What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-02-02 compared with 2020-08-04 · 69 added, 186 removed, 146 unchanged (64% of the section changed)

7 unchanged sentences

This heightened volatility and uncertainty makes it difficult for us to predict the extent of COVID-19’s impact on our operations going forward.

As of the date of this filing, we have seen volume declines in our business across several product categories, as customers and end markets face some uncertainty and delays in timing of work.

As of the date of this filing, customers and end markets face some uncertainty and delays in timing of work.

In particular, some construction site closures or project delays have occurred, and job sites have had to adjust to increased physical distancing and health-related precautions.

6 unchanged sentences

Results of Operations

The results of operations for the three months ended June 26, 2020 and June 28, 2019 were as follows:

The results of operations for the three months ended December 25, 2020 and December 27, 2019 were as follows:

Three months ended

($ in thousands) June 26, 2020 June 28, 2019 Change % Change

($ in thousands) December 25, 2020 December 27, 2019 Change % Change

Net sales $ 511,082 $ 447,448 $ 63,634 14.2 %

12 unchanged sentences

Foreign exchange 0.3 %

Acquisitions 1.0 %

Other (0.2) %

Net sales 14.2 %

Net sales decreased by $108.6 million, or 22.0%, to $384.9 million for the three months ended June 26, 2020, compared to $493.5 million for the three months ended June 28, 2019.

The decrease in net sales is primarily attributed to $102.3 million of lower volume attributed predominantly to the impacts of COVID-19.

The Company saw volume declines primarily in the armored cable and fittings and the metal electrical conduit and fittings product categories within the Electrical Raceway segment and the construction services and barbed tape product categories within the MP&S segment.

Additionally, net sales decreased $9.1 million due to lower average selling prices resulting from lower input costs of steel and resin.

The decrease in net sales was partially offset by increased sales of $5.1 million from the acquisition of the assets of United Structural Products, LLC.

("US Tray") and Rocky Mountain Pipe ("Cor-Tek") and the acquisition of Flytec Systems Ltd.

and its parent holding company, Modern Associates Ltd., in fiscal 2019 (together, the "2019 acquisitions").

Net sales increased by $63.6 million, or 14.2%, to $511.1 million for the three months ended December 25, 2020, compared to $447.4 million for the three months ended December 27, 2019.

The increase in net sales is primarily attributed to increased average selling prices of $81.2 million which was mostly driven by the PVC electrical conduit and fittings product category within the Electrical segment, partially offset by lower volume of $27.8 million primarily attributed to declines in the armored cable and fittings and the metal electrical conduit and fittings product categories within the Electrical segment.

Cost of sales

1 unchanged sentence

Average input costs 6.9 %

Acquisitions 1.2 %

Foreign exchange (0.7) %

Other (2.3) %

Cost of sales (2.6) %

Cost of sales decreased by $78.3 million, or 21.3%, to $289.1 million for the three months ended June 26, 2020 compared to $367.4 million for the three months ended June 28, 2019.

The decrease was primarily due to lower volume of $75.2 million and the associated freight costs of $6.4 million.

Additionally, cost of sales decreased by $1.2 million due to $5.3 million from favorable inventory adjustments related to changes in market prices, partially offset by higher input costs of steel and resin of $4.1 million above the pass through impact of average selling prices.

The decrease in cost of sales is partially offset by incremental costs of $4.5 million due to the 2019 acquisitions and higher input costs of steel and resin.

Cost of sales decreased by $8.7 million, or 2.6%, to $321.9 million for the three months ended December 25, 2020 compared to $330.6 million for the three months ended December 27, 2019.

The decrease was primarily due to lower volume of $21.4 million.

Additionally, cost of sales decreased by $10.2 million primarily from favorable inventory reserve adjustments, partially offset by higher input costs of steel, copper and resin of $22.9 million above the pass through impact of average selling prices.

Selling, general and administrative

Selling, general and administrative expenses decreased by $12.9 million, or 21.8%, to $46.2 million for the three months ended June 26, 2020 compared to $59.0 million for the three months ended June 28, 2019.

