expire in April 2020.

All unions are located in either the United States or Canada, with no unions or Worker's Councils at any of the other locations abroad.

On July 14, 2020, the Company and the United Steelworkers Union, representing approximately 350 employees, reached agreement on the terms of a new collective bargaining agreement for our largest facility in Harvey, Illinois, which expires in April 2024.

The Company believes its relationship with its employees is good.

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Net income per share

(1) Includes a $4,758 benefit due to the re-measurement of deferred tax liabilities as a result of the TCJA.

See Note 9, "Income taxes" for additional information.

(2) Includes $26,737 pre-tax gain on the sale of Flexhead.

The Company recorded an additional working capital adjustment to the assets sold, which increased the gain by $838, in the quarter ending June 29, 2018.

See Note 4, "Divestitures" for additional information.

(3) Includes $7,171 pre-tax reversal of expense related to the Antidumping Duty Order for Malleable Iron Pipe Fittings.

See Note 17, Commitments and contingencies" for additional information.

(1) Includes a $7,384 gain on the acquisition of Cor-Tek.

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(2) The sum of the quarters may not equal the total of the respective year's earnings per share due to changes in the weighted average shares outstanding throughout the year.

SUBSEQUENT EVENTS

On October 22, 2020, the Company acquired the assets of Queen City Plastics, Inc., a manufacturer of PVC conduit, elbows and fittings for the electrical market for an estimated purchase price of $ 7.3 million.

Subsequent to September 30, 2020, the Company repurchased 637,200 shares for $ 15.0 million reducing the Company's share count to 47,409,886 as of November 13, 2020 .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data