What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2021-11-18 compared with 2020-11-19 · 162 added, 166 removed, 317 unchanged (51% of the section changed)

7 unchanged sentences

Business Factors Influencing our Results of Operations

We are a leading manufacturer of Electrical Raceway products primarily for the non-residential construction and renovation markets and MP&S for the construction and industrial markets.

Electrical Raceway products form the critical infrastructure that enables the deployment, isolation and protection of a structure's electrical circuitry from the original power source to the final outlet.

MP&S frame, support and secure component parts in a broad range of structures, equipment and systems in electrical, industrial and construction applications.

We are a leading manufacturer of Electrical products primarily for the non-residential construction and renovation markets and Safety & Infrastructure for the construction and industrial markets.

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

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

We believe we hold #1 or #2 positions in the United States by net sales in the vast majority of our products.

7 unchanged sentences

A stronger United States economy and robust non-residential construction generally increase demand for our products.

In fiscal 2021, our sales and cost of sales were impacted by sharp increases in the prices of the raw materials used in our products.

We generally sell our products on a spot basis and as such, were able to pass some of these increases on to our customers.

Additionally, we participated in the broader economic recovery from the COVID-19 pandemic as our customers began to resume their operations at pre-pandemic levels of activity.

We believe that our business and demand for our products is influenced by two main economic indicators:

4 unchanged sentences

During those periods, our MR&R demand as a percentage of total demand typically increases, providing a more consistent revenue stream for our business.

Impacts of COVID-19.

The outbreak of 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

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.

Raw Materials.

10 unchanged sentences

Our inventory levels may be impacted from time to time, due to delivery lead times from our suppliers.

We are typically obligated to pay for our raw material purchases within 10 and 30 days of their receipt, while we typically receive payment 30 to 60 days from the point we have satisfied the related performance obligation to the customer.

Our average working capital days during fiscal 2020 was 79 days.

Our cash collection cycle is generally one to two months longer than our cash payment cycle.

If our working capital requirements increase and we are unable to finance our working capital on terms and conditions acceptable to us, we may not be able to obtain raw materials to respond to customer demand, which could result in a loss of sales.

Labor Cost and Availability.

Labor costs are a direct input into the manufacture of our products.

Labor costs are capitalized as a cost of inventory.

In a typical year, our operating results are impacted by seasonality.

5 unchanged sentences

In total, we have invested $145.0 million in acquisitions since 2019.

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

("Cii"), a manufacturer of modular, prefabricated power, voice and data distribution systems.

On October 1, 2018, we acquired Vergokan International NV ("Vergokan") , a leading manufacturer of cable tray and cable ladder systems, underfloor installations and industrial floor trunking that serves industrial, power and energy, commercial and infrastructure sectors in more than 45 countries.

On June 3, 2019, we acquired the assets of United Structural Products, LLC.

Tray"), a manufacturer of welded aluminum and engineered-to-order cable trays.

On August 12, 2019 we acquired Flytec Systems Ltd.

("Flytec"), a manufacturer of metal surface trunking, including IP4X, perimeter systems, pedestal boxes, as well as underfloor installations and industrial floor trunking.

On August 21, 2019 we acquired Rocky Mountain Colby Pipe ("Cor-Tek"), a manufacturer of PVC conduit for electrical applications considered a leading innovator in cellular core extrusion technology.

We expect to continue to pursue synergistic acquisitions as part of our growth strategy to expand our product offerings.

See Note 3, “Acquisitions” to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Divestitures and Restructurings.

Since 2011, we have continuously evaluated our operations to ensure that we are investing resources strategically.

Our assessment has included existing operating performance, required levels of investment to improve performance and the overall complexities of doing business in certain markets and geographic regions.

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

Foreign Currencies.

8 unchanged sentences

Emerging Industry Trends.

In addition to United States GDP and non-residential construction starts, there are emerging industry trends that we believe will drive further demand for our products.

These include new building technologies which enhance facility management, such as automation and LED lighting systems, as well as the rapid expansion of certain non-residential construction categories, for example, data centers.

In recent years, technological advancements aimed at improving facility management have been driven by a number of factors, including integration and interoperability, the proliferation of the Internet and associated increases in data and power requirements and a desire to reduce costs through improved energy efficiency, lighting systems and operating effectiveness.

We believe that these trends will drive greater needs for electrical capacity and circuitry, increasing the demand for many of our products.

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

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

Pressure from regulators, and expectations from customers, to combat climate change may accelerate the move to more renewable power generation, the electrification of buildings and transportation, and the use of more sustainable methods in construction in our markets.