The decrease was primarily due to cost reduction initiatives as a result of COVID-19, in particular lower variable compensation of $5.1 million, lower medical costs of $1.4 million, reduced travel costs of $1.0 million and lower consulting costs of $1.0 million.

Additionally, due to sales volume declines associated with COVID-19, commissions expense decreased $3.1 million.

Selling, general and administrative expenses increased by $4.9 million, or 8.7%, to $61.1 million for the three months ended December 25, 2020 compared to $56.2 million for the three months ended December 27, 2019.

The increase was primarily due to $2.7 million of increased spending on productivity initiatives and growth investments, higher stock compensation expense of $2.4 million and higher variable compensation of $1.4 million, offset by productivity efficiencies of $2.4 million.

Intangible asset amortization

Intangible asset amortization expense increased by $0.1 million, or 2.0%, to $8.0 million for the three months ended June 26, 2020 compared to $7.9 million for the three months ended June 28, 2019.

The increase in intangible asset amortization is primarily due to additional amortization resulting from fiscal 2019 acquisitions, partially offset by certain assets that reached the end of their amortized lives by the conclusion of fiscal 2019.

Intangible asset amortization expense remained consistent at $8.3 million for the three months ended December 25, 2020 compared to $8.1 million for the three months ended December 27, 2019.

Interest expense, net

Interest expense, net decreased by $3.4 million, or 26.3% to $9.4 million for the three months ended June 26, 2020 compared to $12.8 million for the three months ended June 28, 2019.

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

Interest expense, net decreased by $2.4 million, or 22.3% to $8.3 million for the three months ended December 25, 2020 compared to $10.6 million for the three months ended December 27, 2019.

The decrease is primarily due to the Company's principal prepayments in fiscal 2020 and 2021, resulting in a lower principal balance in fiscal 2021 from which interest expense was derived.

Other income, net

Other income, net decreased by $0.7 million to $0.5 million for the three months ended June 26, 2020 compared to $1.2 million for the three months ended June 28, 2019 primarily due to gains from the Company's undesignated foreign currency derivative instruments partially offset by foreign exchange losses on intercompany loans.

Other income, net remained consistent at $0.4 million for the three months ended December 25, 2020 compared to $0.2 million for the three months ended December 27, 2019.

Income tax expense

The Company's income tax rate increased to 26.5% for the three months ended June 26, 2020 compared to 23.3% for the three months ended June 28, 2019.

The increase in the current period effective tax rate was primarily due to an increase in losses incurred by our foreign jurisdictions for which we are not able to realize the related tax benefit.

The Company's income tax rate increased to 24.1% for the three months ended December 25, 2020 compared to 17.4% for the three months ended December 27, 2019.

The increase in the current period effective tax rate was primarily due to a decrease in the excess tax benefit associated with stock compensation.

Segment results

Effective in the first quarter of fiscal 2021, the Company renamed and redefined its reportable segments.

The Electrical Raceway segment was renamed as the Electrical segment.

The Electrical segment manufactures high quality products used in the construction of electrical power systems including conduit, cable, and installation accessories.

This segment serves contractors in partnership with the electrical wholesale channel.

The Mechanical Products & Solutions segment was renamed as the Safety & Infrastructure segment.

This segment designs and manufactures solutions including metal framing, mechanical pipe, perimeter security, and cable management for the protection and reliability of critical infrastructure.

These solutions are marketed to contractors, original equipment manufacturers and end users.

Effective in the first quarter of fiscal 2021, the Company implemented a realignment (the “Realignment”) of its segment financial reporting structure.

The Company’s domestic cable management and prefabrication modular businesses had historically been reported in the Electrical Raceway segment.

Due to transitions in the Company’s Executive Leadership Team, these businesses are now reported in the Safety & Infrastructure segment.

The Realignment reflects how the Company’s Chief Operating Decision Maker now assesses the operating performance and allocates resources to the Safety & Infrastructure segment.

