UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________

FORM 10-Q

_________________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 26,2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to

Commission file number 001-37793

 _________________________________________

Atkore International Group Inc.

(Exact name of registrant as specified in its charter)

 _________________________________________

Delaware	90-0631463
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

16100 South Lathrop Avenue, Harvey, Illinois 60426

(Address of principal executive offices) (Zip Code)

708-339-1610

(Registrant's telephone number, including area code)

_________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $.01 par value per share	ATKR	New York Stock Exchange

_____________________

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒     No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒

_____________________

As of July 31, 2020, there were 47,259,994 shares of the registrant's common stock, $0.01 par value per share, outstanding.

Table of Contents

	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)	2
Condensed Consolidated Statements of Operations	2
Condensed Consolidated Statements of Comprehensive Income	3
Condensed Consolidated Balance Sheets	4
Condensed Consolidated Statements of Cash Flows	5
Condensed Consolidated Statement of Changes in Shareholders' Equity	6
Notes to Condensed Consolidated Financial Statements	8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures about Market Risk	38
Item 4. Controls and Procedures	38
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	39
Item 1A. Risk Factors	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3. Defaults Upon Senior Securities	39
Item 4. Mine Safety Disclosures	39
Item 5. Other Information	39
Item 6. Exhibits	41
Signatures	42

1

PART I. FINANCIAL INFORMATION

        Item 1. Financial Statements

ATKORE INTERNATIONAL GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Three months ended				Nine months ended
(in thousands, except per share data)	Note	June 26, 2020		June 28, 2019		June 26, 2020		June 28, 2019
Net sales		$	384,899	$	493,491	$	1,288,001	$	1,414,828
Cost of sales		289,086		367,357		943,741		1,061,350
Gross profit		95,813		126,134		344,260		353,478
Selling, general and administrative		46,159		59,049		164,734		171,778
Intangible asset amortization	13	8,026		7,868		24,210		24,278
Operating income		41,628		59,217		155,316		157,422
Interest expense, net		9,421		12,789		30,605		38,277
Other income, net	7	(543)		(1,228)		(2,462)		(3,422)
Income before income taxes		32,750		47,656		127,173		122,567
Income tax expense	8	8,672		11,106		29,112		29,513
Net income		$	24,078	$	36,550	$	98,061	$	93,054
Net income per share
Basic	9	$	0.50	$	0.77	$	2.03	$	1.95
Diluted	9	$	0.49	$	0.75	$	1.99	$	1.90

See Notes to unaudited condensed consolidated financial statements.

2

ATKORE INTERNATIONAL GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

		Three months ended				Nine months ended
(in thousands)	Note	June 26, 2020		June 28, 2019		June 26, 2020		June 28, 2019
Net income		$	24,078	$	36,550	$	98,061	$	93,054
Other comprehensive (loss) income, net of tax:
Change in foreign currency translation adjustment		2,252		(610)		1,132		(2,404)
Change in unrecognized loss related to pension benefit plans	5	216		20		649		60
Total other comprehensive income (loss)	10	2,468		(590)		1,781		(2,344)
Comprehensive income		$	26,546	$	35,960	$	99,842	$	90,710

See Notes to unaudited condensed consolidated financial statements.

3

ATKORE INTERNATIONAL GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)	Note	June 26, 2020		September 30, 2019
Assets
Current Assets:
Cash and cash equivalents		$	237,309	$	123,415
Accounts receivable, less allowance for doubtful accounts of $4,321 and $2,608, respectively		268,354		315,353
Inventories, net	11	201,933		226,090
Prepaid expenses and other current assets		47,938		34,679
Total current assets		755,534		699,537
Property, plant and equipment, net	12	242,654		260,703
Intangible assets, net	13	261,876		285,684
Goodwill	13	186,609		186,231
Right-of-use assets, net	2	38,682		—
Deferred tax assets	8	1,115		577
Other long-term assets		5,307		4,263
Total Assets		$	1,491,777	$	1,436,995
Liabilities and Equity
Current Liabilities:
Accounts payable		101,399		150,681
Income tax payable		2,009		2,157
Accrued compensation and employee benefits		25,160		35,770
Customer liabilities		36,105		44,983
Lease obligations	2	11,565		—
Other current liabilities		53,248		53,943
Total current liabilities		229,486		287,534
Long-term debt	14	846,145		845,317
Long-term lease obligations	2	27,913		—
Deferred tax liabilities	8	18,701		19,986
Other long-term tax liabilities		740		3,669
Pension liabilities		31,390		34,509
Other long-term liabilities		13,207		13,044
Total Liabilities		1,167,582		1,204,059
Equity:
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 47,259,994 and 46,955,163 shares issued and outstanding, respectively		474		471
Treasury stock, held at cost, 260,900 and 260,900 shares, respectively		(2,580)		(2,580)
Additional paid-in capital		484,613		477,139
Accumulated deficit		(118,395)		(200,396)
Accumulated other comprehensive loss	10	(39,917)		(41,698)
Total Equity		324,195		232,936
Total Liabilities and Equity		$	1,491,777	$	1,436,995

