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Item 1. Financial Statements

2021-08-03 compared with 2021-04-29 · 441 added, 98 removed, 430 unchanged (56% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended Six months ended

(in thousands, except per share data) Note March 26, 2021 March 27, 2020 March 26, 2021 March 27, 2020

Three months ended Nine months ended

(in thousands, except per share data) Note June 25, 2021 June 26, 2020 June 25, 2021 June 26, 2020

Net sales $ 853,658 $ 384,899 $ 2,004,283 $ 1,288,001

5 unchanged sentences

Interest expense, net 8,090 9,421 24,760 30,605

Loss on extinguishment of debt 4,202 — 4,202 —

Other income, net 5 ( 509 ) ( 543 ) ( 8,180 ) ( 2,462 )

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended Six months ended

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

Three months ended Nine months ended

(in thousands) Note June 25, 2021 June 26, 2020 June 25, 2021 June 26, 2020

Net income $ 175,297 $ 24,078 385,296 $ 98,061

Other comprehensive income (loss), net of tax:

Other comprehensive income, net of tax:

Change in foreign currency translation adjustment 2,152 2,252 8,385 1,132

Change in unrecognized loss related to pension benefit plans 4 262 216 786 649

Total other comprehensive income (loss) 8 ( 556 ) ( 6,003 ) 6,757 ( 687 )

Total other comprehensive income 8 2,414 2,468 9,171 1,781

Comprehensive income $ 177,711 $ 26,546 $ 394,467 $ 99,842

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data) Note March 26, 2021 September 30, 2020

(in thousands, except share and per share data) Note June 25, 2021 September 30, 2020

Current Assets:

14 unchanged sentences

Current Liabilities:

Short-term debt and current maturities of long-term debt 12 $ 4,000 $ —

Accounts payable 214,618 142,601

22 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended

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

Nine months ended

(in thousands) Note June 25, 2021 June 26, 2020

Operating activities:

6 unchanged sentences

Loss on disposal of property, plant and equipment 71 6,456

Other adjustments to net income 918 2,672

Loss on extinguishment of debt 4,202 —

Other non-cash adjustments to net income ( 1,035 ) 4,668

Changes in operating assets and liabilities, net of effects from acquisitions

12 unchanged sentences

Repayments of long-term debt 12 ( 812,120 ) —

Proceeds from issuance of long-term debt 12 798,000 —

Payment for debt financing costs and fees ( 11,294 ) —

Issuance of common stock, net of shares withheld for tax 65 ( 1,821 )

20 unchanged sentences

Net income — — — — 124,933 — 124,933

Other comprehensive income — — — — — ( 556 ) ( 556 )

Other comprehensive (loss) — — — — — ( 556 ) ( 556 )

Stock-based compensation — — — 4,868 — — 4,868

1 unchanged sentence

Balance as of March 26, 2021 46,983 $ 471 $ ( 2,580 ) $ 497,249 $ 110,819 $ ( 35,797 ) $ 570,162

Net income — — — — 175,297 — 175,297

Other comprehensive income — — — — — 2,414 2,414

Stock-based compensation — — — 3,768 — — 3,768

Issuance of common stock, net of shares withheld for tax 38 3 — 421 — — 424

Repurchase of common stock ( 918 ) ( 11 ) — — ( 75,017 ) — ( 75,028 )

Balance as of June 25, 2021 46,103 463 ( 2,580 ) 501,438 211,099 ( 33,383 ) $ 677,037

Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Equity

8 unchanged sentences

Net income — — — — 39,193 — 39,193

Other comprehensive income — — — — — ( 6,003 ) ( 6,003 )

Other comprehensive (loss) — — — — — ( 6,003 ) ( 6,003 )

Stock-based compensation — — — 4,523 — — 4,523

2 unchanged sentences

Balance as of March 27, 2020 47,176 $ 473 $ ( 2,580 ) $ 482,399 $ ( 142,473 ) $ ( 42,385 ) $ 295,434

Net income — $ — $ — $ — $ 24,078 $ — 24,078

Other comprehensive income — $ — $ — $ — $ — $ 2,468 2,468

Stock-based compensation — $ — $ — $ 1,656 $ — $ — 1,656

Issuance of common stock — $ 1 $ — $ 558 $ — $ — 559

Balance as of June 26, 2020 47,176 474 ( 2,580 ) 484,613 ( 118,395 ) ( 39,917 ) 324,195

See Notes to unaudited condensed consolidated financial statements.

48 unchanged sentences

2019-12, Simplifying the accounting for income taxes (Topic 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 a business combination that result in a step up in the tax basis of goodwill.

Under evaluation.

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.

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

Option to implement ASU expires in 2022

The Company will adopt the new standard on October 1, 2021.

The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

REVENUE FROM CONTRACTS WITH CUSTOMERS

19 unchanged sentences

The purchase price was allocated to tangible and intangible assets acquired and liabilities assumed, based on their fair values.

As of March 26, 2021, the purchase price allocation has not been finalized as the Company is refining its fair value estimates for working capital, fixed assets and intangible assets.

As of June 25, 2021, the purchase price allocation has not been finalized as the Company is refining its estimates for taxes.

The preliminary purchase price was $ 37.0 million.

27 unchanged sentences

The net periodic benefit credit was as follows:

Three months ended Six months ended

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

Three months ended Nine months ended

(in thousands) Note June 25, 2021 June 26, 2020 June 25, 2021 June 26, 2020

Interest cost $ 682 $ 935 $ 2,047 $ 2,805

4 unchanged sentences

Other income, net consisted of the following:

Three months ended Six months ended

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

Three months ended Nine months ended

(in thousands) June 25, 2021 June 26, 2020 June 25, 2021 June 26, 2020

Business interruption insurance recovery $ — $ — $ ( 6,000 ) $ —

Undesignated foreign currency derivative instruments 377 ( 569 ) 3,786 ( 1,112 )

Foreign exchange gain on intercompany loans ( 711 ) 2,407 ( 3,168 ) ( 524 )

Foreign exchange (gain) loss on intercompany loans ( 294 ) 452 ( 3,459 ) ( 72 )

Pension-related benefits ( 592 ) ( 426 ) ( 1,776 ) ( 1,278 )

1 unchanged sentence

Other income, net $ ( 509 ) $ ( 543 ) $ ( 8,180 ) $ ( 2,462 )

For the three months ended March 26, 2021 and March 27, 2020, the Company's effective tax rate attributable to income before income taxes was 23.5 % and 25.1 %, respectively.