The Company reflected these changes to its segment information retrospectively to the earliest period presented which resulted in a transfer of external net sales, intersegment sales, total assets, and Adjusted EBITDA from the Electrical segment to the Safety & Infrastructure segment.

These changes had no impact on the Company’s previously reported consolidated net sales, operating income, net income or earnings per share.

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

Segment Adjusted EBITDA is the sum of income (loss) before income taxes, adjusted to exclude unallocated expenses, depreciation and amortization, interest expense, net, restructuring charges, stock-based compensation, certain legal matters, transaction costs and other items, such as inventory reserves and adjustments, loss on disposal of property, plant and equipment, insurance recovery related to damages of property, plant and equipment, release of indemnified uncertain tax positions, and realized or unrealized gain (loss) on foreign currency transactions.

Segment Adjusted EBITDA is income (loss) before income taxes, adjusted to exclude unallocated expenses, depreciation and amortization, interest expense, net, restructuring charges, stock-based compensation, certain legal matters, transaction costs and other items, such as inventory reserves and adjustments, loss on disposal of property, plant and equipment, release of indemnified uncertain tax positions, and realized or unrealized gain (loss) on foreign currency impacts of intercompany loans and related forward currency derivatives.

We define segment Adjusted EBITDA margin as segment Adjusted EBITDA as a percentage of segment Net sales.

Electrical Raceway

Three months ended

($ in thousands) June 26, 2020 June 28, 2019 Change % Change

($ in thousands) December 25, 2020 December 27, 2019 Change % Change

Net sales $ 387,145 $ 324,547 $ 62,598 19.3 %

4 unchanged sentences

Foreign exchange 0.5 %

Acquisitions 1.4 %

Net sales 19.3 %

Net sales decreased by $87.2 million, or 23.4%, to $286.0 million for the three months ended June 26, 2020 compared to $373.2 million for the three months ended June 28, 2019.

The decrease in net sales is primarily driven by $87.6 million in lower volume attributed primarily to impacts of COVID-19.

The Electrical Raceway segment saw volume declines in the armored cable and fittings and the metal electrical conduit and fittings product categories.

Additionally net sales decreased $3.6 million due to lower average selling prices resulting from lower input costs of steel and resin.

The decrease in net sales was partially offset by the 2019 acquisitions, which contributed $5.1 million in sales for the three months ended June 26, 2020.

Net sales increased by $62.6 million, or 19.3%, to $387.1 million for the three months ended December 25, 2020 compared to $324.5 million for the three months ended December 27, 2019.

The increase in net sales is primarily attributed to increased average selling prices of $81.4 million which was mostly driven by the PVC electrical conduit and fittings product category, partially offset by lower volume of $29.4 million primarily attributed to declines in the armored cable and fittings and the metal electrical conduit and fittings product categories.

Adjusted EBITDA

Adjusted EBITDA for the three months ended June 26, 2020 decreased by $19.3 million, or 25.1%, to $57.5 million from $76.7 million for the three months ended June 28, 2019.

Adjusted EBITDA margins decreased to 20.1% for the three months ended June 26, 2020 compared to 20.6% for the three months ended June 28, 2019.

The decrease in Adjusted EBITDA was largely due to lower volume, partially offset by the benefit of lower material costs in excess of declines in average selling prices, operational efficiencies and cost reductions in response to COVID-19, and the contributions from the 2019 acquisitions.

Mechanical Products & Solutions

Adjusted EBITDA for the three months ended December 25, 2020 increased by $65.2 million, or 95.6%, to $133.3 million from $68.1 million for the three months ended December 27, 2019.

Adjusted EBITDA margins increased to 34.4% for the three months ended December 25, 2020 compared to 21.0% for the three months ended December 27, 2019.

The increase in Adjusted EBITDA was largely due to higher average selling prices in relation to changes in input costs and operational efficiencies.

