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 International Group Inc. (the "Company", "Atkore" or "AIG") is a leading manufacturer of
Electrical Raceway
products primarily for the non-residential construction and renovation markets and Mechanical Products & Solutions ("
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.
Atkore was incorporated in the State of Delaware on November 4, 2010.
Atkore is the sole stockholder of Atkore International Holdings Inc. ("AIH"), which in turn is the sole stockholder of Atkore International, Inc. ("AII").
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, 2018
filed with the U.S. Securities and Exchange Commission (the "SEC") on November 28, 2018, 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. It is the Company's practice to establish quarterly closings using a 4-5-4 calendar. The Company's fiscal quarters end on the last Friday in December, March and June.
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.
Summary of Significant Accounting Policies
Fair Value Measurements —
Authoritative guidance for fair value measurements establishes a three-level hierarchy that ranks the quality and reliability of information used in developing fair value estimates. The hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. In cases where two or more levels of inputs are used to determine fair value, a financial instrument’s level is determined based on the lowest level input that is considered significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are summarized as follows:
Level 1
—
inputs are based upon quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible as of the measurement date.
Level 2
—
inputs are based upon quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-derived valuations for the asset or liability that are derived principally from or corroborated by market data for which the primary inputs are observable, including forward interest rates, yield curves, credit risk and exchange rates.
Level 3
—
inputs for the valuations are unobservable and are based on management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques such as option pricing models and discounted cash flow models.
See
Note 15, ''Fair Value Measurements''
for further detail.
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
|
|
Note
|
|
Adoption Date
|
|
2014-09 Revenue from Contracts with Customers and subsequent amendments
|
|
The Accounting Standards Update ("ASU") provides guidance for revenue recognition. The update's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. Examples of the use of judgments and estimates may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The update also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The update provides for two transition methods to the new guidance: a full retrospective approach and a modified retrospective approach.
|
|
The Company adopted the guidance in the first quarter of 2019 using the modified retrospective method. See Note 2, "Revenue from Contracts with Customers" for further detail.
|
|
2
|
|
2019
|
|
2018-02 Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
|
|
The ASU provided entities with the option to reclassify tax effects stranded in accumulated other comprehensive income as a result of the "H.R.1", also known as the "Tax Cuts and Jobs Act" ("TCJA") to retained earnings.
|
|
The Company elected to adopt the guidance early in the quarter ended March 29, 2019. As a result of adoption of the ASU, we reclassified $2,333 of stranded tax benefits related to our pension plans out of Accumulated other comprehensive loss and into Accumulated deficit for the quarter ended March 29, 2019. The Company's policy is to release the tax effects as the related amounts in other comprehensive income are recognized in net income.
|
|
10
|
|
2019
|
A summary of accounting guidance not yet adopted is as follows. Effective dates are on the first day of the fiscal year indicated below, unless otherwise specified.
|
|
|
|
|
|
|
|
|
|
|
ASU
|
|
Description of ASU
|
|
Impact to Atkore
|
|
Effective Date
|
|
2016-02 Leases (Topic 842)
|
|
The ASU requires companies to use a "right of use" lease model that assumes that each lease creates an asset (the lessee's right to use the leased asset) and a liability (the future rent payment obligations), which should be reflected on a lessee's balance sheet to fairly represent the lease transaction and the lessee's related financial obligations with terms of more than 12 months.
|
|
The Company will adopt the new lease guidance in the first quarter of fiscal 2020. The Company has established an implementation team, deployed lease landscape surveys, selected a software provider and is currently evaluating the impact of adoption of this ASU on its consolidated financial statements.
|
|
2020
|
|
2018-07 Improvements to Nonemployee Share-Based Payment Accounting.
|
|
ASU 2018-07 simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions.
|
|
Under evaluation.
|
|
2020
|
|
2018-13 Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement
|
|
The ASU amends Accounting Standard Codification ("ASC") 820 to add, remove and clarify disclosure requirements related to fair value measurements.
|
|
Under evaluation.
|
|
2020
|
|
2018-14 Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans
|
|
The ASU amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans.
|
|
Under evaluation.
|
|
2021
|
2. REVENUE FROM CONTRACTS WITH CUSTOMERS
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, and December 2016 within ASU 2015-14, ASU 2016-08, ASU 2016-10 and ASU 2016-20, respectively. The core principle of this new revenue recognition guidance is that a company will recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidance defines a five-step process to implement this core principle. The new guidance also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance provides for two transition methods, a full retrospective approach and a modified retrospective approach. The Company adopted the new guidance on October 1, 2018 utilizing the modified retrospective method of adoption for contracts not completed at the adoption date and determined there were no changes required to its reported revenues and earnings as a result of the adoption. The impacts to the consolidated financial statements consist of balance sheet reclassifications including amounts associated with the changes in the classification of reserves related to volume rebates and returns reserves. The Company has also enhanced its disclosures of revenue to comply with the new guidance. The impact to the Company’s financial statements as of
March 29, 2019
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
As of March 29, 2019
|
|
Balance Sheet
|
As Reported
|
Balances before adoption of ASC 606
|
Effect of Adoption
Higher/(Lower)
|
|
Accounts Receivable, net
|
319,769
|
|
281,113
|
|
38,656
|
|
|
Customer liabilities
|
42,723
|
|
4,067
|
|
38,656
|
|
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.
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. 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.