The rapid market growth for the use of digital technologies may continue to drive the need for more digital infrastructure such as data centers and the need for advanced warehousing and distribution centers to support e-commerce.

Atkore offers products including electrical conduit & fittings, electrical cable & cable management, metal framing and racking structures that are commonly used in the construction of new and renovated buildings, infrastructure, renewable power systems, data centers, warehouses, and to connect electric vehicle charging stations to the electrical grid.

Increases in demand for these applications in our markets may drive an increased demand for Atkore products.

Reportable Segments

We operate our business through two operating segments which are also our reportable segments:

Electrical Raceway and MP&S.

Electrical and Safety & Infrastructure.

Our operating segments are organized based on primary market channel and, in most instances, the end use of products.

1 unchanged sentence

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

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 also implemented the Realignment of its segment financial reporting structure such that its domestic cable management and prefabrication modular businesses are now reflected in its Safety & Infrastructure segment.

These businesses were previously reflected within the Electrical segment.

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” for additional information.

Prior year results have been revised for the impact of the Realignment for comparability .

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

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

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

See Note 17, “Segment Information” to the accompanying consolidated financial statements included elsewhere in this Annual Report.

3 unchanged sentences

Key Components of Results of Operations

Net sales represents external sales of Electrical Raceway products to the non-residential construction and MR&R markets and MP&S products and solutions to the commercial and industrial markets.

Net sales represents external sales of Electrical products to the non-residential construction and MR&R markets and Safety & Infrastructure products and solutions to the commercial and industrial markets.

Net sales includes gross product sales and freight billed to our customers, net of allowances for rebates, sales incentives, trade promotions, product returns and discounts.

9 unchanged sentences

Fiscal year ended

($ in thousands)

September 30, 2020

September 30, 2019

($ in thousands) September 30, 2021 September 30, 2020 Change ($) Change (%)

Net sales $ 2,928,014 $ 1,765,421 $ 1,162,593 65.9 %

Cost of sales 1,802,401 1,274,107 528,294 41.5 %

Gross profit 1,125,613 491,314 634,299 129.1 %

Selling, general and administrative 293,019 219,496 73,523 33.5 %

6 unchanged sentences

Income tax expense 192,144 49,696 142,448 286.6 %

Net income $ 587,857 $ 152,302 $ 435,555 286.0 %

Average selling prices 55.4 %

Foreign exchange 1.0 %

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

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

The Company experienced volume declines in most of its product categories with the exception of the PVC electrical conduit and fittings product category within the Electrical Raceway segment and the mechanical pipe product category within the MP&S segment.

Additionally, net sales decreased $37.7 million due to lower average selling prices resulting from lower input costs of steel, which was partially offset by higher average selling prices resulting from higher input costs of PVC resin and copper.

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

Acquisitions 4.5 %

Net sales 65.9 %

Net sales for fiscal 2021 increased $1,162.6 million to $2,928.0 million, an increase of 65.9%, compared to $1,765.4 million for fiscal 2020.

The increase in net sales is primarily attributed to increased average selling prices of $977.9 million which were mostly driven by the plastic pipe and conduit category within the Electrical segment and increased net sales of $79.1 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 $88.4 million across the majority of product categories within both the Electrical and the Safety & Infrastructure segments.

Cost of sales

1 unchanged sentence

Foreign exchange 1.2 %

Acquisitions 2.6 %

Cost of sales 41.5 %

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

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

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

Cost of sales increased $528.3 million, or 41.5%, to $1,802.4 million for fiscal 2021 compared to $1,274.1 million for fiscal 2020.

The increase was primarily due to higher input costs of steel, copper and PVC resin of $386.5 million, higher sales volume of $64.0 million and the acquisitions of Queen City Plastics and FRE Composites Group of $32.5 million.

Selling, general and administrative

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

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

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

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

Selling, general and administrative expenses increased $73.5 million, or 33.5%, to $293.0 million for fiscal 2021 compared to $219.5 million for fiscal 2020.

The increase was primarily due to higher variable compensation of $24.1 million, higher sales commission expense of $22.4 million, increased general spending on business improvement initiatives of $10.8 million, the acquisitions of Queen City Plastics and the FRE Composites Group of $5.4 million, and higher stock compensation expense of $3.5 million partially offset by productivity efficiencies of $4.1 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 decreased $0.6 million , or 1.9% , to $32.3 million for fiscal 2020 compared to $32.9 million for fiscal 2019 .

