Atkore Inc. 10-Q

Item 1. Financial Statements ATKORE INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three months ended (in thousands, except per share data) Note December 29, 2023 December 30, 2022 Net sales $ 798,481 $ 833,821 Cost of sales 507,941 499,468 Gross profit 290,540 334,353 Selling, general and administrative 100,615 89,977 Intangible asset amortization 11 14,467 12,796 Operating income 175,458 231,580 Interest expense, net 7,793 9,488 Other expense, net 5 12 41 Income before income taxes 167,653 222,051 Income tax expense 6 29,272 48,559 Net income $ 138,381 $ 173,492 Net income per share Basic 7 $ 3.66 $ 4.26 Diluted 7 $ 3.61 $ 4.20 See Notes to unaudited condensed consolidated financial statements. 2 ATKORE INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three months ended (in thousands) Note December 29, 2023 December 30, 2022 Net income $ 138,381 $ 173,492 Other comprehensive income, net of tax: Change in foreign currency translation adjustment 9,727 11,262 Change in unrecognized loss related to pension benefit plans 4 53 62 Total other comprehensive income 8 9,780 11,324 Comprehensive income $ 148,161 $ 184,816 See Notes to unaudited condensed consolidated financial statements. 3 ATKORE INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except share and per share data) Note December 29, 2023 September 30, 2023 Assets Current Assets: Cash and cash equivalents $ 380,922 $ 388,114 Accounts receivable, less allowance for current and expected credit losses of $ 6,265 and $ 5,179 , respectively 517,634 559,854 Inventories, net 9 493,637 493,852 Prepaid expenses and other current assets 105,951 96,670 Total current assets 1,498,144 1,538,490 Property, plant and equipment, net 10 586,983 559,041 Intangible assets, net 11 381,205 394,372 Goodwill 11 312,960 311,106 Right-of-use assets, net 144,828 120,747 Deferred tax assets 6 569 546 Other long-term assets 10,703 10,707 Total Assets $ 2,935,392 $ 2,935,009 Liabilities and Equity Current Liabilities: Accounts payable 248,261 292,734 Income tax payable 4,625 6,322 Accrued compensation and employee benefits 30,516 45,576 Customer liabilities 131,121 121,576 Lease obligations 17,883 16,230 Other current liabilities 72,951 82,166 Total current liabilities 505,357 564,604 Long-term debt 12 763,225 762,687 Long-term lease obligations 129,050 105,517 Deferred tax liabilities 6 21,284 22,346 Other long-term liabilities 14,131 11,736 Total Liabilities 1,433,047 1,466,890 Equity: Common stock, $ 0.01 par value, 1,000,000,000 shares authorized, 36,905,528 and 37,317,893 shares issued and outstanding, respectively 370 374 Additional paid-in capital 490,238 506,783 Retained earnings 1,035,897 994,902 Accumulated other comprehensive loss 8 ( 24,160 ) ( 33,940 ) Total Equity 1,502,345 1,468,119 Total Liabilities and Equity $ 2,935,392 $ 2,935,009 See Notes to unaudited condensed consolidated financial statements. 4 ATKORE INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three months ended (in thousands) Note December 29, 2023 December 30, 2022 Operating activities: Net income $ 138,381 $ 173,492 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 29,020 25,967 Deferred income taxes 6 ( 1,668 ) 3,275 Stock-based compensation 4,757 5,270 Amortization of right-of-use assets 6,140 3,538 Other non-cash adjustments to net income 2,074 1,410 Changes in operating assets and liabilities, net of effects from acquisitions Accounts receivable 43,837 26,841 Inventories 2,015 11,565 Prepaid expenses and other current assets ( 9,140 ) ( 6,930 ) Accounts payable ( 42,014 ) ( 48,826 ) Accrued and other liabilities ( 15,946 ) ( 36,070 ) Income taxes ( 260 ) 38,787 Other, net 910 532 Net cash provided by operating activities 158,106 198,851 Investing activities: Capital expenditures ( 44,331 ) ( 35,006 ) Acquisition of businesses, net of cash acquired 3 ( 5,973 ) ( 82,181 ) Net cash used in investing activities ( 50,304 ) ( 117,187 ) Financing activities: Issuance of common stock, net of shares withheld for tax ( 21,299 ) ( 14,775 ) Repurchase of common stock ( 96,428 ) ( 150,056 ) Finance lease payments ( 427 ) — Net cash used for financing activities ( 118,154 ) ( 164,831 ) Effects of foreign exchange rate changes on cash and cash equivalents 3,160 2,243 Decrease in cash and cash equivalents ( 7,192 ) ( 80,924 ) Cash and cash equivalents at beginning of period 388,114 388,751 Cash and cash equivalents at end of period $ 380,922 $ 307,827 Supplementary Cash Flow information Capital expenditures, not yet paid $ 5,030 $ 7,227 Operating lease right-of-use assets obtained in exchange for lease liabilities $ 24,752 $ 1,181 Acquisitions of businesses, not yet paid $ — $ 14,125 See Notes to unaudited condensed consolidated financial statements. 