As part of the adoption of the new revenue standard, the Company has elected to utilize certain practical expedients. 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 practical expedient not to disclose information about remaining performance obligations has also been elected as these obligations have an original duration of one year or less. 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 18, ''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 attain new customers.
On October 1, 2018, the Company acquired all of the outstanding stock of
Vergokan International NV ("Vergokan")
for a purchase price of
$57,899
, net of cash received. Vergokan is 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. This transaction provides Atkore with an expanded presence in Western Europe and strengthens the Company's electrical portfolio of cable management products within the Electrical Raceway segment. The Company incurred approximately
$148
for acquisition-related expenses for Vergokan which were recorded as a component of selling, general and administrative expenses for the three and six months ended March 29, 2019. The Company incurred approximately $
293
for acquisition-related expenses for Vergokan which were recorded as a component of selling, general and administrative expenses for the three and twelve months ended September 30, 2018.
The purchase price was allocated to tangible and intangible assets acquired and liabilities assumed, based on their fair values. The following table summarizes the Level 3 fair values assigned to the net assets acquired and liabilities assumed as of the acquisition date:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Vergokan
|
|
Fair value of consideration transferred:
|
|
|
|
Cash consideration
|
|
$
|
58,728
|
|
|
Fair value of assets acquired and liabilities assumed:
|
|
|
|
|
Cash
|
|
829
|
|
|
Accounts receivable
|
|
8,761
|
|
|
Inventories
|
|
11,434
|
|
|
Intangible assets
|
|
12,621
|
|
|
Fixed assets
|
|
32,490
|
|
|
Accounts payable
|
|
(18,716
|
)
|
|
Other
|
|
1,680
|
|
|
Net assets acquired
|
|
49,099
|
|
|
Excess purchase price attributed to goodwill acquired
|
|
$
|
9,629
|
|
The following table summarizes the fair value of intangible assets as of the acquisition date:
|
|
|
|
|
|
|
|
|
|
|
|
|
Vergokan
|
|
($ in thousands)
|
|
Fair Value
|
|
Weighted Average Useful Life (Years)
|
|
Customer relationships
|
|
$
|
10,535
|
|
|
12.0
|
|
Other
|
|
2,086
|
|
|
9.0
|
|
Total intangible assets
|
|
$
|
12,621
|
|
|
|
The purchase price allocation, intangible asset values and related estimates of useful lives for Vergokan are preliminary, as the Company is finalizing its fair value estimates of intangible assets, fixed assets and working capital items.
On January 8, 2018, the Company acquired the assets of Communications Integrators, Inc. ("Cii"), a manufacturer of modular, prefabricated power, voice and data distribution systems located in Tempe, Arizona for a total purchase price, including contingent consideration, of $
3,997
.
4. DIVESTITURES
On March 30, 2018, the Company sold the
assets of FlexHead Industries, Inc. and SprinkFLEX, LLC (together "FlexHead")
. The FlexHead businesses manufacture commercial flexible sprinkler head connection products for use in a variety of markets, including for industrial, commercial, cold storage, institutional and clean room applications. The cash consideration received, net assets disposed and resulting gain on sale are as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
FlexHead
|
|
Cash consideration
|
|
$
|
42,000
|
|
|
Net assets divested
|
|
15,263
|
|
|
Gain on sale of a business
|
|
$
|
26,737
|
|
Net assets divested included
$2,626
of goodwill. For the
three months ended March 30, 2018
a preliminary gain on the sale of the business was recorded as a component of
Other (income) expense, net
for
$26,737
. An additional working capital adjustment of
$838
was recorded for the three months ended June 29, 2018.
5. 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
|
|
Six months ended
|
|
(in thousands)
|
|
Note
|
|
March 29, 2019
|
|
March 30, 2018
|
|
March 29, 2019
|
|
March 30, 2018
|
|
Interest cost
|
|
|
|
1,166
|
|
|
1,025
|
|
|
$
|
2,332
|
|
|
$
|
2,049
|
|
|
Expected return on plan assets
|
|
|
|
(1,593
|
)
|
|
(1,604
|
)
|
|
(3,186
|
)
|
|
(3,207
|
)
|
|
Amortization of actuarial loss
|
|
|
|
25
|
|
|
86
|
|
|
50
|
|
|
171
|
|
|
Net periodic benefit credit
|
|
7
|
|
$
|
(402
|
)
|
|
$
|
(493
|
)
|
|
$
|
(804
|
)
|
|
$
|
(987
|
)
|
6. RESTRUCTURING CHARGES
The liability for restructuring reserves is included within other current liabilities in the Company's
condensed consolidated balance sheets
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electrical Raceway
|
|
MP&S
|
|
Other/Corporate
|
|
|
|
(in thousands)
|
Severance (a)
|
|
Other (a)
|
|
Severance
|
|
Other
|
|
Severance
|
|
Total
|
|
Balance as of September 30, 2017
|
$
|
449
|
|
|
$
|
—
|
|
|
$
|
278
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
737
|
|
|
Charges
|
536
|
|
|
1,130
|
|
|
97
|
|
|
179
|
|
|
98
|
|
|
2,040
|
|
|
Utilization
|
(787
|
)
|
|
(820
|
)
|
|
(178
|
)
|
|
(160
|
)
|
|
(98
|
)
|
|
(2,043
|
)
|
|
Reversal
|
—
|
|
|
—
|
|
|
(191
|
)
|
|
—
|
|
|
—
|
|
|
(191
|
)
|
|
Exchange rate effects
|
14
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
8
|
|
|
Balance as of September 30, 2018
|
212
|
|
|
310
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
551
|
|
|
Charges
|
611
|
|
|
1,861
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,472
|
|
|
Utilization
|
(512
|
)
|
|
(2,171
|
)
|
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(2,712
|
)
|
|
Balance as of March 29, 2019
|
$
|
312
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
312
|
|
(a) Primarily related to Atkore's commitment to close certain facilities as part of its continuing effort to realign its strategic focus. The Company recorded severance restructuring charges of
$611
and
$129
related to termination benefits during the
six months ended
March 29, 2019
and
March 30, 2018
, respectively. The Company recorded other restructuring charges to close facilities of $
1,834
and
$523
for the
six months ended
March 29, 2019
and
March 30, 2018
, respectively.