Safety & Infrastructure

Three months ended

($ in thousands) June 26, 2020 June 28, 2019 Change % Change

Net sales $ 99,487 $ 120,596 $ (21,109) (17.5) %

Adjusted EBITDA $ 12,243 $ 20,595 $ (8,352) (40.6) %

Adjusted EBITDA margin 12.3 % 17.1 %

Volume (12.2) %

Average selling prices (4.6) %

Other (0.7) %

Net sales (17.5) %

Net sales decreased by $21.1 million, or 17.5%, for the three months ended June 26, 2020 to $99.5 million compared to $120.6 million for the three months ended June 28, 2019.

The decrease is primarily attributed to lower volume of $14.7 million primarily attributed to the impacts of COVID-19 and certain one-time projects in the prior year period within the construction services and barbed tape product categories.

Additionally, net sales decreased due to lower average selling prices resulting from the lower input cost of steel of $5.5 million.

Adjusted EBITDA

Adjusted EBITDA decreased by $8.4 million, or 40.6%, to $12.2 million for the three months ended June 26, 2020 compared to $20.6 million for the three months ended June 28, 2019.

Adjusted EBITDA margins decreased to 12.3% for the three months ended June 26, 2020 compared to 17.1% for the three months ended June 28, 2019.

The Adjusted EBITDA decrease is primarily due to the lower volume and the mix of products sold in the prior year period, partially offset by cost reductions in response to COVID-19.

The results of operations for the nine months ended June 26, 2020 and June 28, 2019 were as follows:

Nine months ended

($ in thousands) June 26, 2020 June 28, 2019 Change % Change

Net sales $ 1,288,001 $ 1,414,828 $ (126,827) (9.0) %

Cost of sales 943,741 1,061,350 (117,609) (11.1) %

Gross profit 344,260 353,478 (9,218) (2.6) %

Selling, general and administrative 164,734 171,778 (7,044) (4.1) %

Intangible asset amortization 24,210 24,278 (68) (0.3) %

Operating income 155,316 157,422 (2,106) (1.3) %

Interest expense, net 30,605 38,277 (7,672) (20.0) %

Other income, net (2,462) (3,422) 960 (28.1) %

Income before income taxes 127,173 122,567 4,606 3.8 %

Income tax expense 29,112 29,513 (401) (1.4) %

Net income $ 98,061 $ 93,054 $ 5,007 5.4 %

Volume (6.6) %

Average selling prices (4.1) %

Foreign exchange (0.2) %

Acquisitions 2.0 %

Other (0.1) %

Net sales (9.0) %

Net sales decreased by $126.8 million, or 9.0%, to $1,288.0 million for the nine months ended June 26, 2020 compared to $1,414.8 million for the nine months ended June 28, 2019.

The decrease is primarily attributed to lower volume of $92.8 million predominantly due to the impacts of COVID-19.

The Company experienced volume declines in the armored cable and fittings and the metal electrical conduit and fittings product categories within the Electrical Raceway segment and the construction services and barbed tape product categories within the MP&S segment.

The decrease in volume is partially offset by volume gains in the PVC electrical conduit and fittings product category within the Electrical Raceway segment and the mechanical pipe product category within the MP&S segment.

Additionally, net sales decreased $57.8 million due to lower average selling prices resulting from lower input costs of steel and resin.

The decrease in net sales was partially offset by $28.1 million of sales from the 2019 acquisitions.

Cost of sales

Volume (6.5) %

Average input costs (6.0) %

Foreign exchange (0.2) %

Acquisitions 2.2 %

Other (0.6) %

Cost of sales (11.1) %

Cost of sales decreased by $117.6 million, or 11.1% to $943.7 million for the nine months ended June 26, 2020 compared to $1,061.4 million for the nine months ended June 28, 2019.

The decrease was primarily due to lower volume of $69.1 million, the lower input costs of steel and resin of $63.3 million, and $6.9 million f rom favorable inventory adjustments related to changes in market prices.

The decrease was partially offset by incremental costs related to the 2019 acquisitions of $23.5 million.