5 ATKORE INC. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited) Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Equity (in thousands) Shares Amount Amount Balance as of September 30, 2023 37,317 $ 375 $ — $ 506,783 $ 994,901 $ ( 33,940 ) $ 1,468,119 Net income — — — — 138,381 — 138,381 Other comprehensive Income — — — — — 9,780 9,780 Stock-based compensation — — — 4,757 — — 4,757 Issuance of common stock, net of shares withheld for tax 309 3 — ( 21,302 ) — — ( 21,299 ) Repurchase of common stock ( 721 ) ( 7 ) — — ( 97,385 ) — ( 97,392 ) Balance as of December 29, 2023 36,905 $ 370 $ — $ 490,238 $ 1,035,897 $ ( 24,160 ) $ 1,502,345 Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Equity (in thousands) Shares Amount Amount Balance as of September 30, 2022 41,351 $ 415 $ ( 2,580 ) $ 500,117 $ 801,981 $ ( 50,146 ) $ 1,249,787 Net income — — — — 173,492 — 173,492 Other comprehensive income — — — — — 11,324 11,324 Stock-based compensation — — — 5,270 — — 5,270 Issuance of common stock, net of shares withheld for tax 200 1 — ( 14,776 ) — — ( 14,775 ) Repurchase of common stock ( 1,683 ) ( 16 ) — — ( 150,040 ) — ( 150,056 ) Balance as of December 30, 2022 39,868 $ 400 $ ( 2,580 ) $ 490,611 $ 825,433 $ ( 38,822 ) $ 1,275,042 See Notes to unaudited condensed consolidated financial statements. 6 ATKORE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (dollars and shares in thousands, except per share data) 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Organization and Ownership Structure — Atkore Inc. (the “ Company ” , “ Atkore ” or “ AI ” ) is a leading manufacturer of Electrical products primarily for the non-residential construction and renovation markets and Safety & Infrastructure solutions for the construction and industrial markets. Atkore was incorporated in the State of Delaware on November 4, 2010 under the name Atkore International Group, Inc. As of December 20, 2022, Atkore was the sole stockholder of Atkore International Holdings Inc. ( “ AIH ” ), which in turn was the sole stockholder of Atkore International Inc. ("AII"). On December 28, 2022, AIH merged into AII, with AII being the surviving entity. Accordingly, Atkore is now the sole stockholder of AII. 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 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. Basis of Presentation — The accompanying unaudited condensed consolidated financial statements of the Company included herein have been prepared in accordance with accounting principles generally accepted in the United States of America ( “ GAAP ” ). These unaudited condensed consolidated financial statements have been prepared in accordance with the Company ’ s accounting policies and on the same basis as those financial statements included in the Company ’ s latest Annual Report on Form 10-K for the year ended September 30, 2023, filed with the U.S. Securities and Exchange Commission (the “ SEC ” ) on November 17, 2023, and should be read in conjunction with those consolidated financial statements and the notes thereto. Certain information and disclosures normally included in the Company ’ s annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. The unaudited condensed consolidated financial statements include the assets and liabilities used in operating the Company ’ s business. All intercompany balances and transactions have been eliminated in consolidation. The results of companies acquired or disposed of are included in the unaudited condensed consolidated financial statements from the effective date of acquisition or up to the date of disposal. These statements include all adjustments (consisting of normal recurring adjustments) that the Company considered necessary to present a fair statement of its results of operations, financial position and cash flows. The results reported in these unaudited condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. Fiscal Periods — The Company has a fiscal year that ends on September 30. The Company ’ s fiscal quarters typically end on the last Friday in December, March and June as it follows a 4-5-4 calendar. Use of Estimates — The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclose contingent assets and liabilities at the date of the condensed consolidated financial statements and report the associated amounts of revenues and expenses. Actual results could differ materially from these estimates. 