What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-11-18 compared with 2021-11-18 · 78 added, 91 removed, 388 unchanged (30% of the section changed)

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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.

In fiscal 2022, our sales and cost of sales continued to be impacted by high 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.

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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.

Additionally, central bank interest rate increases, inflation and the Russia-Ukraine conflict, are creating additional uncertainty in the global economy, generally, and in the markets in which we operate.

COVID-19, the Russia-Ukraine conflict and other factors have had and will continue to have adverse effects on global supply chains, which may impact some aspects of our business.

Furthermore, we are mindful of the effects that adverse weather, such as hurricanes, can have on our domestic supply chain.

Raw Materials.

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Foreign Currencies .

In fiscal 2021, approximately 10% of our net sales came from customers located outside the United States, most of which were foreign currency sales denominated in British pounds sterling, European euros, Canadian dollars, Australian dollars, Chinese yuan, Russian rubles and New Zealand dollars.

In fiscal 2022, approximately 9% of our net sales came from customers located outside the United States, most of which were foreign currency sales denominated in British pounds sterling, European euros, Canadian dollars, Australian dollars, and New Zealand dollars.

The functional currency of our operations outside the United States is generally the local currency.

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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.

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.

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, 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, impairment 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.

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Net income $ 913,434 $ 587,857 $ 325,577 55.4 %

Volume (3.2) %

Average selling prices 34.0 %

Foreign exchange 1.0 %

Acquisitions 3.3 %

Other (0.4) %

Net sales 33.7 %

Net sales for fiscal 2022 increased $985.9 million to $3,913.9 million, an increase of 33.7%, compared to $2,928.0 million for fiscal 2021.

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.

The increase in net sales is primarily attributed to increased average selling prices of $996.2 million which were mostly driven by the plastic pipe and conduit category within the Electrical segment and increased net sales of $96.4 million from companies acquired during fiscal 2021 and 2022.

These increases are offset by decreased sales volume of $94.8 million across varying product categories within both the Electrical and the Safety & Infrastructure segments.

Pricing for PVC products, as well as other products, has begun to decline from historic highs.

Cost of sales

Volume (2.9) %

Average input costs 22.5 %

Foreign exchange 1.2 %

Acquisitions 3.9 %

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Cost of sales increased $471.5 million, or 26.2%, to $2,273.9 million for fiscal 2022 compared to $1,802.4 million for fiscal 2021.

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.

The increase was primarily due to higher input costs of steel, copper and PVC resin of $405.5 million and recent acquisitions during fiscal 2021 and 2022 of $70.4 million partially offset by lower sales volume of $52.8 million across varying product categories within both the Electrical and the Safety & Infrastructure segments.

Selling, general and administrative

Selling, general and administrative expenses increased $77.0 million, or 26.3%, to $370.0 million for fiscal 2022 compared to $293.0 million for fiscal 2021.

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.

The increase was primarily due to higher sales commission expense of $21.1 million, increased general spending on business improvement initiatives of $29.8 million, higher variable compensation of $6.5 million, transaction costs of $2.6 million, and recent acquisitions in fiscal 2021 and 2022 of $7.4 million.

The remaining increase of $9.6 million is spread across a variety of other spend categories.

Intangible asset amortization

Intangible asset amortization expense increased $2.5 million, or 7.5%, to $36.2 million for fiscal 2022 compared to $33.6 million for fiscal 2021.

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

The increase in intangible asset amortization is primarily driven by the acquisition of definite-lived intangible assets in fiscal 2022.

Interest expense, net

Interest expense, net, decreased $2.2 million, or 6.8% to $30.7 million for fiscal 2022, compared to $32.9 million for fiscal 2021.

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.

The decrease is primarily due to debt refinancing and principal prepayments in the second half of 2021 resulting in a lower average principal balance in fiscal 2022 from which interest expense was derived.

Other income, net

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.

Other income, net decreased $17.7 million to income of $0.5 million for fiscal 2022, compared to income of $18.2 million for fiscal 2021.

The decrease was primarily due to a $15.5 million business interruption insurance recovery from a flood at one of the Company’s manufacturing facilities recognized in fiscal 2021.

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

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Income tax expense increased $98.0 million to $290.2 million, compared to $192.1 million for fiscal 2021.

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.

The Company's income tax rate decreased to 24.1% for fiscal 2022, compared to 24.6% for fiscal 2021.

The increase in income tax expense is due to higher income before taxes, while the decrease in effective tax rate was primarily due to a decrease in state income taxes.

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

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Adjusted EBITDA Margin 42.3 % 39.1 %

Volume (3.1) %

Average selling prices 35.2 %

Foreign exchange 1.5 %

Acquisitions 3.5 %

Other (0.7) %

Net sales 34.9 %

Net sales increased by $780.5 million, or 34.9%, to $3,013.8 million for fiscal 2022 compared to $2,233.3 million for fiscal 2021.

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.

The increase in net sales is primarily attributed to increased average selling prices of $788.8 million which were mostly driven by the plastic pipe and conduit category and increased net sales of $78.0 million from companies acquired during fiscal 2021 and 2022.

These increases were partially offset by decreased sales volume of $67.4 million.

Pricing for PVC products, as well as other products, has begun to decline from historic highs.