Selling, general and administrative

Selling, general and administrative expenses decreased by $7.0 million, or 4.1% to $164.7 million for the nine months ended June 26, 2020 compared to $171.8 million for the nine months ended June 28, 2019.

The decrease in selling, general and administrative expenses was primarily due to cost reduction incentives as a result of COVID-19, in particular lower variable compensation related expenses of $6.7 million.

Intangible asset amortization

Intangible asset amortization expense decreased by $0.1 million, or 0.3% to $24.2 million for the nine months ended June 26, 2020 compared to $24.3 million for the nine months ended June 28, 2019.

The decrease in intangible asset amortization is primarily due to certain assets that reached the end of their amortized lives by the conclusion of fiscal 2019, partially offset by additional amortization resulting from the fiscal 2019 acquisitions.

Interest expense, net

Interest expense, net, decreased by $7.7 million, or 20.0% to $30.6 million for the nine months ended June 26, 2020 compared to $38.3 million for the nine months ended June 28, 2019.

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

Other income, net

Other income, net decreased by $1.0 million to $2.5 million for the nine months ended June 26, 2020 compared to $3.4 million for the nine months ended June 28, 2019 primarily due to lower gains from undesignated foreign currency derivative instruments, partially offset by foreign exchange gains on intercompany loans in the nine months ended June 28, 2019.

Income tax expense

The Company's income tax rate decreased to 22.9% for the nine months ended June 26, 2020 compared to 24.1% for the nine months ended June 28, 2019.

The decrease in the current period effective tax rate was primarily due to an increase in the excess tax benefit associated with stock compensation, partially offset by the increase in losses incurred by our foreign jurisdictions for which we are not able to realize the related tax benefit.

Electrical Raceway

Nine months ended

($ in thousands) June 26, 2020 June 28, 2019 Change % Change

($ in thousands) December 25, 2020 December 27, 2019 Change % Change

Net sales $ 124,765 $ 123,508 $ 1,257 1.0 %

1 unchanged sentence

Adjusted EBITDA margin 11.4 % 15.2 %

Volume (8.8) %

Average selling prices (0.2) %

Foreign exchange (0.3) %

Acquisitions 2.6 %

Other (0.1) %

Net sales 1.0 %

Net sales decreased by $103.0 million, or 9.6%, to $967.1 million for the nine months ended June 26, 2020 compared to $1,070.1 million for the nine months ended June 28, 2019.

Net sales decreased by $94.4 million due to lower volume primarily attributed to the impacts of COVID-19.

The Electrical Raceway segment experienced declines predominately in the armored cable and fittings and the metal electrical conduit and fittings product categories, partially offset by volume gains in the PVC electrical conduit and fittings product category within the first six months of the year.

Additionally, net sales decreased by $32.2 million as a result of lower average selling prices resulting from lower input costs of steel and resin.

The decrease in net sales was partially offset by the 2019 acquisitions, which contributed $28.1 million in sales for the nine months ended June 26, 2020.

Adjusted EBITDA

Adjusted EBITDA for the nine months ended June 26, 2020 decreased by $6.0 million, or 2.8%, to $206.6 million from $212.6 million for the nine months ended June 28, 2019.

The decrease in Adjusted EBITDA was largely due to lower volume, partially offset by the benefit of lower material costs in excess of declines in average selling prices, operational efficiencies, and the contributions from the 2019 acquisitions.

Mechanical Products & Solutions

Nine months ended

($ in thousands) June 26, 2020 June 28, 2019 Change % Change

Net sales $ 322,796 $ 345,599 $ (22,803) (6.6) %

Adjusted EBITDA $ 45,041 $ 48,903 $ (3,862) (7.9) %

Adjusted EBITDA margin 14.0 % 14.2 %

Average selling prices (7.4) %

Net sales (6.6) %

Net sales decreased by $22.8 million, or 6.6%, for the nine months ended June 26, 2020 to $322.8 million compared to $345.6 million for the nine months ended June 28, 2019.

The decrease is primarily attributed to the pass-through impact of lower average input costs of steel products of $25.6 million.