The Company expects to utilize all restructuring accruals as of
March 29, 2019
within the next twelve months. The net restructuring charges included as a component of
selling, general and administrative
expenses in the Company's
condensed consolidated statements of operations
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
(in thousands)
|
March 29, 2019
|
|
March 30, 2018
|
|
March 29, 2019
|
|
March 30, 2018
|
|
Total restructuring charges, net
|
$
|
1,085
|
|
|
$
|
576
|
|
|
$
|
2,472
|
|
|
$
|
838
|
|
7. OTHER (INCOME) EXPENSE, NET
Other (income) expense, net
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
(in thousands)
|
|
March 29, 2019
|
|
March 30, 2018
|
|
March 29, 2019
|
|
March 30, 2018
|
|
Gain on sale of a business
|
|
—
|
|
|
(26,737
|
)
|
|
—
|
|
|
(26,737
|
)
|
|
Undesignated foreign currency derivative instruments
|
|
1,112
|
|
|
2,511
|
|
|
(1,467
|
)
|
|
3,735
|
|
|
Foreign exchange (gain) loss on intercompany loans
|
|
(1,318
|
)
|
|
(2,135
|
)
|
|
63
|
|
|
(2,579
|
)
|
|
Debt modification costs
|
|
—
|
|
|
892
|
|
|
—
|
|
|
892
|
|
|
Pension-related benefits
|
|
(402
|
)
|
|
(493
|
)
|
|
(804
|
)
|
|
(987
|
)
|
|
Other
|
|
14
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
Other (income) expense, net
|
|
$
|
(594
|
)
|
|
$
|
(25,962
|
)
|
|
$
|
(2,194
|
)
|
|
$
|
(25,676
|
)
|
|
|
|
|
|
|
|
|
|
|
8. INCOME TAXES
On December 22, 2017, "
H.R.1
," also known as the "Tax Cuts and Jobs Act" ("TCJA"), was signed into law. TCJA provides for significant changes to corporate taxation including, but not limited to, a reduction of the federal corporate tax rate from
35%
to
21%
, limitations on the deductibility of interest expense and executive compensation, full expensing of the costs of qualified property in the period of acquisition, the elimination of the domestic production activities deduction and a new provision designed to tax global intangible low-taxed income ("GILTI"). The legislation also adopts a new quasi-territorial tax regime and imposes a one-time transition tax on deemed repatriated earnings of certain foreign subsidiaries.
The value of the Company’s net deferred tax liability on the balance sheet decreased as a result of the enacted tax rates creating a one-time tax benefit to the Company; the preliminary analysis of the impact, using December 29, 2017 values, was an estimated decrease to the net deferred tax liability of
$4,758
, which was recognized in the first quarter of fiscal 2018. The SEC Staff Accounting Bulletin No. 118 allowed for a measurement period of up to one year from the date of enactment; during the course of the fiscal year ended September 30, 2018, the Company recorded an adjustment to the re-measurement of deferred tax liabilities of an additional
$708
benefit as a result of updated estimates. For the period ended December 28, 2018, the Company finalized the re-measurement with no additional adjustments. The Company has an accumulated earnings and profit deficit in the foreign jurisdictions in which it operates. The Company completed its calculation and did not have an income tax liability from the one-time transition tax on the deemed repatriation of its foreign earnings.
The GILTI provision of TCJA requires certain income earned by controlled foreign corporations ("CFCs") to be included currently in the gross income of the CFC's controlling U.S. shareholder. In accordance with accounting standards applicable to income taxes, there is allowed an accounting policy choice of either (1) treating taxes due on U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the “period cost method”) or (2) factoring such amounts into the Company’s measurement of its deferred taxes (the “deferred method”). The Company has elected the period method and included an estimate of the GILTI tax in the Company’s annualized effective tax rate.
For the
three months ended March 29, 2019
and
March 30, 2018
, the Company's effective tax rate attributable to
income before income taxes
was
25.8%
and
26.6%
, respectively. For the
three months ended March 29, 2019
and
March 30, 2018
, the Company's income tax expense was
$10,253
and
$15,392
respectively.
The decrease in the current period effective tax rate was primarily due to the use of a blended federal statutory rate of 24.5% for fiscal year 2018, in accordance with rules described in Section 15 of the Internal Revenue Code, and a federal statutory rate of 21.0% for fiscal year 2019 and certain nondeductible costs in the prior period
.