For the three months ended March 26, 2021 and March 27, 2020, the Company's income tax expense was $ 38,304 and $ 13,100 respectively.

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

For the six months ended March 26, 2021 and March 27, 2020, the Company's effective tax rate attributable to income before income taxes was 23.7 % and 21.6 %, respectively.

For the six months ended March 26, 2021 and March 27, 2020, the Company's tax expense was $ 65,268 and $ 20,440 , respectively.

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.

For the three months ended June 25, 2021 and June 26, 2020, the Company’s effective tax rate attributable to income before income taxes was 26.0 % and 26.5 %, respectively.

For the three months ended June 25, 2021 and June 26, 2020, the Company’s income tax expense was $ 61,654 and $ 8,672 respectively.

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

For the nine months ended June 25, 2021 and June 26, 2020, the Company’s effective tax rate attributable to income before income taxes was 24.8 % and 22.9 %, respectively.

For the nine months ended June 25, 2021 and June 26, 2020, the Company’s tax expense was $ 126,922 and $ 29,112 , respectively.

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

A valuation allowance has been recorded against certain net operating losses in certain foreign jurisdictions.

4 unchanged sentences

We record interest and penalties related to unrecognized tax benefits as a component of income tax expense.

During the six months ended March 26, 2021, the balance of unrecognized tax benefits decreased by an immaterial amount due to the change in reserves for state audit items.

For the six months ended March 26, 2021, the Company made no additional provision for U.S.

During the nine months ended June 25, 2021, the balance of unrecognized tax benefits decreased by $ 127 primarily due to the lapse in the statute of limitations related to certain prior tax years.

For the nine months ended June 25, 2021, the Company made no additional provision for U.S.

income taxes for unrecognized deferred tax liabilities for temporary differences related to basis differences in investments in subsidiaries, as the investments are essentially permanent in duration.

6 unchanged sentences

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

Three months ended Six months ended

(in thousands, except per share data) March 26, 2021 March 27, 2020 March 26, 2021 March 27, 2020

Three months ended Nine months ended

(in thousands, except per share data) June 25, 2021 June 26, 2020 June 25, 2021 June 26, 2020

Net income $ 175,297 $ 24,078 $ 385,296 $ 98,061

8 unchanged sentences

Diluted earnings per share $ 3.64 $ 0.49 $ 7.95 $ 1.99

(1) Stock options to purchase approximately 0.0 million and 0.3 million shares of common stock were outstanding during the three months ended March 26, 2021 and March 27, 2020, respectively, but were not included in the calculation of diluted earnings per share as the impact of these options would have been anti-dilutive.

Stock options to purchase approximately 0.0 million and 0.1 million shares of common stock were outstanding during the six months ended March 26, 2021 and March 27, 2020, respectively, but were not included in the calculation of diluted earnings per share as the impact of these options would have been anti-dilutive.

(1) Stock options to purchase approximately 0.0 million and 0.3 million shares of common stock were outstanding during the three months ended June 25, 2021 and June 26, 2020, respectively, but were not included in the calculation of diluted earnings per share as the impact of these options would have been anti-dilutive.

Stock options to purchase approximately 0.0 million and 0.1 million shares of common stock were outstanding during the nine months ended June 25, 2021 and June 26, 2020, respectively, but were not included in the calculation of diluted earnings per share as the impact of these options would have been anti-dilutive.

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in accumulated other comprehensive loss by component for the three months ended March 26, 2021 and March 27, 2020.

The following table presents the changes in accumulated other comprehensive loss by component for the three months ended June 25, 2021 and June 26, 2020.

(in thousands) Defined benefit

1 unchanged sentence

adjustments Total

Balance as of December 25, 2020 $ ( 30,499 ) $ ( 4,742 ) $ ( 35,241 )

Other comprehensive loss before reclassifications — ( 818 ) ( 818 )

Balance as of March 26, 2021 $ ( 30,237 ) $ ( 5,560 ) $ ( 35,797 )

Other comprehensive income before reclassifications — 2,152 2,152

Amounts reclassified from accumulated other

comprehensive loss, net of tax 262 — 262

Net current period other comprehensive income (loss) 262 ( 818 ) ( 556 )

Balance as of March 26, 2021 $ ( 30,237 ) $ ( 5,560 ) $ ( 35,797 )

Net current period other comprehensive income 262 2,152 2,414

Balance as of June 25, 2021 $ ( 29,975 ) $ ( 3,408 ) $ ( 33,383 )

(in thousands) Defined benefit

1 unchanged sentence

adjustments Total

Balance as of December 27, 2019 $ ( 23,611 ) $ ( 12,771 ) $ ( 36,382 )

Other comprehensive loss before reclassifications — ( 6,229 ) ( 6,229 )

Balance as of March 27, 2020 $ ( 23,385 ) $ ( 19,000 ) $ ( 42,385 )

Other comprehensive income before reclassifications — 2,252 2,252

Amounts reclassified from accumulated other

comprehensive loss, net of tax 216 — 216

Net current period other comprehensive income (loss) 226 ( 6,229 ) ( 6,003 )

Balance as of March 27, 2020 $ ( 23,385 ) $ ( 19,000 ) $ ( 42,385 )

The following table presents the changes in accumulated other comprehensive loss by component for the six months ended March 26, 2021 and March 27, 2020.

Net current period other comprehensive income 216 2,252 2,468

Balance as of June 26, 2020 $ ( 23,169 ) $ ( 16,748 ) $ ( 39,917 )

The following table presents the changes in accumulated other comprehensive loss by component for the nine months ended June 25, 2021 and June 26, 2020.