7 Recent Accounting Pronouncements A summary of recently adopted accounting guidance is as follows. Adoption dates are on the first day of the fiscal year indicated below, unless otherwise specified. ASU Description of ASU Impact to Atkore Adoption Date 2023-07 Segment Reporting (Topic 280); Improvements to Reportable Segment Disclosures The ASU requires companies to provide additional segment disclosures including disclosing title and position of the chief operating decision maker (“CODM”), disclosure of significant segment expenses provided to and reviewed by the CODM, and that public entities provide all annual disclosures about a reportable segment’s profit or loss and assets required by Topic 280 in interim periods. The Company will adopt the standard in the first quarter of fiscal 2025 and include the disclosures required by the ASU within the Segment Footnote. 2025 2. REVENUE FROM CONTRACTS WITH CUSTOMERS The Company’s revenue arrangements primarily consist of a single performance obligation to transfer promised goods which is satisfied at a point in time when title, risks and rewards of ownership, and subsequently control have transferred to the customer. This generally occurs when the product is shipped to the customer, with an immaterial amount of transactions in which control transfers upon delivery. The Company primarily offers assurance-type standard warranties that do not represent separate performance obligations. Under the Inflation Reduction Act of 2022 (“IRA”), the Company is eligible for tax credits related to the manufacturing and selling of components used in the solar energy industry. These tax credits are transferable under the IRA when they meet certain criteria. When credits do not meet the transferability criteria, the benefit is recognized within income tax expense in accordance with ASC 740, “Income Taxes.” Beginning in fiscal 2024, the Company has concluded that the credits generated are transferable. As such, the benefit of the solar tax credits is recognized as a reduction of cost of sales. The Company has contractual arrangements with certain customers to transfer a portion of the tax credits or to otherwise provide a rebate based on an agreed-upon value of the tax credits generated. Pursuant to such contractual arrangements, if the tax credits will be transferred to the customer, the Company identifies two separate performance obligations: (1) transfer the promised goods; and (2) transfer of the defined portion of the tax credits earned. The Company allocates the total value of these transactions between the two performance obligations. As a result of this allocation, the Company recognizes a reduction to revenue, similar to a rebate. For arrangements with no transfer of tax credits there is only a single performance obligation to transfer the promised goods and a rebate is granted based on the agreed-upon value of the tax credits generated. The solar tax credit receivable is recorded in Prepaid Expenses and Other Current Assets and the liability to transfer the defined portion of the tax credits or the economic value is recorded in Customer Liabilities. For the three months ended December 29, 2023, the Company has recognized a reduction of revenue of $ 14,853 for the economic value of tax credits to be transferred and a benefit to cost of sales of $ 19,127 . As of December 29, 2023, the Company has a liability of $ 29,310 for credits to be transferred or the value thereof and a solar tax credit receivable of $ 64,595 . As of December 29, 2023, all activity related to the solar tax credits is within the Safety & Infrastructure segment. The Company has certain arrangements that require it to estimate at the time of sale the amounts of variable consideration that should not be recorded as revenue as certain amounts are not expected to be collected from customers, as well as an estimate of the value of products to be returned. 