The decrease in net sales is partially offset by higher volume of $1.6 million primarily in the mechanical pipe product category.

Net sales increased by $1.3 million, or 1.0%, for the three months ended December 25, 2020 to $124.8 million compared to $123.5 million for the three months ended December 27, 2019.

The increase is primarily attributed to higher volume of $1.6 million primarily in the mechanical pipe product category.

Adjusted EBITDA

Adjusted EBITDA decreased $3.9 million, or 7.9%, to $45.0 million for the nine months ended June 26, 2020 compared to $48.9 million for the nine months ended June 28, 2019.

Adjusted EBITDA decreased primarily due to a change in the mix of products sold partially offset by operational efficiencies.

Other Matters

Our collective bargaining agreement in Harvey, Illinois expired in April 2020.

On July 14, 2020, the Company and the United Steelworkers Union reached agreement on the terms of a new collective bargaining agreement which expires in April 2024.

Adjusted EBITDA decreased by $4.5 million, or 23.9%, to $14.3 million for the three months ended December 25, 2020 compared to $18.7 million for the three months ended December 27, 2019.

Adjusted EBITDA margins decreased to 11.4% for the three months ended December 25, 2020 compared to 15.2% for the three months ended December 27, 2019.

The Adjusted EBITDA decrease is primarily due to the timing lag in reflecting the rising input costs of steel in average selling prices.

Liquidity and Capital Resources

We believe we have sufficient liquidity to support our ongoing operations and to invest in future growth and create value for stockholders.

Our cash and cash equivalents were $237.3 million as of June 26, 2020, of which $43.4 million was held at non-U.S.

Our cash and cash equivalents were $280.4 million as of December 25, 2020, of which $53.2 million was held at non-U.S.

subsidiaries.

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We have access to the ABL Credit Facility to fund operational needs.

As of June 26, 2020, there were no outstanding borrowings under the ABL Credit Facility and $9.5 million of letters of credit issued under the ABL Credit Facility.

The borrowing base was estimated to be $257.3 million and approximately $247.8 million was available under the ABL Credit Facility as of June 26, 2020.

As of December 25, 2020, there were no outstanding borrowings under the ABL Credit Facility and $9.5 million of letters of credit issued under the ABL Credit Facility.

The borrowing base was estimated to be $322.8 million and approximately $313.3

million was available under the ABL Credit Facility as of December 25, 2020.

Outstanding letters of credit count as utilization of the commitments under the ABL Credit Facility and reduce the amount available for borrowings.

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The table below summarizes cash flow information derived from our statements of cash flows for the periods indicated:

Nine months ended

(in thousands) June 26, 2020 June 28, 2019

Three months ended

(in thousands) December 25, 2020 December 27, 2019

Cash flows provided by (used in):

3 unchanged sentences

Operating activities

During the nine months ended June 26, 2020, the Company was provided $156.0 million by operating activities compared to $120.2 million during the nine months ended June 28, 2019.

The $35.8 million increase in cash provided was primarily due to higher cash flows from reductions in working capital.

During the three months ended December 25, 2020, the Company was provided $86.3 million by operating activities compared to $52.2 million during the three months ended December 27, 2019.

The $34.1 million increase in cash provided was primarily due to higher cash flows from the increase in operating income of $67.2 million and lower payments for variable compensation of $8.0 million.

This was partially offset by a $45.2 million increase in working capital.

Investing activities

During the nine months ended June 26, 2020, the Company used $24.8 million in investing activities compared to $105.2 million during the nine months ended June 28, 2019.

The decrease in cash used in investing activities is primarily due the acquisition of Vergokan and US Tray for $83.4 million during the nine months ended June 28, 2019.

During the three months ended December 25, 2020, the Company used $14.3 million in investing activities compared to $9.8 million during the three months ended December 27, 2019.

The increase in cash used in investing activities is primarily due the acquisition of Queen City Plastics, Inc.

for $7.2 million during the three months ended December 25, 2020.