For the
six months ended March 29, 2019
and
March 30, 2018
, the Company's effective tax rate attributable to
income before income taxes
was
24.6%
and
20.4%
, respectively. For the
six months ended March 29, 2019
and
March 30, 2018
, the Company's income tax expense was
$18,407
and
$17,908
respectively.
The increase in the effective tax rate was primarily due to the prior year benefit of the one-time re-measurement of deferred taxes as a result of the Tax Cuts and Jobs Act, which was recorded in the first quarter of fiscal 2018.
The Company has recorded a valuation allowance against net operating losses in certain foreign jurisdictions. A valuation allowance is recorded when it is determined to be more likely than not that deferred tax 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 of appropriate character in the relevant jurisdiction to utilize the assets. For the
six months ended March 29, 2019
, the Company has partially released a valuation allowance for
$266
on deferred tax assets in its Asia Pacific business due to an increase in forecasted taxable income. The amount of the deferred tax assets considered realizable is subject to adjustment in future periods.
The Company recognizes the benefits of uncertain tax positions taken or expected to be taken in tax returns in the provision for income taxes only for those positions that it has determined are more likely than not to be realized upon examination. The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. During the
six months ended March 29, 2019
, the balance of unrecognized tax benefits decreased by
$536
upon the resolution of a state audit item.
For the
six months ended March 29, 2019
, the Company made no additional provision for U.S. or non-U.S. income taxes for unrecognized deferred tax liabilities for temporary differences related to basis differences in investments in subsidiaries, as the investments are essentially permanent in duration.
9. EARNINGS PER SHARE
For the three and
six months ended
March 29, 2019
, the Company calculated 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 allocable 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.
For the three and
six months ended
March 30, 2018
, the Company calculated basic and diluted earnings per common share using the treasury stock method as net income allocated to participating securities was not significant. Basic earnings per common share was computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share was computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period, adjusted to include the number of shares of common stock that would have been outstanding had potentially dilutive shares of common stock been issued.
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
(in thousands, except per share data)
|
|
March 29, 2019
|
|
March 30, 2018
|
|
March 29, 2019
|
|
March 30, 2018
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
29,555
|
|
|
$
|
42,558
|
|
|
$
|
56,504
|
|
|
$
|
69,747
|
|
|
Less: Undistributed earnings allocated to participating securities
|
857
|
|
|
—
|
|
|
1,507
|
|
|
—
|
|
|
Net income available to common shareholders
|
$
|
28,698
|
|
|
$
|
42,558
|
|
|
$
|
54,997
|
|
|
$
|
69,747
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding
|
46,079
|
|
|
51,367
|
|
|
46,529
|
|
|
57,287
|
|
|
Effect of dilutive securities: Non-participating employee stock options
(1)
|
1,290
|
|
|
2,636
|
|
|
1,288
|
|
|
2,658
|
|
|
Diluted weighted average common shares outstanding
|
47,369
|
|
|
54,003
|
|
|
47,817
|
|
|
59,945
|
|
|
Basic earnings per share
|
$
|
0.62
|
|
|
$
|
0.83
|
|
|
$
|
1.18
|
|
|
$
|
1.22
|
|
|
Diluted earnings per share
|
$
|
0.61
|
|
|
$
|
0.79
|
|
|
$
|
1.15
|
|
|
$
|
1.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Stock options to purchase approximately 0.4 million and 0.3 million shares of common stock were outstanding during the three months ended March 29, 2019 and March 30, 2018, respectively, but were not included in the calculation of diluted earnings per share as the impact of these options would have been anti-dilutive. Stock options to purchase approximately 0.5 million and 0.4 million shares of common stock were outstanding during the six months ended March 29, 2019 and March 30, 2018, respectively, but were not included in the calculation of diluted earnings per share as the impact of these options would have been anti-dilutive.
|
10. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents the changes in
accumulated other comprehensive loss
by component for the
six months ended March 29, 2019
and
March 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Defined benefit
pension items
|
|
Currency
translation
adjustments
|
|
Total
|
|
Balance as of September 30, 2018
|
|
$
|
(6,048
|
)
|
|
$
|
(10,390
|
)
|
|
$
|
(16,438
|
)
|
|
Other comprehensive loss before reclassifications
|
|
—
|
|
|
(1,794
|
)
|
|
(1,794
|
)
|
|
Amounts reclassified from accumulated other
comprehensive loss, net of tax
|
|
40
|
|
|
—
|
|
|
40
|
|
|
Net current period other comprehensive (loss)
|
|
40
|
|
|
(1,794