Adjusted EBITDA

Adjusted EBITDA increased $399.5 million, or 45.7%, to $1,273.4 million for fiscal 2022 compared to $873.9 million for fiscal 2021.

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

The increase in Adjusted EBITDA was largely due to the increase in average selling prices and acquisitions offset by volume declines as discussed above.

Safety & Infrastructure

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Adjusted EBITDA Margin 15.4 % 11.7 %

Volume (4.1) %

Average selling prices 29.9 %

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Net sales increased $202.3 million, or 29.0%, to $900.6 million for fiscal 2022 compared to $698.3 million for fiscal 2021.

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.

The increase is primarily attributed to increased average selling prices of $207.4 million

and increased net sales of $18.4 million from companies acquired during fiscal 2022, partially offset by lower volumes of $27.3 million across various steel product categories.

Adjusted EBITDA

Adjusted EBITDA increased $56.6 million, or 69.1%, to $138.4 million for fiscal 2022 compared to $81.8 million for fiscal 2021.

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

The Adjusted EBITDA increase was primarily due to the increase in average selling prices and acquisitions, offset by volume declines as discussed above.

Fiscal 2021 Compared to Fiscal 2020

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

Volume (7.3) %

Average selling prices 55.4 %

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Net sales 65.9 %

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.

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.

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.

Cost of sales

Volume (7.3) %

Average input costs 30.4 %

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Acquisitions 2.6 %

Other (0.6) %

Cost of sales 41.5 %

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 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 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 majority of the remaining increase was primarily driven by the tight controls on expenditures put into place in fiscal 2020 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 6, “Other Income, net” to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Other income, net increased $15.4 million to $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 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.

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.

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Adjusted EBITDA Margin 39.1 % 23.0 %

Volume (9.6) %

Average selling prices 64.4 %

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Acquisitions 6.1 %

Other (0.4) %

Net sales 75.8 %

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.

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.

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

Safety & Infrastructure

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Adjusted EBITDA Margin 11.7 % 13.6 %

Volume (1.4) %

Average selling prices 32.3 %

Net sales 40.4 %

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.

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

Adjusted EBITDA

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

Liquidity and Capital Resources

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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.

Our cash and cash equivalents increased $291.8 million from September 30, 2020, primarily due to cash provided from operating activities, partially offset by debt repayments, capital expenditures and share repurchases.

Our cash and cash equivalents decreased $187.5 million from September 30, 2021, primarily due to acquisitions, capital expenditures and share repurchases and partially offset by cash provided from operating activities.

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

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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.

During fiscal 2022, we made an investment of $24.4 million in new mills for our Hobart, Indiana facility.

Additionally, we purchased new land and buildings for $34.2 million in Dallas, Texas to expand our operations.

We have purchase commitments of $175.3 million and $4.7 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.

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Total $ 45,198 $ 90,002 $ 80,013 $ 852,770 $ 1,067,983

(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).

(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, 2022 (4.25% for the Senior Notes, between 6.0% and 7.9% 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.

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During fiscal 2022, operating activities provided $786.8 million of cash, compared to $572.9 million during fiscal year 2021.

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.

The $213.9 million increase was primarily driven by improved operating income of $434.9 million year over year and was partially offset by increased tax impacts of $224.8 million, with cash used in working capital relatively flat year over year.

Investing activities

During fiscal 2022, we used $442.8 million of cash for investing activities compared to $98.0 million during fiscal 2021.

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.

The $344.8 million increase in cash used by investing activities was primarily driven by $264.6 million in increased cash used for acquisitions in fiscal 2022 over the prior year as well as increased capital expenditures of $71.3 million, which includes the purchase of facilities in Dallas, Texas.

Financing Activities

During fiscal 2022, we used $524.2 million for financing activities compared to $184.5 million during fiscal 2021.

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.

Cash used for financing activities during fiscal 2022 was primarily driven by repurchases of shares of $500.2 million as compared to $135.1 million of share repurchases in fiscal 2021.

The table below summarizes cash flow information derived from our statements of cash flows for the fiscal years ended September 30, 2021 and September 30, 2020.

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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.

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 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 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.

Critical Accounting Policies and Estimates

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

Critical Accounting 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.

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

Business Combinations

We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed, including amounts attributable to noncontrolling interests, are recorded at their respective fair values at the date of acquisition.

The determination of fair values of identifiable assets and liabilities requires estimates and the use of valuation techniques when market value is not readily available.

For intangible assets acquired in a business combination, we typically use the income method.

Significant estimates in valuing certain intangible assets include, but are not limited to, the amount and timing of future cash flows, growth rates, discount rates and useful lives.

The excess of the purchase price over fair values of identifiable assets and liabilities is recorded as goodwill.

Indefinite-Lived Intangible Assets and Goodwill Impairments

Goodwill and other intangible assets primarily result from business acquisitions.

Goodwill and other intangible assets primarily result from business combinations.

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

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

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

Fair value under the comparable transaction method is determined based on exchange

prices in actual transactions and on asking prices for controlling interests in public or private companies currently offered for sale by applying market multiples for comparable public companies to the unit’s financial results.

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

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Special Note Regarding Forward-Looking Statements and Information

This Annual Report on Form 10-K 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.

This Annual Report on Form 10-K 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.

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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