Financing Activities

During the nine months ended June 26, 2020, the Company used $16.9 million in financing activities compared to $40.3 million used during the nine months ended June 28, 2019.

The decrease in cash used in financing activities is primarily due to $24.4 million of share repurchases and $21.0 million of debt repayments during the nine months ended June 28, 2019, compared to $15.0 million of share repurchases during the nine months ended June 26, 2020.

During the three months ended December 25, 2020, the Company used $79.0 million in financing activities compared to $3.0 million used during the three months ended December 27, 2019.

The increase in cash used in financing activities is primarily due to $40.0 million of debt repayments and $35.0 million used to repurchase common stock during the three months ended December 25, 2020.

Contractual Obligations and Commitments

1 unchanged sentence

Change in Critical Accounting Policies and Estimates

Other than as set forth below, there have been no material changes in our critical accounting policies and estimates since the filing of our Annual Report on Form 10-K.

Goodwill Impairments

Goodwill and other intangible assets primarily result from business acquisitions.

The Company assesses the recoverability of goodwill and indefinite-lived trade names on an annual basis in accordance with Accounting Standards Codification ("ASC") 350 "Intangibles - Goodwill and Other." The measurement date is the first day of the fourth fiscal quarter, or more frequently, if events or circumstances indicate that it is more likely than not that the fair value of a reporting unit or the respective indefinite-lived trade name is less than the carrying value.

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

The Company considered whether the adverse economic impacts of the novel coronavirus (COVID-19) outbreak, which were developing during the three months ended March 27, 2020 and continued to develop during the three months ended June 26, 2020, would indicate whether it’s more likely than not that the fair value of its reporting units or its indefinite lived intangible assets would be below the carrying value.

For a majority of the Company’s operations, the fair values of its related reporting units and indefinite lived intangible assets significantly exceeded their respective carrying values as of the most recent impairment testing period in July 2019.

For these reporting units and the indefinite lived intangibles, the Company concluded that it was not more likely than not that the fair value of these reporting units or indefinite lived intangible assets was less than the carrying value and therefore there was not a triggering event requiring the performance of an impairment test as of June 26, 2020.

The economic impacts of the COVID-19 outbreak were more substantial for the Company’s reporting unit related to its operations in Europe, Middle East, and Africa (EMEA), due to the cross-border transactions that occur within those operations, the cross-border interactions needed to fully realize the synergies associated with recent in-region acquisitions and the COVID-19 related closing of these borders.

The Company deemed the economic related developments of the outbreak to be a triggering event for the EMEA reporting unit as of March 27, 2020 and performed an updated goodwill impairment test as of that date.

The Company calculated the fair value of its EMEA reporting unit considering three valuation approaches:

(a) the income approach;

(b) the guideline public company method;

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

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

Internally forecasted future cash flows, which the Company believes reasonably approximate market participant assumptions, are discounted using a weighted average cost of capital (Discount Rate) developed for the specific reporting unit.

The Discount Rate is developed using market observable inputs, as well as considering whether or not there is a measure of risk related to the specific reporting unit’s forecasted performance.

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

The key uncertainties in these calculations are the assumptions used in determining the reporting unit’s forecasted future performance, including revenue growth and EBITDA margins, as well as the perceived risk associated with those forecasts, along with selecting representative market multiples.

Fair value under the transactional analysis is determined based on exchange prices in actual transactions and on asking prices for controlling interests in public or private companies currently offered for sale by applying market multiples for comparable public companies to the unit’s financial results.

The key uncertainties in the guideline public company method and the transactional analysis calculations are the assumptions used in determining the reporting unit's comparable public companies, comparable transactions and the selection of the market multiples.

The EMEA reporting unit’s impairment test as of March 27, 2020 revealed that its fair value was greater than carrying value by an amount of less than 10 %.

During the three months ended June 26, 2020, the Company continued to assess information related to the current and anticipated economic impacts of COVID-19 on the EMEA reporting unit and revised its financial projections.