(in thousands) Defined benefit

6 unchanged sentences

Net current period other comprehensive income 786 8,385 9,171

Balance as of March 26, 2021 $ ( 30,237 ) $ ( 5,560 ) $ ( 35,797 )

Balance as of June 25, 2021 $ ( 29,975 ) $ ( 3,408 ) $ ( 33,383 )

(in thousands) Defined benefit

2 unchanged sentences

Balance as of September 30, 2019 $ ( 23,818 ) $ ( 17,880 ) $ ( 41,698 )

Other comprehensive loss before reclassifications — ( 1,120 ) ( 1,120 )

Other comprehensive income before reclassifications — 1,132 1,132

Amounts reclassified from accumulated other

comprehensive loss, net of tax 649 — 649

Net current period other comprehensive income (loss) 433 ( 1,120 ) ( 687 )

Balance as of March 27, 2020 $ ( 23,385 ) $ ( 19,000 ) $ ( 42,385 )

Net current period other comprehensive income 649 1,132 1,781

Balance as of June 26, 2020 $ ( 23,169 ) $ ( 16,748 ) $ ( 39,917 )

INVENTORIES, NET

A majority of the Company’s inventories are recorded at the lower of cost (primarily last in, first out, or “LIFO”) or market or net realizable value, as applicable.

Approximately 77 % and 73 % of the Company's inventories were valued at the lower of LIFO cost or market at March 26, 2021 and September 30, 2020, respectively.

Interim LIFO determinations, including those at March 26, 2021, are based on management's estimates of future inventory levels and costs for the remainder of the current fiscal year.

(in thousands) March 26, 2021 September 30, 2020

Approximately 78 % and 73 % of the Company’s inventories were valued at the lower of LIFO cost or market at June 25, 2021 and September 30, 2020, respectively.

Interim LIFO determinations, including those at June 25, 2021, are based on management’s estimates of future inventory levels and costs for the remainder of the current fiscal year.

(in thousands) June 25, 2021 September 30, 2020

Purchased materials and manufactured parts, net $ 70,894 $ 49,192

2 unchanged sentences

Inventories, net $ 241,022 $ 199,095

Total inventories would be $ 32,550 higher and $ 4,418 lower than reported as of March 26, 2021 and September 30, 2020, respectively, if the first-in, first-out method was used for all inventories.

As of March 26, 2021, and September 30, 2020, the excess and obsolete inventory reserve was $ 13,762 and $ 14,533 , respectively.

Total inventories would be $ 71,473 higher and $ 4,418 lower than reported as of June 25, 2021 and September 30, 2020, respectively, if the first-in, first-out method was used for all inventories.

As of June 25, 2021, and September 30, 2020, the excess and obsolete inventory reserve was $ 12,821 and $ 14,533 , respectively.

PROPERTY, PLANT AND EQUIPMENT

As of March 26, 2021, and September 30, 2020, property, plant and equipment and accumulated depreciation were as follows:

(in thousands) March 26, 2021 September 30, 2020

As of June 25, 2021, and September 30, 2020, property, plant and equipment and accumulated depreciation were as follows:

(in thousands) June 25, 2021 September 30, 2020

Land $ 23,854 $ 20,460

7 unchanged sentences

Property, plant and equipment, net $ 257,586 $ 243,891

Depreciation expense for the three months ended March 26, 2021 and March 27, 2020 totaled $ 11,170 and $ 10,407 respectively.

Depreciation expense for the six months ended March 26, 2021 and March 27, 2020 totaled $ 21,953 and $ 21,024 , respectively.

Depreciation expense for the three months ended June 25, 2021 and June 26, 2020 totaled $ 11,459 and $ 10,290 respectively.

Depreciation expense for the nine months ended June 25, 2021 and June 26, 2020 totaled $ 33,412 and $ 31,314 , respectively.

GOODWILL AND INTANGIBLE ASSETS

4 unchanged sentences

Exchange rate effects 2,418 — 2,418

Balance as of March 26, 2021 $ 155,936 $ 43,577 $ 199,513

Goodwill balances as of October 1, 2020 and March 26, 2021 include $ 3,924 and $ 43,000 of accumulated impairment losses within the Electrical and Safety & Infrastructure segments, respectively.

Balance as of June 25, 2021 $ 157,968 $ 43,577 $ 201,545

Goodwill balances as of October 1, 2020 and June 25, 2021 include $ 3,924 and $ 43,000 of accumulated impairment losses within the Electrical and Safety & Infrastructure segments, respectively.

The Company assesses the recoverability of goodwill and indefinite-lived trade names on an annual basis in accordance with 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 following table provides the gross carrying value, accumulated amortization and net carrying value for each major class of intangible assets:

March 26, 2021 September 30, 2020

The following table provides the gross carrying value, accumulated amortization and net carrying value for each major class of intangible asset:

June 25, 2021 September 30, 2020

($ in thousands) Weighted Average Useful Life (Years) Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value

7 unchanged sentences

Other intangible assets consist of definite-lived trade names, technology, non-compete agreements and backlogs.

Amortization expense for the three months ended March 26, 2021 and March 27, 2020 was $ 8,096 and $ 8,071 , respectively.

Amortization expense for the six months ended March 26, 2021 and March 27, 2020 was $ 16,356 and $ 16,184 , respectively.

Amortization expense for the three months ended June 25, 2021 and June 26, 2020 was $ 8,707 and $ 8,026 , respectively.

Amortization expense for the nine months ended June 25, 2021 and June 26, 2020 was $ 25,063 and $ 24,210 , respectively.

Expected amortization expense for intangible assets for the remainder of fiscal 2021 and over the next five years and thereafter is as follows:

3 unchanged sentences

Actual amounts of amortization may differ from estimated amounts due to additional intangible asset acquisitions, impairment of intangible assets and other events.

Debt as of March 26, 2021 and September 30, 2020 was as follows:

(in thousands) March 26, 2021 September 30, 2020

Debt as of June 25, 2021 and September 30, 2020 was as follows:

(in thousands) June 25, 2021 September 30, 2020

First Lien Term Loan Facility due December 22, 2023 $ — $ 811,540

New Senior Secured Term Loan Facility due May 26, 2028 398,024 —

Senior Notes due June 2031 400,000 —

Deferred financing costs ( 13,535 ) ( 7,804 )

2 unchanged sentences

Long-term debt $ 780,489 $ 803,736

During the three months ended December 25, 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 elimination of all principal payment requirements until the contractual maturity of the debt in fiscal 2024.

The asset-based credit facility (the "ABL Credit Facility") has aggregate commitments of $ 325,000 and is guaranteed by AIH, the U.S.

operating companies owned by AII and certain other restricted subsidiaries of AII that AII causes to be a subsidiary guarantor from time to time.

AII's availability under the ABL Credit Facility was $ 315,499 and $ 265,899 as of March 26, 2021 and September 30, 2020, respectively.

The asset-based credit facility (the “ABL Credit Facility”) has aggregate commitments of $ 325,000 .