8 The Company principally relies on historical experience, specific customer agreements, and anticipated future trends to estimate these amounts at the time of sale and to reduce the transaction price. These arrangements include sales discounts and allowances, volume rebates, and returned goods. The Company records its obligations related to these items within the Customer Liabilities line on the balance sheet. The Company records amounts billed to customers for reimbursement of shipping and handling costs within revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of goods sold. Sales taxes and other usage-based taxes are excluded from revenue. The Company does not evaluate whether the selling price includes a financing interest component for contracts that are less than a year. The Company also expenses costs incurred to obtain a contract, primarily sales commissions, as all obligations will be settled in less than one year . The Company typically receives payment 30 to 60 days from the point it has satisfied the related performance obligation. See Note 16, “Segment Information” for revenue disaggregated by geography and product categories. 3. ACQUISITIONS From time to time, the Company enters into strategic acquisitions in an effort to better service existing customers and to obtain new customers. During the three months ended December 29, 2023, the Company paid out $ 5,973 of accrued purchase price related to the fiscal 2022 acquisition of Cascade Poly Pipe & Conduit and Northwest Polymers. No other acquisition activity occurred during the three months ended December 29, 2023. Fiscal 2023 On November 7, 2022, Atkore HDPE, LLC, a wholly-owned subsidiary of the Company, acquired the assets of Elite Polymer Solutions (“Elite”), for a purchase price of $ 90,230 , of which $ 75,981 was paid at closing and an additional purchase price payable of $ 14,000 was accrued, of which $ 500 was paid in fiscal 2023 subsequent to the acquisition date. Elite is a manufacturer of high density polyethylene (HDPE) conduit, primarily serving the telecommunications, utility, and transportation markets. As a result of the acquisition, the Company preliminarily recognized $ 18,669 of tax deductible goodwill, $ 68,480 of identifiable intangible assets, of which $ 68,200 relates to customer relationships with an estimated useful life of 8 years, and $ 3,082 of working capital and other net tangible assets. The Company finalized the purchase price allocation of Elite in the fourth quarter of fiscal 2023. The Elite acquisition in fiscal 2023 was funded using cash-on-hand. The Company incurred approximately $ 968 in acquisition-related expenses for fiscal 2023, which was recorded as a component of selling, general and administrative expenses. Net sales and net income of the above acquisition are included in the condensed consolidated financial statement of operations for the post-acquisition period. Due to the immaterial nature of this acquisition, the Company did not include the pro forma results of operations for this acquisition for the current period or the previous interim period. 9 4. POSTRETIREMENT BENEFITS The Company provides pension benefits through a number of noncontributory and contributory defined benefit retirement plans covering eligible U.S. employees. As of September 30, 2017, all defined pension benefit plans were frozen, whereby participants no longer accrue credited service. The net periodic benefit credit was as follows: Three months ended (in thousands) Note December 29, 2023 December 30, 2022 Interest cost $ 1,316 $ 1,294 Expected return on plan assets ( 841 ) ( 1,257 ) Amortization of actuarial loss 67 167 Net periodic benefit cost 5 $ 542 $ 204 5. OTHER EXPENSE, NET Other expense, net consisted of the following: Three months ended (in thousands) December 29, 2023 December 30, 2022 Undesignated foreign currency derivative instruments $ — $ ( 14 ) Loss on assets held for sale ( 64 ) — Foreign exchange loss on intercompany loans ( 198 ) ( 149 ) Pension-related benefits 274 204 Other expense, net $ 12 $ 41 In fiscal 2023, the Company initiated plans to exit operations in Russia and expects to sell the related business at a loss. Accordingly, the Company recognized an impairment of the related assets in fiscal 2023 and continues to recognize any incremental losses on those assets. 6. INCOME TAXES For the three months ended December 29, 2023 and December 30, 2022, the Company’s effective tax rate attributable to income before income taxes was 17.5 % and 21.9 %, respectively. For the three months ended December 29, 2023 and December 30, 2022, the Company’s income tax expense was $ 29,272 and $ 48,559 respectively. The decrease in the current period effective tax rate was driven by an increase in the excess tax benefit associated with stock compensation. A valuation allowance has been recorded against certain net operating losses in certain foreign jurisdictions. A valuation allowance is recorded when it is determined to be more likely than not that these assets will not be fully realized in the foreseeable future. The realization of deferred tax assets is dependent upon whether the Company can generate future taxable income in the appropriate character and jurisdiction to utilize the assets. The amount of the deferred tax assets considered realizable is subject to adjustment in future periods. 