|
)
|
|
(1,754
|
)
|
|
Reclassification of stranded tax benefits
(1)
|
|
(2,333
|
)
|
|
—
|
|
|
(2,333
|
)
|
|
Balance as of March 29, 2019
|
|
$
|
(8,341
|
)
|
|
$
|
(12,184
|
)
|
|
$
|
(20,525
|
)
|
|
|
|
|
|
|
|
|
|
(1) Due to the adoption of ASU 2018-02.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Defined benefit
pension items
|
|
Currency
translation
adjustments
|
|
Total
|
|
Balance as of September 30, 2017
|
|
$
|
(10,445
|
)
|
|
$
|
(7,537
|
)
|
|
$
|
(17,982
|
)
|
|
Other comprehensive income before reclassifications
|
|
—
|
|
|
1,500
|
|
|
1,500
|
|
|
Amounts reclassified from accumulated other
comprehensive loss, net of tax
|
|
129
|
|
|
—
|
|
|
129
|
|
|
Net current period other comprehensive income
|
|
129
|
|
|
1,500
|
|
|
1,629
|
|
|
Balance as of March 30, 2018
|
|
$
|
(10,316
|
)
|
|
$
|
(6,037
|
)
|
|
$
|
(16,353
|
)
|
|
|
|
|
|
|
|
|
The following table presents the changes in
accumulated other comprehensive loss
by component for the
three months ended March 29, 2019
and
March 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Defined benefit
pension items
|
|
Currency
translation
adjustments
|
|
Total
|
|
Balance as of December 28, 2018
|
|
$
|
(6,023
|
)
|
|
$
|
(13,136
|
)
|
|
$
|
(19,159
|
)
|
|
Other comprehensive income before reclassifications
|
|
—
|
|
|
952
|
|
|
952
|
|
|
Amounts reclassified from accumulated other
comprehensive loss, net of tax
|
|
15
|
|
|
—
|
|
|
15
|
|
|
Net current period other comprehensive (loss) income
|
|
15
|
|
|
952
|
|
|
967
|
|
|
Reclassification of stranded tax benefits
(1)
|
|
(2,333
|
)
|
|
—
|
|
|
(2,333
|
)
|
|
Balance as of March 29, 2019
|
|
$
|
(8,341
|
)
|
|
$
|
(12,184
|
)
|
|
$
|
(20,525
|
)
|
|
|
|
|
|
|
|
|
|
(1) Due to the adoption of ASU 2018-02.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Defined benefit
pension items
|
|
Currency
translation
adjustments
|
|
Total
|
|
Balance as of December 29, 2017
|
|
$
|
(10,380
|
)
|
|
$
|
(7,206
|
)
|
|
$
|
(17,586
|
)
|
|
Other comprehensive income before reclassifications
|
|
—
|
|
|
1,169
|
|
|
1,169
|
|
|
Amounts reclassified from accumulated other
comprehensive loss, net of tax
|
|
64
|
|
|
—
|
|
|
64
|
|
|
Net current period other comprehensive income
|
|
64
|
|
|
1,169
|
|
|
1,233
|
|
|
Balance as of March 30, 2018
|
|
$
|
(10,316
|
)
|
|
$
|
(6,037
|
)
|
|
$
|
(16,353
|
)
|
|
|
|
|
|
|
|
|
11. 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. Approximately
76%
and
80%
of the Company's inventories were valued at the lower of LIFO cost or market at
March 29, 2019
and
September 30, 2018
, respectively. Interim LIFO determinations, including those at
March 29, 2019
, are based on management's estimates of future inventory levels and costs for the remainder of the current fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
March 29, 2019
|
|
September 30, 2018
|
|
Purchased materials and manufactured parts, net
|
$
|
49,664
|
|
|
$
|
58,572
|
|
|
Work in process, net
|
24,276
|
|
|
21,769
|
|
|
Finished goods, net
|
146,847
|
|
|
141,412
|
|
|
Inventories, net
|
$
|
220,787
|
|
|
$
|
221,753
|
|
Total inventories would be
$15,088
and
$26,340
higher than reported as of
March 29, 2019
and
September 30, 2018
, respectively, if the first-in, first-out method was used for all inventories. As of
March 29, 2019
, and
September 30, 2018
, the excess and obsolete inventory reserve was
$16,052
and
$12,909
, respectively.
12. PROPERTY, PLANT AND EQUIPMENT
As of
March 29, 2019
, and
September 30, 2018
, property, plant and equipment at cost and accumulated depreciation were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
March 29, 2019
|
|
September 30, 2018
|
|
Land
|
$
|
19,815
|
|
|
$
|
13,295
|
|
|
Buildings and related improvements
|
121,477
|
|
|
108,758
|
|
|
Machinery and equipment
|
292,330
|
|
|
262,078
|
|
|
Leasehold improvements
|
8,105
|
|
|
7,382
|
|
|
Software
|
24,350
|
|
|
30,502
|
|
|
Construction in progress
|
18,971
|
|
|
16,777
|
|
|
Property, plant and equipment
|
485,048
|
|
|
438,792
|
|
|
Accumulated depreciation
|
(244,860
|
)
|
|
(225,684
|
)
|
|
Property, plant and equipment, net
|
$
|
240,188
|
|
|
$
|
213,108
|
|
Depreciation expense for the
three months ended March 29, 2019
and
March 30, 2018
totaled
$10,084
and
$8,088
, respectively. Depreciation expense for the
six months ended March 29, 2019
and
March 30, 2018
totaled
$19,891
and
$16,611
, respectively.
13. GOODWILL AND INTANGIBLE ASSETS
Changes in the carrying amount of goodwill are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Electrical Raceway
|
|
Mechanical Products & Solutions
|
|
Total
|
|
Balance as of October 1, 2018
|
$
|
133,566
|
|
|
$
|
36,563
|
|
|
$
|
170,129
|
|
|
Goodwill acquired during year
|
9,629
|
|
|
—
|
|
|
9,629
|
|
|
Exchange rate effects
|
(269
|
)
|
|
—
|
|
|
(269
|
)
|
|
Balance as of March 29, 2019
|
$
|
142,926
|
|
|
$
|
36,563
|
|
|
$
|
179,489
|
|
Goodwill balances as of October 1, 2018 and
March 29, 2019
include
$3,924
and
$43,000
of accumulated impairment losses within the
Electrical Raceway
and
MP&S
segments, respectively.
The Company assesses the recoverability of goodwill and
indefinite-lived trade names
on an annual basis in accordance with ASC 350, "Intangibles - Goodwill and Other." The measurement date is the first day of the fourth fiscal quarter, or more frequently, if events or circumstances indicate that it is more likely than not that the fair value of a reporting unit or the respective indefinite-lived trade name is less than the carrying value.
The following table provides the gross carrying value, accumulated amortization and net carrying value for each major class of intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 29, 2019
|
|
September 30, 2018
|
|
($ 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
|
10
|
|
$
|
340,520
|
|
|
$
|
(156,884
|
)
|
|
$
|
183,636
|
|
|
$
|
330,295
|
|
|
$
|
(141,401
|
)
|
|
$
|
188,894
|
|
|
Other
|
8
|
|
18,086
|
|
|
(6,801
|
)
|
|
11,285
|
|
|
16,003
|
|
|
(5,861
|
)
|
|
10,142
|
|
|
Total
|
|
|
358,606
|
|
|
(163,685
|
)
|
|
194,921
|
|
|
346,298
|
|
|
(147,262
|
)
|
|
199,036
|
|
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
|
|
92,880
|
|
|
—
|
|
|
92,880
|
|
|
92,880
|
|
|
—
|
|
|
92,880
|
|
|
Total
|
|
|
$
|
451,486
|
|
|
$
|
(163,685
|
)
|
|
$
|
287,801
|
|
|
$
|
439,178
|
|
|
$
|
(147,262
|
)
|
|
$
|
291,916
|
|
Other intangible assets consist of definite-lived trade names, technology, non-compete agreements and backlogs. Amortization expense for the
three months ended March 29, 2019
and
March 30, 2018
was
$8,196
and
$7,765
, respectively. Amortization expense for the
six months ended March 29, 2019
and
March 30, 2018
was
$16,410
and
$16,452
, respectively. Expected amortization expense for intangible assets for the remainder of fiscal
2019
and over the next five years and thereafter is as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Remaining 2019
|
|
$
|
16,503
|
|
|
2020
|
|
30,573
|
|
|
2021
|
|
30,440
|
|
|
2022
|
|
29,108
|
|
|
2023
|
|
28,988
|
|
|
2024
|
|
24,451
|
|
|
Thereafter
|
|
34,858
|
|
Actual amounts of amortization may differ from estimated amounts due to additional intangible asset acquisitions, impairment of intangible assets and other events.
14. DEBT
Debt as of
March 29, 2019
and
September 30, 2018
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
March 29, 2019
|
|
September 30, 2018
|
|
First Lien Term Loan Facility due December 22, 2023
|
$
|
891,272
|
|
|
$
|
912,162
|
|
|
Deferred financing costs
|
(7,382
|
)
|
|
(8,194
|
)
|
|
Other
|
205
|
|
|
279
|
|
|
Total debt
|
$
|
884,095
|
|
|
$
|
904,247
|
|
|
Less: Current portion
|
—
|
|
|
26,561
|
|
|
Long-term debt
|
$
|
884,095
|
|
|
$
|
877,686
|
|
The asset-based credit facility (the "ABL Credit Facility") has aggregate commitments of
$325,000
and is guaranteed by AIH and the U.S. operating companies owned by AII. AII's availability under the ABL Credit Facility was
$304,318
and
$315,119
as of
March 29, 2019
and
September 30, 2018
, respectively.
During the
three months ended March 29, 2019
, the Company made an accelerated repayment of
$18,680
of principal on the First Lien Loan, which was calculated by a formula based on 2018 excess cash flows and a leverage ratio as defined within the Term Loan Agreement. As a result, there are no principal payments due in the next twelve months.
15. FAIR VALUE MEASUREMENTS
Certain assets and liabilities are required to be recorded at fair value on a recurring basis.
The Company uses forward currency contracts to hedge the effects of foreign exchange relating to certain of the Company’s intercompany receivables denominated in a foreign currency. These derivative instruments are not formally designated as hedges by the Company and the terms of these instruments range from
six
months to
six
years. 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 other long-term liabilities in the condensed consolidated balance sheet. The fair value gains and losses are included in
other (income) expense, net
within the
condensed consolidated statements of operations
. See
Note 7, ''Other (Income) Expense, net''
for further detail.
The total notional amount of undesignated forward currency contracts were £
45.8 million
and £
49.1 million
as of
March 29, 2019
and
September 30, 2018
, respectively. 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 following table presents the Company's assets and liabilities measured at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 29, 2019
|
|
September 30, 2018
|
|
(in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
12,433
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28,175
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Forward currency contracts
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency contracts
|
|
—
|
|
|
467
|
|
|
—
|
|
|
—
|
|
|
1,857
|
|
|
—
|
|
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.
The estimated fair value of financial instruments not carried at fair value in the condensed consolidated balance sheets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 29, 2019
|
|
September 30, 2018
|
|
(in thousands)
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
|
First Lien Term Loan Facility due December 22, 2023
|
|
$
|
892,120
|
|
|
$
|
879,898
|
|
|
$
|
913,100
|
|
|
$
|
916,113
|
|
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.
16. COMMITMENTS AND CONTINGENCIES
The Company has obligations related to commitments to purchase certain goods. As of
March 29, 2019
, such obligations were
$170,458
for the rest of fiscal year
2019
and
$3,576
for fiscal year
2020
and beyond. These amounts represent open purchase orders for materials used in production.
Legal Contingencies —
The Company is a defendant in a number of pending legal proceedings, some of which were inherited from its former parent, Tyco International Ltd. ("Tyco"), including certain product liability claims. Several lawsuits have been filed against the Company and the Company has also received other claim demand letters alleging that the Company's anti-microbial coated steel sprinkler pipe, which the Company has not manufactured or sold for several years, is incompatible with chlorinated polyvinyl chloride and caused stress cracking in such pipe manufactured by third parties when installed together in the same sprinkler system, which the Company refers to collectively as the "
Special Products Claims
." After an analysis of claims experience, the Company reserved its best estimate of the probable and reasonably estimable losses related to these matters. The Company's total product liability reserves were
$1,150
and
$6,755
as of
March 29, 2019
and
September 30, 2018
, respectively. As of
March 29, 2019
, the Company believes that the range of losses for product liability claims is between
$1,000
and
$9,000
.
During the quarter ended December 28, 2018, Tyco and the Company agreed with a plaintiff to settle one Special
Products Claim that was to go to trial. The Company agreed to fund the total settlement in exchange for Tyco's agreement to cap the Company's Special Products Claim deductible at
$12,000
, as opposed to the
$13,000
cap negotiated within the original indemnity agreement. As of
March 29, 2019
, the cap has been satisfied and Tyco, now Johnson Controls International plc, is contractually obligated to indemnify the Company in respect of claims of incompatibility between the Company's antimicrobial coated steel sprinkler pipe and CPVC pipe used in the same sprinkler system.
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.
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.
17. GUARANTEES
The Company had outstanding letters of credit totaling
$10,795
supporting workers' compensation and general liability insurance policies as of
March 29, 2019
. The Company also had surety bonds primarily related to performance guarantees on supply agreements and construction contracts, and payment of duties and taxes totaling
$20,083
as of
March 29, 2019
.
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.
18. SEGMENT INFORMATION
The Company has
two
operating segments, which are also its reportable segments. The Company's operating segments are organized based upon primary market channels and, in most instances, the end use of products.
Through its Electrical Raceway segment, the Company manufactures products that deploy, isolate and protect a structure's electrical circuitry from the original power source to the final outlet. These products, which include electrical conduit, armored cable, cable trays, mounting systems and fittings, are critical components of the electrical infrastructure for maintenance, repair and remodel markets. The vast majority of the Company's Electrical Raceway net sales are made to electrical distributors, who then serve electrical contractors and the Company considers both to be customers.
Through the MP&S segment, the Company provides products and services that frame, support and secure component parts in a broad range of structures, equipment and systems in electrical, industrial and construction applications. The Company's principal products in this segment are metal framing products and in-line galvanized mechanical tube. Through its metal framing business, the Company designs, manufactures and installs metal strut and fittings used to assemble mounting structures that support heavy equipment and electrical content in buildings and other structures.
Both segments use Adjusted EBITDA as the primary measure of profit and loss. Segment Adjusted EBITDA is the sum of income (loss) from operations before income taxes, adjusted to exclude unallocated expenses, depreciation and amortization, interest expense, net, gain (loss) on extinguishment of debt, restructuring and impairments, stock-based compensation, certain legal matters, transaction costs, gain on sale of joint venture and other items, such as inventory reserves and adjustments, release of indemnified uncertain tax positions, and the impact of foreign exchange gains or losses.
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 segments. These shared assets are reported within the MP&S segment. We allocate 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