AII is the borrower under the ABL Credit Facility which is guaranteed by the Company and all other subsidiaries of the Company (other than AII) that are guarantors of the Senior Notes.

AII’s availability under the ABL Credit Facility was $ 315,499 and $ 265,899 as of June 25, 2021 and September 30, 2020, respectively.

Senior Notes - On May 26, 2021, the Company completed the issuance and sale of the $ 400 million aggregate principal amount of 4.25 % Senior Notes due 2031 (the “Senior Notes”) in a previously announced private offering.

The Senior Notes were sold only to qualified institutional buyers in compliance with Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”), and to non-U.S.

persons outside of the United States in compliance with Regulation S of the Securities Act.

New Senior Secured Term Loan Facility - On May 26, 2021, the Company entered into a new $ 400 million senior secured term loan facility (the “New Senior Secured Term Loan Facility”).

The New Senior Secured Term Loan Facility will mature on May 26, 2028 and borrowings thereunder bear interest at the rate of either (x) LIBOR (with a floor of 0.50 %) plus 2.00 %, or (y) an alternate base rate (with a floor of 1.50 %) plus 1.00 %.

The New Senior Secured Term Loan Facility has an annual amortization rate of 1.00 %.

The New Senior Secured Term Loan Facility will be payable in consecutive quarterly installments in the amount of 0.25 % of the aggregate initial principal amount of $ 400 million with all unpaid aggregate principal amounts paid at maturity.

ABL Credit Facility - On May 26, 2021, the Company entered into an amendment to the ABL Credit Facility.

The amendment (i) extends the maturity of the facility to the earlier of five years from entering into the amendment or 91 days prior to the maturity date of the New Senior Secured Term Loan Facility if at least $ 100 million of obligations remain outstanding under the New Senior Secured Term Loan Facility on such date (ii) decreases the interest rate margins applicable to loans under the facility to (a) 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 (b) in the case of Canadian dollar-denominated loans, either (x) the bankers acceptance 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 %.

(iii) decreases the fee payable with respect to unutilized availability under the facility from 0.375 % to 0.25 % to 0.30 % depending on the remaining availability under the ABL Credit Facility and (iv) made certain other changes agreed with the lenders under the ABL Credit Facility.

The New Senior Secured Term Loan Facility and the ABL Credit Facility are secured by all of the assets of AII and the guarantors under such facilities.

The New Senior Secured Term Loan Facility has priority over all real property, plant and equipment, intellectual property and capital stock of AII and any guarantor and any documents or instruments evidencing the foregoing assets.

The ABL Credit Facility has second priority over 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.

The New Senior Secured Term Loan Facility has second priority over the foregoing assets.

The aforementioned debt instruments contain customary covenants typical for this type of financing, including limitations on indebtedness, restricted payments including dividends, liens, restrictions on distributions from restricted subsidiaries, sales of assets, affiliate transactions and mergers and consolidations.

Many of these covenants are only applicable when the Company has surpassed certain thresholds relating to its indebtedness.

Additionally, these debt instruments include customary events of default, including, among other things, payment default, covenant default, payment defaults and accelerations under other indebtedness, judgment defaults and bankruptcy, insolvency or reorganization affecting the Company or certain of its subsidiaries.

Use of Proceeds - The proceeds from the Senior Notes and the New Senior Secured Term Loan Facility were used to repay the remaining principal of the existing First Lien Term Loan Facility of $ 772 million and $ 4 million of accrued interest.

The Company accounted for the repayment of the First Lien Term Loan Facility as an extinguishment of debt and recorded a $ 4.2 million loss on extinguishment of debt.

The Company accounted for the amendment to the ABL Credit Facility as a modification of debt.

FAIR VALUE MEASUREMENTS

1 unchanged sentence

The Company uses forward currency contracts to hedge the effects of foreign exchange relating to certain of the Company’s intercompany balances 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 two years .

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

Short-term forward currency contracts are recorded in either other current assets or other current liabilities and long-term forward currency contracts are recorded in either other long-term assets or other long-term liabilities in the condensed consolidated balance sheet.

1 unchanged sentence

See Note 5, “Other Income, net” for further detail.

The total notional amounts of undesignated forward currency contracts were £ 36.1 million and £ 43.3 million as of March 26, 2021 and September 30, 2020, respectively.

The total notional amounts of undesignated forward currency contracts were £ 36.1 and £ 43.3 million as of June 25, 2021 and September 30, 2020, respectively.

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

1 unchanged sentence

The following table presents the Company’s assets and liabilities measured at fair value:

March 26, 2021 September 30, 2020

June 25, 2021 September 30, 2020

(in thousands) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

4 unchanged sentences

The estimated fair value of financial instruments not carried at fair value in the condensed consolidated balance sheets were as follows:

March 26, 2021 September 30, 2020

June 25, 2021 September 30, 2020

(in thousands) Carrying Value Fair Value Carrying Value Fair Value

First Lien Term Loan Facility due December 22, 2023 $ — — $ 812,120 $ 808,060

New Senior Secured Term Loan Facility due May 26, 2028 $ 400,000 $ 399,300 $ — $ —

Senior Notes due June 2031 $ 400,000 $ 400,000 $ — $ —

In determining the approximate fair value of its long-term debt, the Company used the trading values among financial institutions, and these values fall within Level 2 of the fair value hierarchy.

The carrying value of the ABL Credit Facility approximates fair value due to it being a market-linked variable rate debt.

The carrying value of the ABL Credit Facility

approximates fair value due to it being a market-linked variable rate debt.

The carrying values of the New Senior Secured Term Loan Facility and the Senior Notes approximate fair value.

COMMITMENTS AND CONTINGENCIES

The Company has obligations related to commitments to purchase certain goods.

As of March 26, 2021, such obligations were $ 293,136 for the rest of fiscal year 2021 and $ 10,905 for fiscal year 2022 and beyond.

As of June 25, 2021, such obligations were $ 291,715 for the rest of fiscal year 2021 and $ 12,923 for fiscal year 2022 and beyond.

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

2 unchanged sentences

Several lawsuits have been filed against the Company and the Company has also received other claim demand letters alleging that the Company’s anti-microbial coated steel sprinkler pipe, which the Company has not manufactured or sold for several years, is incompatible with chlorinated polyvinyl chloride and caused stress cracking in such pipe manufactured by third parties when installed together in the same sprinkler system, which the Company refers to collectively as the “Special Products Claims.” After an analysis of claims experience, the Company reserved its best estimate of the probable and reasonably estimable losses related to these matters.