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

Intangible asset amortization expense increased $1.4 million, or 4.3%, to $33.6 million for fiscal 2021 compared to $32.3 million for fiscal 2020.

The increase in intangible asset amortization is primarily due to the 2021 acquisition of FRE Composites Group.

Interest expense, net

Interest expense, net, decreased $7.2 million, or 17.9% to $32.9 million for fiscal 2021, compared to $40.1 million for fiscal 2020.

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

The decrease is primarily due to a lower average principal balance in fiscal 2021 from which interest expense was derived.

See Note 13, “Debt” to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Other income, net

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

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

Other income, net increased $15.4 million to income of $18.2 million for fiscal 2021, compared to income of $2.8 million for fiscal 2020.

The increase was primarily due to a $15.5 million business interruption insurance recovery from a flood at one of the Company’s manufacturing facilities.

See Note 15, “Commitments and Contingencies” and Note 6, “Other Income, net” to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Income tax expense

Income tax expense increased $142.4 million to $192.1 million, compared to $49.7 million for fiscal 2020.

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

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

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

The Company's income tax rate remained consistent at 24.6% for fiscal 2021, compared to 24.6% for fiscal 2020.

The increase in tax expense is due to higher income before taxes.

See Note 7, “Income Taxes” to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Segment results

Electrical Raceway

Fiscal year ended

($ in thousands)

September 30, 2020

September 30, 2019

($ in thousands) September 30, 2021 September 30, 2020 Change ($) Change (%)

Net sales $ 2,233,299 $ 1,270,547 $ 962,752 75.8 %

Adjusted EBITDA 873,868 292,809 581,059 198.4 %

2 unchanged sentences

Foreign exchange 1.5 %

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

Net sales decreased by $132.9 million due to lower volume primarily attributed to the impacts of COVID-19.

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

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

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

Acquisitions 6.1 %

Net sales 75.8 %

Net sales increased by $962.8 million, or 75.8%, to $2,233.3 million for fiscal 2021 compared to $1,270.5 million for fiscal 2020.

The increase in net sales is primarily attributed to increased average selling prices of $817.4 million which were mostly driven by the plastic pipe and conduit and the metal electrical conduit and fittings product categories, increased sales volume across most product categories and increased net sales of $78.8 million from the acquisitions of Queen City Plastics and FRE Composites Group.

Adjusted EBITDA

Adjusted EBITDA increased $581.1 million, or 198.4%, to $873.9 million for fiscal 2021 compared to $292.8 million for fiscal 2020.

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

Mechanical Products & Solutions

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

Safety & Infrastructure

Fiscal year ended

($ in thousands)

September 30, 2020

September 30, 2019

($ in thousands) September 30, 2021 September 30, 2020 Change ($) Change (%)

Net sales $ 698,320 $ 497,523 $ 200,797 40.4 %

Adjusted EBITDA $ 81,827 $ 67,821 $ 14,006 20.7 %

1 unchanged sentence

Average selling prices 32.3 %

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

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

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

Net sales 40.4 %

Net sales increased $200.8 million, or 40.4%, to $698.3 million for fiscal 2021 compared to $497.5 million for fiscal 2020.

The increase is primarily attributed to increased average selling prices of $160.4 million primarily driven by higher input costs of steel as well as increases in sales volumes across most product categories.

Adjusted EBITDA

Adjusted EBITDA decreased $8.9 million , or 12.7% , to $61.2 million for fiscal 2020 compared to $70.0 million for fiscal 2019 .

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

Adjusted EBITDA increased $14.0 million, or 20.7%, to $81.8 million for fiscal 2021 compared to $67.8 million for fiscal 2020.

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

Fiscal 2020 Compared to Fiscal 2019

1 unchanged sentence

Fiscal year ended

($ in thousands)

September 30, 2019

September 30, 2018

($ in thousands) September 30, 2020 September 30, 2019 Change ($) Change (%)

Net sales $ 1,765,421 $ 1,916,538 $ (151,117) (7.9) %

Cost of sales 1,274,107 1,419,338 (145,231) (10.2) %

Gross profit 491,314 497,200 (5,886) (1.2) %

Selling, general and administrative 219,496 240,660 (21,164) (8.8) %

2 unchanged sentences

Interest expense, net 40,062 50,473 (10,411) (20.6) %

Loss on extinguishment of debt 273 — 273 100.0 %

Other income, net (2,777) (11,478) 8,701 (75.8) %

1 unchanged sentence

Income tax expense 49,696 45,618 $ 4,078 8.9 %

Net income $ 152,302 $ 139,051 $ 13,251 9.5 %

Volume (7.3) %

Average selling prices (2.0) %

Foreign exchange (0.1) %

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

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

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

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

Acquisitions 1.5 %

Net sales (7.9) %

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

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

The Company experienced volume declines in most of its product categories with the exception of the plastic pipe and conduit product category within the Electrical segment and the mechanical pipe product category within the Safety & Infrastructure segment.