See Notes to unaudited condensed consolidated financial statements.

4

ATKORE INTERNATIONAL GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		Nine months ended
(in thousands)	Note	June 26, 2020		June 28, 2019
Operating activities:
Net income		$	98,061	$	93,054
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		55,524		54,061
Deferred income taxes	8	(1,645)		1,882
Stock-based compensation		9,302		8,936
Amortization of right-of-use assets		10,995		—
Loss on disposal of property, plant and equipment		6,456		—
Other adjustments to net income		4,668		3,857
Changes in operating assets and liabilities, net of effects from acquisitions
Accounts receivable		44,809		(4,190)
Inventories		22,129		5,032
Accounts payable		(45,699)		(11,218)
Other, net		(48,581)		(31,235)
Net cash provided by operating activities		156,019		120,179
Investing activities:
Capital expenditures		(25,590)		(21,611)
Insurance proceeds for properties and equipment		789		—
Acquisition of businesses, net of cash acquired	4	—		(83,385)
Other, net		45		(194)
Net cash used in investing activities		(24,756)		(105,190)
Financing activities:
Borrowings under credit facility		—		39,000
Repayments under credit facility		—		(39,000)
Repayments of short-term debt	14	—		(20,980)
Issuance of common stock		(1,821)		5,232
Repurchase of common stock		(15,011)		(24,419)
Other, net		(85)		(105)
Net cash used for financing activities		(16,917)		(40,272)
Effects of foreign exchange rate changes on cash and cash equivalents		(452)		(645)
Increase (decrease) in cash and cash equivalents		113,894		(25,928)
Cash and cash equivalents at beginning of period		123,415		126,662
Cash and cash equivalents at end of period		$	237,309	$	100,734
Supplementary Cash Flow information
Capital expenditures, not yet paid		$	713	$	767

See Notes to unaudited condensed consolidated financial statements.

5

ATKORE INTERNATIONAL GROUP INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

	Common Stock			Treasury Stock	Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Equity
(in thousands)	Shares	Amount		Amount
Balance as of September 30, 2018	47,080	$	472	(2,580)	$	457,978	$	(317,373)	$	(16,438)	$	122,059
Net income	—	—		—	—		26,949		—		26,949
Other comprehensive loss	—	—		—	—		—		(2,721)		(2,721)
Stock-based compensation	—	—		—	2,982		—		—		2,982
Issuance of common stock	131	1		—	(696)				—		(695)
Repurchase of common stock	(1,230)	(12)		—	—		(24,407)		—		(24,419)
Balance as of December 28, 2018	45,981	461		(2,580)	460,264		(314,831)		(19,159)		124,155
Net income	—	—		—	—		29,555		—		29,555
Other comprehensive income	—	—		—	—		—		967		967
Reclassification of stranded tax benefits (1)	—	—		—	—		2,333		(2,333)		—
Stock-based compensation	—	—		—	1,834		—		—		1,834
Issuance of common stock	235	2		—	1,984		—				1,986
Repurchase of common stock	—	—		—	—		—		—		—
Balance as of March 30, 2019	46,216	463		(2,580)	464,082		(282,943)		(20,525)		158,497
Net income	—	—		—	—		36,550		—		36,550
Other comprehensive loss	—	—		—	—		—		(590)		(590)
Stock-based compensation	—	—		—	4,120		—		—		4,120
Issuance of common stock	460	5		—	3,936		—		—		3,941
Balance as of June 28, 2019	46,676	468		(2,580)	472,138		(246,393)		(21,115)		202,518
(1) Due to the adoption of ASU 2018-02.