The Company's total product liability reserves for Special Products Claims and other product liability matters were $ 682 and $ 597 as of March 26, 2021 and September 30, 2020, respectively.

As of March 26, 2021, the Company believes that the range of aggregate reasonably possible losses for Special Products Claims and other product liabilities is between $ 1,000 and $ 8,000 .

The Company’s total product liability reserves for Special Products Claims and other product liability matters were $ 729 and $ 597 as of June 25, 2021 and September 30, 2020, respectively.

As of June 25, 2021, the Company believes that the range of aggregate 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.

10 unchanged sentences

During the three months ended March 26, 2021, the Company received $ 6,000 of business interruption insurance recovery proceeds related to this incident.

The amount was recorded as other income within the condensed consolidated statements of operations for the three and six months ended March 26, 2021.

The amount was recorded as other income within the condensed consolidated statements of operations for the nine months ended June 25, 2021.

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.

1 unchanged sentence

On the basis of information currently available to the Company, it does not believe that existing proceedings and claims will have a material adverse effect on its business, financial condition, results of operations or cash flows.

However, litigation is unpredictable, and

the Company could incur judgments or enter into settlements for current or future claims that could adversely affect its business, financial condition, results of operations or cash flows.

The Company had outstanding letters of credit totaling $ 9,501 supporting workers' compensation and general liability insurance policies as of March 26, 2021.

The Company also had surety bonds primarily related to performance guarantees on supply agreements and construction contracts, and payment of duties and taxes totaling $ 15,675 as of March 26, 2021.

However, litigation is unpredictable, and the Company could incur judgments or enter into settlements for current or future claims that could adversely affect its business, financial condition, results of operations or cash flows.

The Company had outstanding letters of credit totaling $ 9,501 supporting workers’ compensation and general liability insurance policies as of June 25, 2021.

The Company also had surety bonds primarily related to performance guarantees on supply agreements and construction contracts, and payment of duties and taxes totaling $ 18,331 as of June 25, 2021.

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.

16 unchanged sentences

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, 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.

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, loss on extinguishment of debt, 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.

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

6 unchanged sentences

Three months ended

March 26, 2021 March 27, 2020

June 25, 2021 June 26, 2020

(in thousands) External Net Sales Intersegment Sales Adjusted EBITDA External Net Sales Intersegment Sales Adjusted EBITDA

3 unchanged sentences

Consolidated operations $ 853,658 $ — $ 384,899 $ —

Six months ended

March 26, 2021 March 27, 2020

Nine months ended

June 25, 2021 June 26, 2020

(in thousands) External Net Sales Intersegment Sales Adjusted EBITDA External Net Sales Intersegment Sales Adjusted EBITDA

4 unchanged sentences

Presented below is a reconciliation of operating Segment Adjusted EBITDA to Income before income taxes:

Three months ended Six months ended

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

Three months ended Nine months ended

(in thousands) June 25, 2021 June 26, 2020 June 25, 2021 June 26, 2020

Operating segment Adjusted EBITDA

5 unchanged sentences

Interest expense, net ( 8,090 ) ( 9,421 ) ( 24,760 ) ( 30,605 )

Loss on extinguishment of debt ( 4,202 ) — ( 4,202 ) —

Stock-based compensation ( 3,768 ) ( 1,656 ) ( 14,158 ) ( 9,302 )

3 unchanged sentences

(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, realized or unrealized gain (loss) on foreign currency impacts of intercompany loans and related forward currency derivatives, gain on purchase of business, restructuring costs and transaction costs.

The Company's net sales by geography were as follows for the six months ended March 26, 2021 and March 27, 2020:

Three months ended Six months ended

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

The Company’s net sales by geography were as follows for the nine months ended June 25, 2021 and June 26, 2020:

Three months ended Nine months ended

(in thousands) June 25, 2021 June 26, 2020 June 25, 2021 June 26, 2020

United States $ 773,204 $ 348,960 1,800,395 $ 1,146,156

3 unchanged sentences

Total $ 853,658 $ 384,899 $ 2,004,283 $ 1,288,001

The table below shows the amount of net sales from external customers for each of the Company's product categories which accounted for 10% or more of consolidated net sales in either period for the six months ended March 26, 2021 and March 27, 2020:

Three months ended Six months ended

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

The table below shows the amount of net sales from external customers for each of the Company’s product categories which accounted for 10% or more of consolidated net sales in either period for the nine months ended June 25, 2021 and June 26, 2020:

Three months ended Nine months ended

(in thousands) June 25, 2021 June 26, 2020 June 25, 2021 June 26, 2020

Metal Electrical Conduit and Fittings $ 200,989 $ 105,079 $ 474,223 $ 354,530

8 unchanged sentences

Net sales $ 853,658 $ 384,899 $ 2,004,283 $ 1,288,001

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this report.

The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs.

Our actual results could differ materially from those discussed in these forward- looking statements.

Factors that could cause or contribute to these differences include those factors discussed below and included or referenced elsewhere in this report, particularly in the sections entitled “ Forward-Looking Statements ” and “ Risk Factors.

Impacts of COVID-19

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

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

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

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

Given the continued volatility within the economic impacts of the pandemic it is too difficult to make any judgment on how significant COVID-19 effects could become.

Factors that contribute to our ability to adjust to the outbreak include currently being deemed an “essential business,” benefiting from mostly localized supply chains, and continuing to take actions within our control to minimize the disruptive impacts of the outbreak.

However, there can be no assurance that we will not be materially and adversely impacted in the future.

The extent to which COVID-19 will impact our business will depend on future developments and public health advancements, which are highly uncertain and cannot be predicted with confidence.

Currently, we have no COVID-19 related facility closures as we look to serve our current levels of demand.

In response to COVID-19, we have implemented a variety of countermeasures to promote the health and safety of our employees during this pandemic, including health screening, physical distancing practices, enhanced cleaning, use of personal protective equipment, business travel restrictions, and remote work capabilities.