As a result of this assessment, the Company concluded that it was not more likely than not that the fair value of the EMEA reporting unit was less than the carrying value and therefore deemed that there was not a triggering event requiring the performance of an updated impairment test.

The goodwill allocated to the EMEA reporting unit as of June 26, 2020 was $ 34,836 .

The impairment analysis is sensitive to changes in both business and valuation assumptions.

Changes to these assumptions could result in revisions of management's estimates of the fair value of the reporting unit and could result in impairment charges in the future, which could be material to our results of operations.

The Company will continue to monitor for such changes in facts or circumstances.

Goodwill impairment charges may be recognized in future periods to the extent changes in facts or circumstances occur, including deterioration in the macroeconomic environment, industry, and deterioration in the Company’s performance or its future projections.

There have been no material changes in our critical accounting policies and estimates since the filing of our Annual Report on Form 10-K.

Recent Accounting Standards

4 unchanged sentences

Forward-looking statements include, without limitation, all matters that are not historical facts.

They appear in a number of places throughout this Quarterly Report on Form 10-Q and include, without limitation, statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, financial position;

They appear in a number of places throughout this Quarterly

Report on From 10-Q and include, without limitation, statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, financial position;

results of operations;

8 unchanged sentences

Additional factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:

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

• declines in, and uncertainty regarding, the general business and economic conditions in the United States and international markets in which we operate;

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

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

• changes in prices of raw materials;

3 unchanged sentences

• changes in federal, state, local and international governmental regulations and trade policies;

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

• recent and future changes to tax legislation;

• adverse weather conditions;

• failure to generate sufficient cash flow from operations or to raise sufficient funds in the capital markets to satisfy existing obligations and support the development of our business;

• increased costs relating to future capital and operating expenditures to maintain compliance with environmental, health and safety laws;

• reduced spending by, deterioration in the financial condition of, or other adverse developments with respect to, one or more of our top customers;

• reduced spending by, deterioration in the financial condition of, or other adverse developments, including inability or unwillingness to pay our invoices on time, with respect to one or more of our top customers;

• increases in our working capital needs, which are substantial and fluctuate based on economic activity and the market prices for our main raw materials, including as a result of failure to collect, or delays in the collection of, cash from the sale of manufactured products;

• work stoppage or other interruptions of production at our facilities as a result of disputes under existing collective bargaining agreements with labor unions or in connection with negotiations of new collective bargaining agreements, as a result of supplier financial distress, or for other reasons;

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

• changes in our financial obligations relating to pension plans that we maintain in the United States;

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• risks inherent in doing business internationally;

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

• our inability to introduce new products effectively or implement our innovation strategies;

• the inability of our customers to pay off the credit lines extended to them by us in a timely manner and the negative impact on customer relations resulting from our collections efforts with respect to non-paying or slow-paying customers;

• our inability to continue importing raw materials, component parts and/or finished goods;

1 unchanged sentence

• failure to manage acquisitions successfully, including identifying, evaluating, and valuing acquisition targets and integrating acquired companies, businesses or assets;

• the incurrence of liabilities in connection with violations of the FCPA and similar foreign anti-corruption laws;

• the incurrence of additional expenses, increase in complexity of our supply chain and potential damage to our reputation with customers resulting from regulations related to "conflict minerals";

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

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

• future changes to tax legislation;

• failure to generate sufficient cash flow from operations or to raise sufficient funds in the capital markets to satisfy existing obligations and support the development of our business;

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

You should read this Quarterly Report on Form 10-Q completely and with the understanding that actual future results may be materially different from expectations.

You should read this quarterly report completely and with the understanding that actual future results may be materially different from expectations.

All forward-looking statements attributable to us or persons acting on our behalf that are made in this quarterly report are qualified in their entirety by these cautionary statements.

These forward-looking statements are made only as of the date of this Quarterly Report on Form 10-Q, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, and changes in future operating results over time or otherwise.

These forward-looking statements are made only as of the date of this quarterly report, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, and changes in future operating results over time or otherwise.

Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.

2 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis