What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-04-29 compared with 2021-02-02 · 133 added, 50 removed, 165 unchanged (53% of the section changed)

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Impacts of COVID-19

The recent outbreak of the novel coronavirus (COVID-19) has continued to spread and is currently classified as a pandemic which is contributing to significant volatility and uncertainty in markets and the global economy.

The outbreak of the novel coronavirus (COVID-19) has continued to spread and is currently classified as a pandemic which is contributing to significant volatility and uncertainty in markets and the global economy.

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

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Results of Operations

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

The results of operations for the three months ended March 26, 2021 and March 27, 2020 were as follows:

Three months ended

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

($ in thousands) March 26, 2021 March 27, 2020 Change % Change

Net sales $ 639,543 $ 455,654 $ 183,889 40.4 %

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Net income $ 124,933 $ 39,193 $ 85,740 218.8 %

Volume (6.2) %

Average selling prices 35.6 %

Foreign exchange 1.0 %

Acquisitions 3.6 %

Net sales 40.4 %

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.

Net sales increased by $183.9 million, or 40.4%, to $639.5 million for the three months ended March 26, 2021, compared to $455.7 million for the three months ended March 27, 2020.

The increase in net sales is primarily attributed to increased average selling prices of $162.4 million which was mostly driven by the PVC electrical conduit and fittings product category within the Electrical segment and increased net sales of $16.2 million due to the acquisitions of Queen City Plastics and FRE Composites Group.

Pricing for PVC products, as well as other parts of the business, are expected to return to more normal historical levels over time, but that time period is uncertain.

Sales volume was mixed with increased volume of $2.4 million primarily from international cable management products sold within the Electrical segment, partially offset by lower volume of $1.9 million in the Safety and Infrastructure segment.

Cost of sales

Volume (6.5) %

Average input costs 18.2 %

Foreign exchange 1.2 %

Other (2.3) %

Acquisitions 2.2 %

Cost of sales 23.3 %

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.

Cost of sales increased by $75.6 million, or 23.3%, to $399.7 million for the three months ended March 26, 2021 compared to $324.1 million for the three months ended March 27, 2020.

The increase was primarily due to higher input costs of steel, copper and PVC resin of $58.9 million and due to the acquisitions of Queen City Plastics and FRE Composites Group of $7.1 million.

Selling, general and administrative

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.

Selling, general and administrative expenses increased by $5.0 million, or 8.0%, to $67.3 million for the three months ended March 26, 2021 compared to $62.4 million for the three months ended March 27, 2020.

The increase was primarily due to higher variable compensation of $6.4 million and the acquisitions of Queen City Plastics and the FRE Composites Group of $1.6 million, offset by productivity efficiencies of $3.2 million.

Intangible asset amortization

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.

Intangible asset amortization expense remained consistent at $8.1 million for the three months ended March 26, 2021 compared to $8.1 million for the three months ended March 27, 2020.

Interest expense, net

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.

Interest expense, net decreased by $2.1 million, or 20.3% to $8.4 million for the three months ended March 26, 2021 compared to $10.6 million for the three months ended March 27, 2020.

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 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.

Other income, net increased by $5.6 million to $7.2 million for the three months ended March 26, 2021 compared to $1.7 million for the three months ended March 27, 2020.

The increase was primarily due to a $6.0 million business interruption insurance recovery from a flood at one of the Company’s manufacturing facilities.

See Note 14, ''Commitments and Contingencies'' to the accompanying condensed consolidated financial statements included elsewhere in this Quarterly Report.

Income tax expense

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.

The Company's income tax rate decreased to 23.5% for the three months ended March 26, 2021 compared to 25.1% for the three months ended March 27, 2020.

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

Segment results

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

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.

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, 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.

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

Three months ended

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

($ in thousands) March 26, 2021 March 27, 2020 Change % Change

Net sales $ 487,500 $ 323,218 $ 164,282 50.8 %

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Adjusted EBITDA margin 38.7 % 23.9 %

Volume (9.0) %

Average selling prices 43.7 %

Foreign exchange 1.4 %

Acquisitions 5.0 %

Net sales 50.8 %

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.

Net sales increased by $164.3 million, or 50.8%, to $487.5 million for the three months ended March 26, 2021 compared to $323.2 million for the three months ended March 27, 2020.

The increase in net sales is primarily attributed to increased average selling prices of $141.4 million which was mostly driven by the PVC electrical conduit and fittings category and the metal electric conduit and fittings product categories and increased net sales of $16.2 million from the acquisitions of Queen City Plastics and FRE Composites Group.

Additionally, sales volume increased $2.4 million primarily due to an increase in international cable management products sold, partially offset by 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 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.

Adjusted EBITDA for the three months ended March 26, 2021 increased by $111.6 million, or 144.5%, to $188.8 million from $77.2 million for the three months ended March 27, 2020.

Adjusted EBITDA margins increased to 38.7% for the three months ended March 26, 2021 compared to 23.9% for the three months ended March 27, 2020.

The increase in Adjusted EBITDA and Adjusted EBITDA margins was largely due to higher average selling prices in relation to changes in input costs, operational efficiencies and contributions from the acquisitions of Queen City Plastics and FRE Composites Group.

Safety & Infrastructure

Three months ended

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

($ in thousands) March 26, 2021 March 27, 2020 Change % Change

Net sales $ 152,700 $ 133,130 $ 19,570 14.7 %

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Adjusted EBITDA margin 10.6 % 13.4 %

Volume (1.4) %

Average selling prices 15.7 %

Net sales 14.7 %

Net sales increased by $19.6 million, or 14.7%, for the three months ended March 26, 2021 to $152.7 million compared to $133.1 million for the three months ended March 27, 2020.

The increase is primarily attributed to increased average selling prices of $21.0 million driven by higher input costs of steel, partially offset by lower volumes of $1.9 million primarily due to project delays and steel supply disruptions related to COVID-19.

Adjusted EBITDA

Adjusted EBITDA decreased by $1.7 million, or 9.5%, to $16.2 million for the three months ended March 26, 2021 compared to $17.9 million for the three months ended March 27, 2020.

Adjusted EBITDA margins decreased to 10.6% for the three months ended March 26, 2021 compared to 13.4% for the three months ended March 27, 2020.

The Adjusted EBITDA decrease is primarily due to the volume declines discussed above.

The results of operations for the six months ended March 26, 2021 and March 27, 2020 were as follows:

Six months ended

($ in thousands) March 26, 2021 March 27, 2020 Change % Change

Net sales $ 1,150,625 $ 903,102 $ 247,523 27.4 %

Cost of sales 721,585 654,655 66,930 10.2 %

Gross profit 429,040 248,447 180,593 72.7 %

Selling, general and administrative 128,418 118,575 9,843 8.3 %

Intangible asset amortization 16,356 16,184 172 1.1 %

Operating income 284,266 113,688 170,578 150.0 %

Interest expense, net 16,670 21,184 (4,514) (21.3) %

Other income, net (7,671) (1,919) (5,752) 299.7 %

Income before income taxes 275,267 94,423 180,844 191.5 %

Income tax expense 65,268 20,440 44,828 219.3 %

Net income $ 209,999 $ 73,983 $ 136,016 183.8 %

Volume (3.0) %

Average selling prices 27.1 %

Foreign exchange 0.7 %

Acquisitions 2.7 %

Other (0.1) %

Net sales 27.4 %

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.

Net sales increased by $247.5 million, or 27.4%, to $1,150.6 million for the six months ended March 26, 2021, compared to $903.1 million for the six months ended March 27, 2020.

The increase in net sales is primarily attributed to increased average selling prices of $244.4 million which was mostly driven by the PVC electrical conduit and fittings product category within the Electrical segment and increased net sales of $24.7 million from the acquisitions of Queen City Plastics and FRE Composites Group.

Pricing for PVC products, as well as other parts of the business, are expected to return to more normal historical levels over time, but that time period is uncertain.

The increase was partially offset by lower volume of $27.3 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

Volume (3.0) %

Average input costs 11.8 %

Foreign exchange 0.8 %

Acquisitions 1.6 %

Other (1.1) %

Cost of sales 10.2 %

Cost of sales increased by $66.9 million, or 10.2% to $721.6 million for the six months ended March 26, 2021 compared to $654.7 million for the six months ended March 27, 2020.

The increase was primarily due to higher input costs for steel, copper and resin of $77.5 million and the acquisitions of Queen City Plastics and FRE Composites Group of $10.8

The increases were partially offset by lower volume of $19.7 million and favorable inventory reserve adjustments of $11.7 million.

Selling, general and administrative

Selling, general and administrative expenses increased by $9.8 million, or 8.3% to $128.4 million for the six months ended March 26, 2021 compared to $118.6 million for the six months ended March 27, 2020.

The increase was primarily due to higher variable compensation of $9.7 million, higher stock compensation expense of $2.3 million and the acquisitions of Queen City Plastics and the FRE Composites Group of $1.7 million, partially offset by productivity efficiencies of $6.7 million.

Intangible asset amortization

Intangible asset amortization expense remained consistent at $16.4 million for the six months ended March 26, 2021 compared to $16.2 million for the six months ended March 27, 2020.

Interest expense, net

Interest expense, net, decreased by $4.5 million, or 21.3% to $16.7 million for the six months ended March 26, 2021 compared to $21.2 million for the six months ended March 27, 2020.

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 increased by $5.8 million to $7.7 million for the six months ended March 26, 2021 compared to $1.9 million for the six months ended March 27, 2020.

The increase was primarily due to a $6.0 million business interruption insurance recovery from a flood at one of the Company’s manufacturing facilities.

See Note 14, ''Commitments and Contingencies'' to the accompanying condensed consolidated financial statements included elsewhere in this Quarterly Report.

Income tax expense

The Company's income tax rate increased to 23.7% for the six months ended March 26, 2021 compared to 21.6% for the six months ended March 27, 2020.

The increase in the six month period effective tax rate was primarily due to a smaller increase in the net discrete tax benefit compared to the increase in earnings period over period.

Six months ended

($ in thousands) March 26, 2021 March 27, 2020 Change % Change

Net sales $ 874,645 $ 647,765 $ 226,880 35.0 %

Adjusted EBITDA $ 322,099 $ 145,352 $ 176,747 121.6 %

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.

Adjusted EBITDA margin 36.8 % 22.4 %

Volume (4.2) %

Average selling prices 34.5 %

Foreign exchange 0.9 %

Acquisitions 3.8 %

Net sales 35.0 %

Net sales increased by $226.9 million, or 35.0%, to $874.6 million for the six months ended March 26, 2021 compared to $647.8 million for the six months ended March 27, 2020.

The increase in net sales is primarily attributed to increased

average selling prices of $223.3 million which was mostly driven by the PVC electrical conduit and fittings and the metal electrical conduit and fittings product categories and increased net sales of $24.7 million from the acquisitions of Queen City Plastics and FRE Composites Group.

The increase was partially offset by lower volume of $27.0 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 six months ended March 26, 2021 increased by $176.7 million, or 121.6%, to $322.1 million from $145.4 million for the six months ended March 27, 2020.

Adjusted EBITDA margins increased to 36.8% for the six months ended March 26, 2021 compared to 22.4% for the six months ended March 27, 2020.

Safety & Infrastructure

Six months ended

($ in thousands) March 26, 2021 March 27, 2020 Change % Change

Net sales $ 277,465 $ 256,638 $ 20,827 8.1 %

Adjusted EBITDA $ 30,445 $ 36,615 $ (6,170) (16.9) %

Adjusted EBITDA margin 11.0 % 14.3 %

Volume (0.1) %

Average selling prices 8.2 %

Net sales 8.1 %

Net sales increased by $20.8 million, or 8.1%, for the six months ended March 26, 2021 to $277.5 million compared to $256.6 million for the six months ended March 27, 2020.

The increase is primarily attributed to increased average selling prices of $21.0 million primarily driven by higher input costs of steel.

Adjusted EBITDA

Adjusted EBITDA decreased $6.2 million, or 16.9%, to $30.4 million for the six months ended March 26, 2021 compared to $36.6 million for the six months ended March 27, 2020.

Adjusted EBITDA margins decreased to 11.0% for the six months ended March 26, 2021 compared to 14.3% for the six months ended March 27, 2020.

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

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 $280.4 million as of December 25, 2020, of which $53.2 million was held at non-U.S.

Our cash and cash equivalents were $304.5 million as of March 26, 2021, 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 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.

As of March 26, 2021, 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 $325.0 million and approximately $315.5 million was available under the ABL Credit Facility as of March 26, 2021.

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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Limitations on Distributions and Dividends by Subsidiaries

AIG, AII, and AIH are each holding companies, and as such have no independent operations or material assets other than ownership of equity interests in their respective subsidiaries.

AI, AII, and AIH are each holding companies, and as such have no independent operations or material assets other than ownership of equity interests in their respective subsidiaries.

Each company depends on its respective subsidiaries to distribute funds to it so that it may pay obligations and expenses, including satisfying obligations with respect to indebtedness.

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

Three months ended

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

Six months ended

(in thousands) March 26, 2021 March 27, 2020

Cash flows provided by (used in):

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Operating activities

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.

During the six months ended March 26, 2021, the Company was provided $153.2 million by operating activities compared to $49.3 million during the six months ended March 27, 2020.

The $104.0 million increase in cash provided was primarily due to higher cash flows from the increase in operating income of $170.6 million, including a business interruption insurance recovery of $6.0 million.

This was partially offset by a $79.7 million increase in cash used in working capital primarily driven by higher sales.

Investing activities

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.

During the six months ended March 26, 2021, the Company used $60.9 million in investing activities compared to $17.1 million during the six months ended March 27, 2020.

The increase in cash used in investing activities is primarily due the acquisition of Queen City Plastics for $6.2 million and FRE Composites Group for $37.1 million during the six months ended March 26, 2021.

Financing Activities

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.

During the six months ended March 26, 2021, the Company used $75.4 million in financing activities compared to $17.4 million used during the six months ended March 27, 2020.

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 six months ended March 26, 2021.

Contractual Obligations and Commitments

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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 From 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;

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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, 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