Results of Operations

The consolidated results of operations for the three months ended June 25, 2021 and June 26, 2020 were as follows:

Three months ended

($ in thousands) June 25, 2021 June 26, 2020 Change % Change

Net sales $ 853,658 $ 384,899 $ 468,759 121.8 %

Cost of sales 514,385 289,086 225,299 77.9 %

Gross profit 339,273 95,813 243,460 254.1 %

Selling, general and administrative 81,832 46,159 35,673 77.3 %

Intangible asset amortization 8,707 8,026 681 8.5 %

Operating income 248,734 41,628 207,106 497.5 %

Interest expense, net 8,090 9,421 (1,331) (14.1) %

Loss on extinguishment of debt 4,202 — 4,202 100.0 %

Other income, net (509) (543) 34 (6.3) %

Income before income taxes 236,951 32,750 204,201 623.5 %

Income tax expense 61,654 8,672 52,982 611.0 %

Net income $ 175,297 $ 24,078 $ 151,219 628.0 %

Volume 23.6 %

Average selling prices 89.0 %

Foreign exchange 1.9 %

Acquisitions 6.9 %

Net sales 121.8 %

Net sales increased by $468.8 million, or 121.8%, to $853.7 million for the three months ended June 25, 2021, compared to $384.9 million for the three months ended June 26, 2020.

The increase in net sales is primarily attributed to increased average selling prices of $342.8 million which were mostly driven by the PVC electrical conduit and fittings product category within the Electrical segment and increased net sales of $26.7 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 is uncertain.

The increase in net sales was also driven by an increase in sales volume of $90.9 million across nearly all product categories within both the Electrical and the Safety & Infrastructure segments.

Cost of sales

Volume 23.5 %

Average input costs 42.8 %

Foreign exchange 2.2 %

Acquisitions 3.7 %

Cost of sales 77.9 %

Cost of sales increased by $225.3 million, or 77.9%, to $514.4 million for the three months ended June 25, 2021 compared to $289.1 million for the three months ended June 26, 2020.

The increase was primarily due to higher input costs of steel, copper and PVC resin of $124.0 million, higher sales volume of $68.0 million and due to the acquisitions of Queen City Plastics and FRE Composites Group of $10.7 million.

Selling, general and administrative

Selling, general and administrative expenses increased by $35.7 million, or 77.3%, to $81.8 million for the three months ended June 25, 2021 compared to $46.2 million for the three months ended June 26, 2020.

The increase was primarily due to higher sales commission expense of $9.1 million, higher variable compensation of $7.1 million, higher stock compensation expense of $2.5 million, higher acquisition related spend of $1.3 million driven by the acquisitions of Queen City Plastics and the FRE Composites Group, and the remainder primarily being driven by the tight controls on expenditures put into place in the prior year at the onset of the COVID-19 pandemic.

Intangible asset amortization

Intangible asset amortization expense increased to $8.7 million for the three months ended June 25, 2021 compared to $8.0 million for the three months ended June 26, 2020.

Interest expense, net

Interest expense, net decreased by $1.3 million, or 14.1% to $8.1 million for the three months ended June 25, 2021 compared to $9.4 million for the three months ended June 26, 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 $0.5 million for the three months ended June 25, 2021 compared to $0.5 million for the three months ended June 26, 2020.

Income tax expense

The Company’s income tax rate decreased to 26.0% for the three months ended June 25, 2021 compared to 26.5% for the three months ended June 26, 2020.

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

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 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 income (loss) before income taxes, adjusted to exclude unallocated expenses, depreciation and amortization, interest expense, net, restructuring charges, stock-based compensation, loss on extinguishment of debt, 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) June 25, 2021 June 26, 2020 Change % Change

Net sales $ 661,163 $ 272,151 $ 389,012 142.9 %

Adjusted EBITDA $ 267,824 $ 55,549 $ 212,275 382.1 %

Adjusted EBITDA margin 40.5 % 20.4 %

Volume 23.6 %

Average selling prices 106.7 %

Foreign exchange 2.7 %

Acquisitions 9.7 %

Net sales 142.9 %

Net sales increased by $389.0 million, or 142.9%, to $661.2 million for the three months ended June 25, 2021 compared to $272.2 million for the three months ended June 26, 2020.

The increase in net sales is primarily attributed to increased average selling prices of $290.6 million which were mostly driven by the PVC electrical conduit and fittings category, the metal electrical conduit and fittings product categories and increased net sales of $26.5 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 is uncertain.

Additionally, sales volume increased $64.1 million driven by increased volumes across all product categories.

Adjusted EBITDA

Adjusted EBITDA for the three months ended June 25, 2021 increased by $212.3 million, or 382.1%, to $267.8 million from $55.5 million for the three months ended June 26, 2020.

Adjusted EBITDA margins increased to 40.5% for the three months ended June 25, 2021 compared to 20.4% for the three months ended June 26, 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) June 25, 2021 June 26, 2020 Change % Change

Net sales $ 193,492 $ 113,380 $ 80,112 70.7 %

Adjusted EBITDA $ 22,365 $ 14,150 $ 8,215 58.1 %

Adjusted EBITDA margin 11.6 % 12.5 %

Volume 23.6 %

Average selling prices 46.1 %

Acquisitions 0.1 %

Net sales 70.7 %

Net sales increased by $80.1 million, or 70.7%, for the three months ended June 25, 2021 to $193.5 million compared to $113.4 million for the three months ended June 26, 2020.

The increase is primarily attributed to increased average selling prices of $52.2 million driven by higher input costs of steel, and by higher volumes of $26.8 million primarily driven by increases across all product categories.

Adjusted EBITDA

Adjusted EBITDA increased by $8.2 million, or 58.1%, to $22.4 million for the three months ended June 25, 2021 compared to $14.2 million for the three months ended June 26, 2020.

Adjusted EBITDA margins decreased to 11.6% for the

three months ended June 25, 2021 compared to 12.5% for the three months ended June 26, 2020.

The Adjusted EBITDA increase is primarily due to the price and volume increases discussed above.