6

	Common Stock			Treasury Stock		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Equity
(in thousands)	Shares	Amount		Amount
Balance as of September 30, 2019	46,955	$	471	$	(2,580)	$	477,139	$	(200,396)	$	(41,698)	$	232,936
Net income	—	—		—		—		34,790		—		34,790
Other comprehensive income	—	—		—		—		—		5,316		5,316
ASU 2016-02 modified retrospective adoption (1)	—	—		—		—		(1,053)		—		(1,053)
Stock-based compensation	—	—		—		3,123		—		—		3,123
Issuance of common stock	524	5		—		(2,986)		—		—		(2,981)
Balance as of December 27, 2019	47,479	476		(2,580)		477,276		(166,659)		(36,382)		272,131
Net income	—	—		—		—		39,193		—		39,193
Other comprehensive loss	—	—		—		—		—		(6,003)		(6,003)
Stock-based compensation	—	—		—		4,523		—		—		4,523
Issuance of common stock	91	1		—		600		—		—		601
Repurchase of common stock	(394)	(4)		—		—		(15,007)		—		(15,011)
Balance as of March 27, 2020	47,176	473		(2,580)		482,399		(142,473)		(42,385)		295,434
Net income	—	—		—		—		24,078		—		24,078
Other comprehensive income	—	—		—		—		—		2,468		2,468
Stock-based compensation	—	—		—		1,656		—		—		1,656
Issuance of common stock	—	1		—		558		—		—		559
Balance as of June 26, 2020	47,176	474		(2,580)		484,613		(118,395)		(39,917)		324,195
(1) Due to the adoption of ASU 2016-02.

See Notes to unaudited condensed consolidated financial statements.

7

ATKORE INTERNATIONAL GROUP 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 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, 2019, filed with the U.S. Securities and Exchange Commission (the "SEC") on November 22, 2019, 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.

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.

8

ASU	Description of ASU	Impact to Atkore	Note	Adoption Date
2016-02 Leases (Topic 842)	The Accounting Standards Update ("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 adopted the guidance in the first quarter of 2020 using the modified retrospective method. See Note 2, "Leases" for further detail.	2	2020

        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
2016-13 Financial Instruments - Credit Losses (Topic 326)	The ASU adds to GAAP an impairment model (known as the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses.	Under evaluation. Based on procedures performed to date, the Company does not anticipate the adoption of this ASU to be material to the financial statements.	2021
2018-14 Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans	The ASU amends Accounting Standards Codification ("ASC") 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans.	Under evaluation. Based on procedures performed to date, the Company does not anticipate the adoption of this ASU to be material to the financial statements. The Company will be required to add a narrative description of the reasons for significant gains and losses affecting the benefit obligation for the period and will no longer be required to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year.	2021
2019-12 Income Tax	The ASU amends ASC 740 to simplify the accounting for various topics related to income taxes.	Under evaluation. Based on procedures performed to date, the Company does not anticipate the adoption of this ASU to be material to the financial statements.	2021
2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (issued March 12, 2020)	The ASU addresses constituents’ concerns about certain accounting consequences that could result from the global markets’ anticipated transition away from the use of the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates.	Under evaluation.	2022

9

2. LEASES

        On October 1, 2019, we adopted Topic 842 using the modified retrospective transition method. Topic 842 requires the recognition of lease assets and liabilities for operating leases, in addition to the finance lease assets and liabilities previously recorded on our condensed consolidated balance sheets. Beginning on October 1, 2019, our condensed consolidated financial statements are presented in accordance with the revised policies, while prior period amounts are not adjusted and continue to be reported in accordance with our historical policies. The modified retrospective transition method required the cumulative effect, if any, of initially applying the guidance to be recognized as an adjustment to our accumulated deficit as of our adoption date. As a result of adopting Topic 842, we recognized additional operating lease assets and liabilities of $45,519 and $46,941 as of October 1, 2019. The discount rate primarily used to calculate that adjustment was the Company's incremental borrowing rate as of the adoption date, October 1, 2019, as a rate implicit in most contracts was not readily determinable. The Company recorded a cumulative effect adjustment of $1,053 to accumulated deficit, net of tax, as a result of the adoption.

        The Company elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed us to carry forward prior conclusions about lease identification, classification and initial direct costs for leases entered into prior to adoption of Topic 842. Additionally, for leases with a term of 12 months or less, the Company elected the short-term lease exemption, which allowed us to not recognize right-of-use assets ("ROU") or lease liabilities for qualifying leases existing at transition and new leases we may enter into in the future. Leases with an initial term of 12 months or less are classified as short-term leases and are not recorded on the condensed consolidated balance sheets. The lease expense for short-term leases is recognized on a straight-line basis over the lease term.

The Company engages in leasing transactions to meet the needs of the business. The Company leases certain warehouses and distribution centers, office space, forklifts, vehicles and other machinery and equipment. The determination to lease, rather than purchase, an asset is primarily contingent upon capital requirements, duration of the forecasted business investment, and asset availability.

        The Company determines if an arrangement is a lease at inception and all arrangements deemed to be leases are subject to an assessment to determine the classification between finance and operating leases. The Company's significant assumptions and judgments in determining whether a contract is or contains a lease include establishing whether the supplier has the ability to use other assets to fulfill its service or whether the terms of the agreement enable the Company to control the use of a dedicated property, plant and equipment asset during the contract term. In the majority of the Company's contracts where it must identify whether a lease is present, it is readily determinable that the Company controls the use of the assets and obtains substantially all of the economic benefit during the term of the contract. In those contracts where identification is not readily determinable, the Company has determined that the supplier has either the ability to use another asset to provide the service or the terms of the contract give the supplier the rights to operate the asset at its discretion during the term of the contract, in which case the arrangement would not constitute a lease.

Right-of-use assets and lease obligations are recognized based on the present value of the future minimum lease payments over the lease term as of the commencement date. The Company’s lease agreements have terms that include both lease and non-lease components. Lease component fees are included in the present value of future minimum lease payments. Conversely, non-lease components are not subject to capitalization and are expensed as incurred. Per Topic 842, the contractual interest rate is used to calculate the present value of the future minimum lease payments. However, the majority of the Company’s leases do not provide an implicit rate. Therefore, the Company's significant assumption and judgments in determining the discount rate include determining the incremental borrowing rate. The Company’s incremental borrowing rates are based on the term of the lease, the economic environment of the lease and the effect of collateralization. The valuation of the ROU asset also includes lease payments made in advance of the lease commencement date and initial direct costs incurred to secure the lease and is reduced for lease incentives. The lease terms include options to extend or terminate the lease when it is reasonably certain the Company will exercise the options.

The Company has certain leasing agreements, related to leased vehicles available to our sales personnel, that contain guaranteed residual value terms, which are not expected to be triggered. The Company’s leasing portfolio does not contain any material restrictive covenants.

10

Leases

(in thousands)	June 26, 2020
Assets
Operating lease assets	$	37,068
Finance lease assets	3,570
Total right-of-use assets, gross	$	40,638
Less: accumulated depreciation	(1,956)
Right-of-use assets, net	$	38,682
Liabilities
Current liabilities:
Current portion of operating lease liabilities	$	11,207
Current portion of finance lease liabilities	358
Lease obligations	$	11,565
Noncurrent liabilities:
Operating lease liabilities	$	27,014
Finance lease liabilities	899
Long-term lease obligations	$	27,913
Total lease obligations	$	39,478

Lease Cost

        The following table summarizes lease costs by type of cost for the three months ended June 26, 2020. In the condensed consolidated statements of operations, cost of sales and selling, general and administrative expenses included lease costs of $4,464 and $349, respectively.

(in thousands)	Three months ended June 26, 2020
Condensed Consolidated Statement of Operations Classification	Total
Amortization of right-of-use assets	$	3,611
Interest on lease liabilities	10
Variable lease costs	405
Short term lease costs	787
Total lease costs	$	4,813

        The following table summarizes lease costs by type of cost for the nine months ended June 26, 2020. In the condensed consolidated statements of operations, cost of sales and selling, general and administrative expenses included lease costs of $10,414 and $2,474, respectively.

(in thousands)	Nine months ended June 26, 2020
Condensed Consolidated Statement of Operations Classification	Total
Amortization of right-of-use assets	$	10,995
Interest on lease liabilities	32
Variable lease costs	487
Short term lease costs	1,374
Total lease costs	$	12,888

11

Maturity of Lease Liabilities

        The Company's maturity analysis of its lease liabilities as of June 26, 2020 is as follows:

(in thousands)	Financing Leases		Operating Leases
2020	$	105	$	3,449
2021	400		11,785
2022	385		8,817
2023	314		6,769
2024	69		5,624
2025 and after	—		6,760
Total lease payments	$	1,273	$	43,204
Less: Interest	(16)		(4,983)
Present value of lease liabilities	$	1,257	$	38,221

        The following represents the Company's future minimum rental payments at September 30, 2019 for agreements classified as operating leases under ASC 840 with non-cancelable terms in excess of one year:

2020	$	13,526
2021	11,592
2022	8,666
2023	6,362
2024	5,097
2025 and thereafter