|
|
|
March 29, 2019
|
|
March 30, 2018
|
|
(in thousands)
|
External Net Sales
|
|
Intersegment Sales
|
|
Adjusted EBITDA
|
|
External Net Sales
|
|
Intersegment Sales
|
|
Adjusted EBITDA
|
|
Electrical Raceway
|
$
|
353,119
|
|
|
$
|
395
|
|
|
$
|
67,375
|
|
|
$
|
324,706
|
|
|
$
|
81
|
|
|
$
|
56,404
|
|
|
MP&S
|
116,190
|
|
|
—
|
|
|
17,421
|
|
|
120,294
|
|
|
16
|
|
|
16,722
|
|
|
Eliminations
|
—
|
|
|
(395
|
)
|
|
|
|
—
|
|
|
(97
|
)
|
|
|
|
Consolidated operations
|
$
|
469,309
|
|
|
$
|
—
|
|
|
|
|
$
|
445,000
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
March 29, 2019
|
|
March 30, 2018
|
|
(in thousands)
|
External Net Sales
|
|
Intersegment Sales
|
|
Adjusted EBITDA
|
|
External Net Sales
|
|
Intersegment Sales
|
|
Adjusted EBITDA
|
|
Electrical Raceway
|
$
|
696,334
|
|
|
$
|
586
|
|
|
$
|
135,864
|
|
|
$
|
640,711
|
|
|
$
|
599
|
|
|
$
|
112,564
|
|
|
MP&S
|
225,003
|
|
|
—
|
|
|
28,308
|
|
|
218,847
|
|
|
37
|
|
|
27,531
|
|
|
Eliminations
|
—
|
|
|
(586
|
)
|
|
|
|
—
|
|
|
(636
|
)
|
|
|
|
Consolidated operations
|
$
|
921,337
|
|
|
$
|
—
|
|
|
|
|
$
|
859,558
|
|
|
$
|
—
|
|
|
|
Presented below is a reconciliation of operating segment Adjusted EBITDA to
Income before income taxes
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
(in thousands)
|
|
|
March 29, 2019
|
|
March 30, 2018
|
|
March 29, 2019
|
|
March 30, 2018
|
|
Operating segment Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
Electrical Raceway
|
|
$
|
67,375
|
|
|
$
|
56,404
|
|
|
$
|
135,864
|
|
|
$
|
112,564
|
|
|
MP&S
|
|
17,421
|
|
|
16,722
|
|
|
28,308
|
|
|
27,531
|
|
|
Total
|
|
84,796
|
|
|
73,126
|
|
|
164,172
|
|
|
140,095
|
|
|
Unallocated expenses
(a)
|
|
(7,702
|
)
|
|
(7,785
|
)
|
|
(17,055
|
)
|
|
(16,267
|
)
|
|
Depreciation and amortization
|
|
(18,280
|
)
|
|
(15,853
|
)
|
|
(36,301
|
)
|
|
(33,063
|
)
|
|
Interest expense, net
|
|
(13,328
|
)
|
|
(9,286
|
)
|
|
(25,488
|
)
|
|
(15,880
|
)
|
|
Restructuring and impairments
|
|
(1,085
|
)
|
|
(576
|
)
|
|
(2,472
|
)
|
|
(838
|
)
|
|
Stock-based compensation
|
|
(1,834
|
)
|
|
(2,770
|
)
|
|
(4,816
|
)
|
|
(6,334
|
)
|
|
Certain legal matters
|
|
—
|
|
|
(2,286
|
)
|
|
—
|
|
|
(2,286
|
)
|
|
Transaction costs
|
|
(123
|
)
|
|
(1,263
|
)
|
|
(287
|
)
|
|
(1,908
|
)
|
|
Gain on sale of a business
|
|
—
|
|
|
26,737
|
|
|
—
|
|
|
26,737
|
|
|
Other
(b)
|
|
(2,636
|
)
|
|
(2,094
|
)
|
|
(2,842
|
)
|
|
(2,601
|
)
|
|
Income before income taxes
|
|
$
|
39,808
|
|
|
$
|
57,950
|
|
|
$
|
74,911
|
|
|
$
|
87,655
|
|
(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, as well as certain costs and earnings of employee-related benefits plans, such as stock-based compensation and a portion of self-insured medical costs.
(b) Represents other items, such as inventory reserves and adjustments, release of indemnified uncertain tax positions and the impact of foreign exchange gains or losses.
The Company's net sales by geography were as follows for the
three and
six months ended
March 29, 2019
and
March 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
(in thousands)
|
|
March 29, 2019
|
|
March 30, 2018
|
|
March 29, 2019
|
|
March 30, 2018
|
|
United States
|
|
$
|
408,007
|
|
|
$
|
398,838
|
|
|
$
|
803,635
|
|
|
$
|
772,666
|
|
|
Other Americas
|
|
8,977
|
|
|
9,714
|
|
|
18,209
|
|
|
17,715
|
|
|
Europe
|
|
38,808
|
|
|
23,385
|
|
|
72,670
|
|
|
43,685
|
|
|
Asia-Pacific
|
|
13,517
|
|
|
13,063
|
|
|
26,823
|
|
|
25,492
|
|
|
Total
|
|
$
|
469,309
|
|
|
$
|
445,000
|
|
|
$
|
921,337
|
|
|
$
|
859,558
|
|
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 and
six months ended
March 29, 2019
and
March 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
(in thousands)
|
|
March 29, 2019
|
|
March 30, 2018
|
|
March 29, 2019
|
|
March 30, 2018
|
|
Metal Electrical Conduit and Fittings
|
|
$
|
134,131
|
|
|
$
|
120,747
|
|
|
$
|
265,378
|
|
|
229,010
|
|
|
Armored Cable and Fittings
|
|
88,629
|
|
|
82,826
|
|
|
172,973
|
|
|
169,041
|
|
|
PVC Electrical Conduit and Fittings
|
|
66,183
|
|
|
71,133
|
|
|
134,416
|
|
|
147,359
|
|
|
Cable Tray and Cable Ladders
|
|
51,138
|
|
|
36,983
|
|
|
96,912
|
|
|
71,099
|
|
|
Other raceway products
|
|
13,038
|
|
|
13,017
|
|
|
26,655
|
|
|
24,202
|
|
|
Electrical Raceway
|
|
353,119
|
|
|
324,706
|
|
|
696,334
|
|
|
640,711
|
|
|
|
|
|
|
|
|
|
|
|
|
Mechanical Pipe
|
|
62,039
|
|
|
59,867
|
|
|
122,707
|
|
|
110,512
|
|
|
Metal Framing and Fittings
|
|
30,450
|
|
|
27,407
|
|
|
59,061
|
|
|
52,310
|
|
|
Other MP&S products
|
|
23,701
|
|
|
33,020
|
|
|
43,235
|
|
|
56,025
|
|
|
MP&S
|
|
116,190
|
|
|
120,294
|
|
|
225,003
|
|
|
218,847
|
|
|
Net sales
|
|
$
|
469,309
|
|
|
$
|
445,000
|
|
|
$
|
921,337
|
|
|
$
|
859,558
|
|