The consolidated results of operations for the nine months ended June 25, 2021 and June 26, 2020 were as follows:

Nine months ended

($ in thousands) June 25, 2021 June 26, 2020 Change % Change

Net sales $ 2,004,283 $ 1,288,001 $ 716,282 55.6 %

Cost of sales 1,235,970 943,741 292,229 31.0 %

Gross profit 768,313 344,260 424,053 123.2 %

Selling, general and administrative 210,250 164,734 45,516 27.6 %

Intangible asset amortization 25,063 24,210 853 3.5 %

Operating income 533,000 155,316 377,684 243.2 %

Interest expense, net 24,760 30,605 (5,845) (19.1) %

Loss on extinguishment of debt 4,202 — 4,202 100.0 %

Other income, net (8,180) (2,462) (5,718) 232.3 %

Income before income taxes 512,218 127,173 385,045 302.8 %

Income tax expense 126,922 29,112 97,810 336.0 %

Net income $ 385,296 $ 98,061 $ 287,235 292.9 %

Average selling prices 45.5 %

Foreign exchange 1.1 %

Acquisitions 4.0 %

Net sales 55.6 %

Net sales increased by $716.3 million, or 55.6%, to $2,004.3 million for the nine months ended June 25, 2021, compared to $1,288.0 million for the nine months ended June 26, 2020.

The increase in net sales is primarily attributed to increased average selling prices of $586.6 million which were mostly driven by the PVC electrical conduit and fittings product category within the Electrical segment and increased net sales of $51.4 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 is uncertain.

The increase in net sales was also driven by increases in sales volumes across the majority of product categories in both the Electrical and the Safety & Infrastructure segments.

Cost of sales

Average input costs 21.5 %

Foreign exchange 1.2 %

Acquisitions 2.3 %

Cost of sales 31.0 %

Cost of sales increased by $292.2 million, or 31.0% to $1,236.0 million for the nine months ended June 25, 2021 compared to $943.7 million for the nine months ended June 26, 2020.

The increase was primarily due to higher sales volumes

of $47.1 million, higher input costs for steel, copper and resin of $202.8 million and the acquisitions of Queen City Plastics and FRE Composites Group of $21.5 million.

Selling, general and administrative

Selling, general and administrative expenses increased by $45.5 million, or 27.6% to $210.3 million for the nine months ended June 25, 2021 compared to $164.7 million for the nine months ended June 26, 2020.

The increase was primarily due to higher sales commission expense of $12.3 million, higher variable compensation of $13.6 million, higher stock compensation expense of $4.8 million and the acquisitions of Queen City Plastics and the FRE Composites Group of $3.0 million, partially offset by productivity efficiencies of $5.4 million.

The majority of the remaining increase was primarily driven by the tight controls on expenditures put into place in the prior year at the onset of the COVID-19 pandemic.

Intangible asset amortization

Intangible asset amortization expense increased to $25.1 million for the nine months ended June 25, 2021 compared to $24.2 million for the nine months ended June 26, 2020.

Interest expense, net

Interest expense, net, decreased by $5.8 million, or 19.1% to $24.8 million for the nine months ended June 25, 2021 compared to $30.6 million for the nine months ended June 26, 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 $5.7 million to $8.2 million for the nine months ended June 25, 2021 compared to $2.5 million for the nine months ended June 26, 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 24.8% for the nine months ended June 25, 2021 compared to 22.9% for the nine months ended June 26, 2020.

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

Segment Results

Nine months ended

($ in thousands) June 25, 2021 June 26, 2020 Change % Change

Net sales $ 1,535,808 $ 919,916 $ 615,892 67.0 %

Adjusted EBITDA $ 589,923 $ 200,901 $ 389,022 193.6 %

Adjusted EBITDA margin 38.4 % 21.8 %

Average selling prices 55.8 %

Foreign exchange 1.5 %

Acquisitions 5.6 %

Net sales 67.0 %

Net sales increased by $615.9 million, or 67.0%, to $1,535.8 million for the nine months ended June 25, 2021 compared to $919.9 million for the nine months ended June 26, 2020.

The increase in net sales is primarily attributed to increased average selling prices of $513.3 million which were mostly driven by the PVC electrical conduit and fittings and the metal electrical conduit and fittings product categories, increased sales volume across most product categories and increased net sales of $51.2 million from the acquisitions of Queen City Plastics and FRE Composites Group.

Adjusted EBITDA

Adjusted EBITDA for the nine months ended June 25, 2021 increased by $389.0 million, or 193.6%, to $589.9 million from $200.9 million for the nine months ended June 26, 2020.

Adjusted EBITDA margins increased to 38.4% for the nine months ended June 25, 2021 compared to 21.8% for the nine months ended June 26, 2020.

Safety & Infrastructure

Nine months ended

($ in thousands) June 25, 2021 June 26, 2020 Change % Change

Net sales $ 470,957 $ 370,018 $ 100,939 27.3 %

Adjusted EBITDA $ 52,810 $ 50,765 $ 2,045 4.0 %

Adjusted EBITDA margin 11.2 % 13.7 %

Average selling prices 19.8 %

Acquisitions 0.1 %

Net sales 27.3 %

Net sales increased by $100.9 million, or 27.3%, for the nine months ended June 25, 2021 to $471.0 million compared to $370.0 million for the nine months ended June 26, 2020.

The increase is primarily attributed to increased average selling prices of $73.3 million primarily driven by higher input costs of steel as well as increases in sales volumes across most product categories.

Adjusted EBITDA

Adjusted EBITDA increased $2.0 million, or 4.0%, to $52.8 million for the nine months ended June 25, 2021 compared to $50.8 million for the nine months ended June 26, 2020.

Adjusted EBITDA margins decreased to 11.2% for the nine months ended June 25, 2021 compared to 13.7% for the nine months ended June 26, 2020.

The Adjusted EBITDA increase was primarily due to the increase in sales volume and average selling prices discussed above.

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 $397.1 million as of June 25, 2021, of which $69.1 million was held at non-U.S.

subsidiaries.

Those cash balances at foreign subsidiaries may be subject to withholding or local country taxes if the Company’s intention to permanently reinvest such income were to change and cash was repatriated to the United States.

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

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

As of June 25, 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 June 25, 2021.

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

The agreements governing the First Lien Term Loan Facility and the ABL Credit Facility (collectively, the "Credit Facilities") contain covenants that limit or restrict AII’s ability to incur additional indebtedness, repurchase debt, incur liens, sell assets, make certain payments (including dividends) and enter into transactions with affiliates.

AII has been in compliance with the covenants under the agreements for all periods presented.

We may from time to time repurchase our debt or take other steps to reduce our debt.

These actions may include open market repurchases, negotiated repurchases or opportunistic refinancing of debt.

The amount of debt, if any, that may be repurchased or refinanced will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations.