10 7. EARNINGS PER SHARE The Company calculates basic and diluted earnings per common share using the two-class method. Under the two-class method, net earnings are allocated to each class of common stock and participating securities as if all of the net earnings for the period had been distributed. The Company ’ s participating securities consist of share-based payment awards that contain a non-forfeitable right to receive dividends and therefore are considered to participate in undistributed earnings with common stockholders. Basic earnings per common share excludes dilution and is calculated by dividing the net earnings allocated to common stock by the weighted-average number of common stock outstanding for the period. Diluted earnings per common share is calculated by dividing net earnings allocated to common stock by the weighted-average number of shares outstanding for the period, as adjusted for the potential dilutive effect of non-participating share-based awards. The following table sets forth the computation of basic and diluted earnings per share: Three months ended (in thousands, except per share data) December 29, 2023 December 30, 2022 Numerator: Net income $ 138,381 $ 173,492 Less: Undistributed earnings allocated to participating securities 2,072 2,807 Net income available to common shareholders $ 136,309 $ 170,685 Denominator: Basic weighted average common shares outstanding 37,242 40,085 Effect of dilutive securities: Non-participating employee stock options (1) 503 528 Diluted weighted average common shares outstanding 37,745 40,613 Basic earnings per share $ 3.66 $ 4.26 Diluted earnings per share $ 3.61 $ 4.20 (1) Stock options to purchase shares of common stock that would have been anti-dilutive are not included in the calculation. There were no anti-dilutive options outstanding during the three months ended December 29, 2023 and December 30, 2022. 11 8. ACCUMULATED OTHER COMPREHENSIVE LOSS The following table presents the changes in accumulated other comprehensive loss by component for the three months ended December 29, 2023 and December 30, 2022. (in thousands) Defined Benefit Pension Items Currency Translation Adjustments Total Balance as of September 30, 2023 $ ( 10,801 ) $ ( 23,139 ) $ ( 33,940 ) Other comprehensive income before reclassifications — 9,727 9,727 Amounts reclassified from accumulated other comprehensive income, net of tax 53 — 53 Net current period other comprehensive income 53 9,727 9,780 Balance as of December 29, 2023 $ ( 10,748 ) $ ( 13,412 ) $ ( 24,160 ) (in thousands) Defined Benefit Pension Items Currency Translation Adjustments Total Balance as of September 30, 2022 $ ( 16,795 ) $ ( 33,351 ) $ ( 50,146 ) Other comprehensive income before reclassifications — 11,262 11,262 Amounts reclassified from accumulated other comprehensive income, net of tax 62 — 62 Net current period other comprehensive income 62 11,262 11,324 Balance as of December 30, 2022 $ ( 16,733 ) $ ( 22,089 ) $ ( 38,822 ) 9. 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 86 % and 82 % of the Company ’ s inventories were valued at the lower of LIFO cost or market at December 29, 2023 and September 30, 2023, respectively. Interim LIFO determinations, including those at December 29, 2023, are based on management ’ s estimates of future inventory levels and costs for the remainder of the current fiscal year. (in thousands) December 29, 2023 September 30, 2023 Purchased materials and manufactured parts, net $ 194,417 $ 231,518 Work in process, net 61,993 60,524 Finished goods, net 237,227 201,810 Inventories, net $ 493,637 $ 493,852 Total inventories would be $ 4,574 higher and $ 29,826 higher than reported as of December 29, 2023 and September 30, 2023, respectively, if the first-in, first-out method was used for all inventories. As of December 29, 2023, and September 30, 2023, the excess and obsolete inventory reserve was $ 26,330 and $ 25,585 , respectively. 12 10. PROPERTY, PLANT AND EQUIPMENT As of December 29, 2023, and September 30, 2023, property, plant and equipment and accumulated depreciation were as follows: (in thousands) December 29, 2023 September 30, 2023 Land $ 29,357 $ 29,082 Buildings and related improvements 184,606 182,760 Machinery and equipment 524,607 513,563 Leasehold improvements 16,901 15,910 Software 46,807 47,072 Construction in progress 235,549 206,311 Property, plant and equipment, at cost 1,037,827 994,698 Accumulated depreciation ( 450,844 ) ( 435,657 ) Property, plant and equipment, net $ 586,983 $ 559,041 Depreciation expense for the three months ended December 29, 2023 and December 30, 2022 totaled $ 14,553 and $ 13,171 respectively. 11. GOODWILL AND INTANGIBLE ASSETS Changes in the carrying amount of goodwill are as follows: (in thousands) Electrical Safety & Infrastructure Total Balance as of September 30, 2023 $ 258,427 $ 52,679 $ 311,106 Exchange rate effects 1,667 187 1,854 Balance as of December 29, 2023 $ 260,094 $ 52,866 $ 312,960 Goodwill balances as of December 29, 2023 included $ 5,645 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. 13 The following table provides the gross carrying value, accumulated amortization and net carrying value for each major class of intangible asset: December 29, 2023 September 30, 2023 (in thousands) Weighted Average Useful Life (Years) Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value Amortizable intangible assets: Customer relationships 11 $ 596,522 $ ( 330,703 ) $ 265,819 $ 596,396 $ ( 318,058 ) $ 278,338 Other 8 46,259 ( 23,684 ) 22,575 43,633 ( 20,406 ) 23,227 Total 642,781 ( 354,387 ) 288,394 640,029 ( 338,464 ) 301,565 Indefinite-lived intangible assets: Trade names 92,811 — 92,811 92,806 — 92,806 Total $ 735,592 $ ( 354,387 ) $ 381,205 $ 732,835 $ ( 338,464 ) $ 394,372 Other intangible assets consist of definite-lived trade names, technology, non-compete agreements and backlogs. Included in the table above are the effects of changes in exchange rates which were not material for the three months ended December 29, 2023. Amortization expense for the three months ended December 29, 2023 and December 30, 2022 was $ 14,467 and $ 12,796 , respectively. Expected amortization expense for intangible assets for the remainder of fiscal 2024 and over the next five years and thereafter is as follows: (in thousands) Remaining 2024 $ 41,242 2025 43,326 2026 40,726 2027 39,610 2028 29,445 2029 28,293 Thereafter 65,752 Actual amounts of amortization may differ from estimated amounts due to additional intangible asset acquisitions, impairment of intangible assets and other events. 12. DEBT Debt as of December 29, 2023 and September 30, 2023 was as follows: (in thousands) December 29, 2023 September 30, 2023 Senior Secured Term Loan Facility due May 26, 2028 $ 371,738 $ 371,667 Senior Notes due June 2031 400,000 400,000 Deferred financing costs ( 8,513 ) ( 8,980 ) Long-term debt $ 763,225 $ 762,687 14 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 $ 322,406 as of December 29, 2023 and $ 322,406 as of September 30, 2023. The ABL Credit Facility will mature on the earlier of five years from May 26, 2021 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. The ABL Credit Facility uses a forward-looking interest rate based on the Secured Overnight Financing Rate (“SOFR”) consisting of an applicable margin ranging from 1.25 % to 1.75 % and a credit spread adjustment of 0.10 %. The New Senior Secured Term Loan Facility will mature on May 26, 2028 and borrowings thereunder bearing interest at the rate of forward-looking interest rate based on the “SOFR”, consisting of an applicable margin of 2.00 % and a credit spread adjustment of (i) 0.11448 % for a one-month interest period, (ii) 0.26161 % for a three-month interest period and (iii) 0.42826 % for a six-month interest period. Senior Notes - On May 26, 2021, the Company completed the issuance and sale of the $ 400.0 million aggregate principal amount of 4.25 % Senior Notes due 2031 (the “Senior Notes”) in a 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. 13. FAIR VALUE MEASUREMENTS Certain assets and liabilities are required to be recorded at fair value on a recurring basis. The Company periodically uses forward currency contracts to hedge the effects of foreign exchange relating to intercompany balances denominated in a foreign currency. These derivative instruments are not formally designated as a hedge by the Company. 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. The fair value gains and losses are included in other expense, net within the condensed consolidated statements of operations. See Note 5, “Other Expense, net” for further detail. Cash flows associated with derivative financial instruments are recognized in the operating section of the condensed consolidated statements of cash flows. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The Company had no active forward currency contracts or other derivative instruments as of December 29, 2023 or September 30, 2023. The following table presents the Company ’ s assets and liabilities measured at fair value: December 29, 2023 September 30, 2023 (in thousands) Level 1 Level 2 Level 1 Level 2 Assets Cash equivalents $ 298,683 $ — $ 321,282 $ — The Company ’ s remaining financial instruments consist primarily of cash, accounts receivable and accounts payable whose carrying value approximate their fair value due to their short-term nature. 15 The estimated fair value of financial instruments not carried at fair value in the condensed consolidated balance sheets were as follows: December 29, 2023 September 30, 2023 (in thousands) Carrying Value Fair Value Carrying Value Fair Value Senior Secured Term Loan Facility due May 26, 2028 $ 373,000 $ 373,116 $ 373,000 $ 372,068 Senior Notes due June 2031 400,000 360,272 400,000 334,368 Total Debt $ 773,000 $ 733,388 $ 773,000 $ 706,436 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. 14. COMMITMENTS AND CONTINGENCIES The Company has obligations related to commitments to purchase certain goods. As of December 29, 2023, such obligations were $ 281,447 for the rest of fiscal year 2024 and $ 13,895 for fiscal year 2025 and beyond. These amounts represent open purchase orders for materials used in production. Insurable Liabilities — The Company maintains policies with various insurance companies for its workers’ compensation, product, property, general, auto, and executive liability risks. The insurance policies that the Company maintains have various retention levels and excess coverage limits. The establishment and update of liabilities for unpaid claims, including claims incurred but not reported, is based on management's estimate as a result of the assessment by the Company's claim administrator of each claim and an independent actuarial valuation of the nature and severity of total claims. The Company utilizes a third-party claims administrator to pay claims, track and evaluate actual claims experience, and ensure consistency in the data used in the actuarial valuation. Legal Contingencies — Historically, a number of 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.” Tyco International Ltd. (“Tyco”), now Johnson Controls, Inc. (“JCI”), has a contractual obligation to indemnify the Company in respect of all remaining and future claims of incompatibility between the Company's antimicrobial coated steel sprinkler pipe and CPVC pipe used in the same sprinkler system. When Special Products Claims arise, JCI has defended and indemnified the Company as required. As of the date of this filing, no Special Product Claims are currently pending against the Company as JCI has resolved all claims at their sole cost and expense. Accordingly, at this time, the Company does not expect the outcome of the Special Products Claims proceedings, either individually or in the aggregate, to have a material adverse effect on its business, financial condition, results of operations or cash flows, and the Company believes that its reserves are adequate for all remaining contingencies for Special Products Claims and other product liabilities. 16 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. These matters generally relate to disputes arising out of the use or installation of the Company ’ s products, product liability litigation, contract disputes, patent infringement accusations, employment matters, personal injury claims and similar matters. 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. 15. GUARANTEES The Company had outstanding letters of credit totaling $ 2,594 supporting workers ’ compensation and general liability insurance policies as of December 29, 2023. The Company also had surety bonds primarily related to performance guarantees on supply agreements and construction contracts, and payment of duties and taxes totaling $ 37,722 as of December 29, 2023. 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. The Company does not have the ability to estimate the potential liability from such indemnities because they relate to unknown conditions. However, the Company has no reason to believe that these uncertainties would have a material adverse effect on the Company ’ s business, financial condition, results of operations or cash flows. In the normal course of business, the Company is liable for product performance and contract completion. In the opinion of management, such obligations will not have a material adverse effect on the Company ’ s business, financial condition, results of operations or cash flows. 16. SEGMENT INFORMATION 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 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. 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, stock-based compensation, loss on extinguishment of debt, certain legal matters, and other items, such as inventory reserves and adjustments, (gain) 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, loss on assets held for sale, restructuring costs and transaction costs. Intersegment transactions primarily consist of product sales at designated transfer prices on an arm ’ s-length basis. Gross profit earned and reported within the segment is eliminated in the Company ’ s consolidated results. Certain manufacturing and distribution expenses are allocated between the segments on a pro rata basis due to the shared nature of activities. Recorded amounts represent a proportional amount of the quantity of product produced for each segment. Certain assets, such as machinery and equipment and facilities, are not allocated to each segment despite serving both 17 segments. These shared assets are reported within the Safety & Infrastructure segment. The Company allocates certain corporate operating expenses that directly benefit our operating segments, such as insurance and information technology, on a basis that reasonably approximates an estimate of the use of these services. Three months ended December 29, 2023 December 30, 2022 (in thousands) External Net Sales Intersegment Sales Adjusted EBITDA External Net Sales Intersegment Sales Adjusted EBITDA Electrical $ 593,660 $ 1 $ 204,360 $ 638,705 $ — $ 243,836 Safety & Infrastructure 204,821 305 19,512 195,116 143 33,404 Eliminations — ( 306 ) — ( 143 ) Consolidated operations $ 798,481 $ — $ 833,821 $ — Presented below is a reconciliation of operating Segment Adjusted EBITDA to Income before income taxes: Three months ended (in thousands) December 29, 2023 December 30, 2022 Operating segment Adjusted EBITDA Electrical $ 204,360 $ 243,836 Safety & Infrastructure 19,512 33,404 Total 223,872 277,240 Unallocated expenses (a) ( 10,349 ) ( 13,395 ) Depreciation and amortization ( 29,020 ) ( 25,967 ) Interest expense, net ( 7,793 ) ( 9,488 ) Stock-based compensation ( 4,757 ) ( 5,270 ) Other (b) ( 4,300 ) ( 1,069 ) Income before income taxes $ 167,653 $ 222,051 (a) Represents unallocated selling, general and administrative activities and associated expenses including, in part, executive, legal, finance, human resources, information technology, business development and communications. (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, gain on purchase of business. realized or unrealized gain (loss) on foreign currency impacts of intercompany loans and related forward currency derivatives, and restructuring charges. The Company ’ s net sales by geography were as follows for the three months ended December 29, 2023 and December 30, 2022: Three months ended (in thousands) December 29, 2023 December 30, 2022 United States $ 708,457 $ 750,087 Other Americas 21,209 20,554 Europe 57,408 52,030 Asia-Pacific 11,407 11,150 Total $ 798,481 $ 833,821 18 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 three months ended December 29, 2023 and December 30, 2022: Three months ended (in thousands) December 29, 2023 December 30, 2022 Metal Electrical Conduit and Fittings $ 139,240 $ 111,158 Electrical Cable & Flexible Conduit 115,693 123,726 Plastic Pipe and Conduit 243,840 316,165 Other Electrical products (a) 94,887 87,656 Electrical 593,660 638,705 Mechanical Pipe 84,498 78,774 Other Safety & Infrastructure products (b) 120,323 116,342 Safety & Infrastructure 204,821 195,116 Net sales $ 798,481 $ 833,821 (a) Other Electrical products includes International Cable Management, Fiberglass Conduit and Corrosion Resistant Conduit (b) Other S&I products includes Metal Framing and Fittings, Construction Services, Perimeter Security and Cable Management 17. SUBSEQUENT EVENTS Subsequent to December 29, 2023, the Company has repurchased 148.4 thousand shares at a cost of $ 22.8 million as of February 1, 2024. On January 30, 2024, the board of directors declared a quarterly cash dividend of $ 0.32 per share of common stock payable on March 15, 2024 to stockholders of record on February 27, 2024. 19