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

Cost of sales

Volume (7.3) %

Average input costs (3.9) %

Foreign exchange (0.3) %

Acquisitions 1.9 %

Other (0.6) %

Cost of sales (10.2) %

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

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

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

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

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

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

Selling, general and administrative

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

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

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

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

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

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

Intangible asset amortization

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

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

Intangible asset amortization expense decreased $0.6 million, or 1.9%, to $32.3 million for fiscal 2020 compared to $32.9 million for fiscal 2019.

Interest expense, net

Interest expense, net, increased $9.8 million , or 24.0% to $50.5 million for fiscal 2019 , compared to $40.7 million for fiscal 2018 .

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

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

See Note 13, “Debt” to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Other income, net

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

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

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

See Note 3, “Acquisitions” and Note 6, “Other Income, net” to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Income tax expense

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

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

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

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

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

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

See Note 7, “Income Taxes” to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Segment results

Electrical Raceway

Fiscal year ended

($ in thousands)

September 30, 2019

September 30, 2018

($ in thousands) September 30, 2020 September 30, 2019 Change ($) Change (%)

Net sales $ 1,270,547 $ 1,390,327 $ (119,780) (8.6) %

Adjusted EBITDA 292,809 285,217 7,592 2.7 %

Adjusted EBITDA Margin 23.0 % 20.5 %

Volume (9.6) %

Average selling prices (0.6) %

Foreign exchange (0.1) %

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

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

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

Acquisitions 2.0 %

Other (0.4) %

Net sales (8.6) %

Net sales decreased $119.8 million, or 8.6%, to $1,270.5 million for fiscal 2020 compared to $1,390.3 million for fiscal 2019.

Net sales decreased by $132.9 million due to lower volume primarily attributed to the impacts of COVID-19.

The Electrical segment experienced declines predominately in the armored cable and fittings and the metal electrical conduit and fittings product categories, partially offset by volume gains in the plastic pipe and conduit product category.

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

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

Adjusted EBITDA

Adjusted EBITDA increased $7.6 million, or 2.7%, to $292.8 million for fiscal 2020 compared to $285.2 million for fiscal 2019.

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

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

Mechanical Products & Solutions

Safety & Infrastructure

Fiscal year ended

($ in thousands)

September 30, 2019

September 30, 2018

($ in thousands) September 30, 2020 September 30, 2019 Change ($) Change (%)

Net sales $ 497,523 $ 527,511 $ (29,988) (5.7) %

Adjusted EBITDA $ 67,821 $ 77,407 $ (9,586) (12.4) %

Adjusted EBITDA Margin 13.6 % 14.7 %

Volume (1.4) %

Average selling prices (5.5) %

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

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

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

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

Net sales (5.7) %

Net sales decreased $30.0 million, or 5.7%, to $497.5 million for fiscal 2020 compared to $527.5 million for fiscal 2019.

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

Adjusted EBITDA

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

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

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

Adjusted EBITDA decreased $9.6 million, or 12.4%, to $67.8 million for fiscal 2020 compared to $77.4 million for fiscal 2019.

Liquidity and Capital Resources

9 unchanged sentences

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 commodities we purchase.

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

Capital expenditures have historically been necessary to expand and update the production capacity and improve the productivity of our manufacturing operations and IT initiatives aimed to facilitate the ease of doing business with Atkore.

We have purchase commitments of $247.2 million and $5.3 million for the years 2022 and 2023, which represent purchases of raw materials in the normal course of business for which all significant terms have been confirmed.

As of September 30, 2021, we had $73.0 million of income tax liability, gross unrecognized tax benefits of $0.7 million and gross interest and penalties of $0.1 million.

Of these amounts, $0.7 million is classified as a non-current liability in the consolidated balance sheet.

The projected company pension contribution for fiscal 2022 is $0.2 million.