Our use of cash may fluctuate during the year and from year to year due to differences in demand and changes in economic conditions primarily related to the prices of the commodities we purchase.

Capital expenditures have historically been necessary to expand and update the production capacity and improve the productivity of our manufacturing operations.

Our ongoing liquidity needs are expected to be funded by cash on hand, net cash provided by operating activities and, as required, borrowings under the ABL Credit Facility.

We expect that cash provided from operations and available capacity under the ABL Credit Facility will provide sufficient funds to operate our business, make expected capital expenditures and meet our liquidity requirements for at least the next twelve months, including payments of interest and principal on our debt.

Limitations on distributions and dividends by 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.

The ability of our subsidiaries to make distributions and dividends to us depends on their operating results, cash requirements and financial and general business conditions, as well as restrictions under the laws of our subsidiaries' jurisdictions.

The agreements governing the ABL Credit Facility significantly restrict the ability of our subsidiaries, including AII, to pay dividends, make loans or otherwise transfer assets from AII and, in turn, to us.

Further, AII’s subsidiaries are permitted under the terms of the ABL Credit Facility to incur additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends or the making of loans by such subsidiaries to AII and, in turn, to us.

The First Lien Term Loan Facility requires AII to meet a certain consolidated coverage ratio on an incurrence basis in connection with additional indebtedness.

The ABL Credit Facility contains limits on additional indebtedness based on various conditions for incurring the additional debt.

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

Nine months ended

(in thousands) June 25, 2021 June 26, 2020

Cash flows provided by (used in):

Operating activities $ 318,621 $ 156,019

Investing activities (74,303) (24,756)

Financing activities (135,412) (16,917)

Operating activities

During the nine months ended June 25, 2021, the Company was provided $318.6 million by operating activities compared to $156.0 million during the nine months ended June 26, 2020.

The $162.6 million increase in cash provided was primarily due to higher cash flows from the increase in operating income of $377.7 million.

This was partially offset by a $202.0 million increase in cash used in working capital primarily driven by higher sales.

Investing activities

During the nine months ended June 25, 2021, the Company used $74.3 million in investing activities compared to $24.8 million during the nine months ended June 26, 2020.

The increase in cash used in investing activities is primarily due to the acquisition of Queen City Plastics for $6.2 million and FRE Composites Group for $37.0 million, as well as increased capital expenditure of $8.7 million driven by investments in digital initiatives during the nine months ended June 25, 2021.

Financing Activities

During the nine months ended June 25, 2021, the Company used $135.4 million in financing activities compared to $16.9 million used during the nine months ended June 26, 2020.

The increase in cash used in financing activities is primarily due to $110.1 million used to repurchase common stock during the nine months ended June 25, 2021.

Contractual Obligations and Commitments

The following table summarizes material changes to our contractual obligations reported as of September 30, 2020, resulting from the changes in our debt during the three months ended June 25, 2021.

These changes resulted from the Company completing the issuance and sale of $400 million aggregate principal amount of the 4.25% Senior Notes due June 2031 and entering into the $400 million New Senior Secured Term Loan Facility which matures on May 26, 2028.

Proceeds from the Senior Notes and New Senior Secured Term Loan Facility were used to repay outstanding loans under the previous First Lien Term Loan Facility.

See Note 12, “Debt” in the notes to the condensed consolidated financial statements.

($ in thousands) Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Total

Senior Notes due June 2031 $ — $ — $ — $ 400,000 $ 400,000

New Senior Secured Term Loan Facility Due May 2028 4,000 8,000 8,000 380,000 $ 400,000

Interest payments (a) 28,870 60,112 66,131 117,821 272,934

Total $ 32,870 $ 68,112 $ 74,131 $ 897,821 $ 1,072,934

(a) Interest expense is estimated based on outstanding loan balances assuming principal payments are made according to the payment schedule and interest rates as of June 25, 2021 (4.25% for the Senior Notes, 2.5% for the New Senior Secured Term Loan Facility).

Changes in Critical Accounting Policies and Estimates

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

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” to our unaudited condensed consolidated financial statements.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements and cautionary statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management’s beliefs and assumptions and information currently available to management.

Some of the forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,” “anticipates” or other comparable terms.

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

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

results of operations;

growth strategies or expectations;

customer retention;

the outcome (by judgment or settlement) and costs of legal, administrative or regulatory proceedings, investigations or inspections, including, without limitation, collective, representative or class action litigation;

and the impact of prevailing economic conditions.

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control.

We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report.

In addition, even if our results of operations, financial condition and cash flows, and the development of the market in which we operate, are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods.

A number of important factors, including, without limitation, the risks and uncertainties discussed or referenced under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, could cause actual results and outcomes to differ materially from those reflected in the forward-looking statements.

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

• 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;

• pricing pressure, reduced profitability, or loss of market share due to intense competition;

• availability and cost of third-party freight carriers and energy;

• high levels of imports of products similar to those manufactured by us;

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

• adverse weather conditions;

• 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, 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;

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

• reduced production or distribution capacity due to interruptions in the operations of our facilities or those of our key suppliers;

• loss of a substantial number of our third-party agents or distributors or a dramatic deviation from the amount of sales they generate;

• security threats, attacks, or other disruptions to our information systems, or failure to comply with complex network security, data privacy and other legal obligations or the failure to protect sensitive information;

• possible impairment of goodwill or other long-lived assets as a result of future triggering events, such as declines in our cash flow projections or customer demand and changes in our business and valuation assumptions;

• safety and labor risks associated with the manufacture and in the testing of our products;

• product liability, construction defect and warranty claims and litigation relating to our various products, as well as government inquiries and investigations, and consumer, employment, tort and other legal proceedings;

• our ability to protect our intellectual property and other material proprietary rights;

• risks inherent in doing business internationally;

• 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;

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

• the incurrence of liabilities and the issuance of additional debt or equity in connection with acquisitions, joint ventures or divestitures and the failure of indemnification provisions in our acquisition agreements to fully protect us from unexpected liabilities;

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

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

• disruptions or impediments to the receipt of sufficient raw materials resulting from various anti-terrorism security measures;

• restrictions contained in our debt agreements;

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

• 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 Quarterly Report and from time to time in documents that we file with the SEC.

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, 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.

Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to the quantitative and qualitative disclosures about market risks previously disclosed in our Annual Report on Form 10-K.

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 1. Financial Statements