Servicing of our existing debt instruments includes the following estimated cash outflows:

($ 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 — — — $ 371,095 $ 371,095

Interest payments (a) 27,868 55,889 55,601 98,592 237,950

Total $ 27,868 $ 55,889 $ 55,601 $ 869,687 $ 1,009,045

(a) Interest expense is estimated based on outstanding loan balances assuming principal payments are made according to the payment schedule and interest rates as of September 30, 2021 (4.25% for the Senior Notes, 2.5% for the New Senior Secured Term Loan Facility).

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 Credit Facilities.

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 payment of interest and principal on our debt.

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

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 them so that they may pay obligations and expenses, including satisfying obligations with respect to indebtedness.

2 unchanged sentences

Further, AII's subsidiaries are permitted under the terms of the Credit Facilities 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 Senior Secured 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.

3 unchanged sentences

Fiscal year ended

(in thousands)

September 30, 2020

September 30, 2019

(in thousands) September 30, 2021 September 30, 2020 Change ($) Change (%)

Cash flows provided by (used in):

4 unchanged sentences

During fiscal 2021, operating activities provided $572.9 million of cash, compared to $248.8 million during fiscal year 2020.

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

The $324.1 million increase was primarily driven by improved operating income of $559.4 million year over year was partially offset by an increase of $137.7 million in net working capital balances.

Investing activities

During fiscal 2021, we used $98.0 million of cash for investing activities compared to $27.5 million during fiscal 2020.

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

The $70.4 million increase in cash used by investing activities was primarily driven by $43.2 million in cash used for acquisitions in fiscal 2021 as well as increased capital expenditures of $30.7 million primarily driven by additional investments in productivity and digital initiatives.

Financing Activities

During fiscal 2021, we used $184.5 million for financing activities compared to $61.2 million during fiscal 2020.

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

Cash used for financing activities during fiscal 2021 was primarily driven by payments of debt of $839.1 million and repurchases of shares of $135.1 million offset by proceeds from the issuance of debt of $798.0 million.

For additional discussion of the debt transactions, see Note 13, “Debt” to the accompanying consolidated financial statements included elsewhere in this Annual Report.

The table below summarizes cash flow information derived from our statements of cash flows for the fiscal years ended September 30, 2020 and September 30, 2019.

Fiscal year ended

(in thousands)

September 30, 2019

September 30, 2018

(in thousands) September 30, 2020 September 30, 2019 Change ($) Change (%)

Cash flows provided by (used in):

4 unchanged sentences

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

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

Investing activities

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

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

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

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

Financing Activities

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

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

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

Contractual Obligations

The following table presents our contractual obligations and commitments as of September 30, 2020 .

($ in thousands)

Less than 1 Year

More than 5 Years

First Lien Term Loan Facility due December 22, 2023

Interest payments (a)

Purchase commitments (b)

(b) Represents purchases of raw materials in the normal course of business for which all significant terms have been confirmed.

(c) As of September 30, 2020, we had $1.4 million of income tax liability, gross unrecognized tax benefits of $1.4 million and gross interest and penalties of $0.2 million.

Of these amounts, $1.6 million is classified as a non-current liability in the consolidated balance sheet.

At this time, we are unable to make a reasonably reliable estimate of the timing for such payments in future years;

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

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

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

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

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

In the normal course of business, we are liable for contract completion and product performance.

In the opinion of management, such obligations will not significantly affect our financial condition, results of operations or cash flows.

Off-Balance Sheet Arrangements

Critical Accounting Policies and Use of Estimates

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

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

Critical Accounting Policies and Estimates

The preparation of financial statements requires management to make estimates and assumptions relating to the reporting of results of operations, financial condition and related disclosure of contingent assets and liabilities at the date of the financial statements.

30 unchanged sentences

See Note 7, “Income Taxes” to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Pension and Postretirement Benefits

Our pension expense and obligations are developed from actuarial valuations.

Two critical assumptions in determining pension expense and obligations are the discount rate and expected long-term return on plan assets.

We evaluate these assumptions at least annually.

Other assumptions reflect demographic factors such as retirement, mortality and turnover and are evaluated periodically and updated to reflect our actual experience.

Actual results may differ from actuarial assumptions.

The following table summarizes the impact of a 50 basis point increase of these assumptions on our operating income for fiscal 2020 :

(in millions)

Operating Income

Discount rate

Return on assets

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

Indefinite-Lived Intangible Assets and Goodwill Impairments

2 unchanged sentences

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

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

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

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

For fiscal 2021, 2020 and 2019 the Company performed a quantitative impairment assessment for goodwill.

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

5 unchanged sentences

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

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

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

79 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-K

Item 7. Management’s Discussion and Analysis