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 December 30, 2022

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 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 January 27, 2023, there were 39,504,703 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	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosures about Market Risk	28
Item 4. Controls and Procedures	28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	30
Item 1A. Risk Factors	30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3. Defaults Upon Senior Securities	30
Item 4. Mine Safety Disclosures	30
Item 5. Other Information	30
Item 6. Exhibits	31
Signatures	32

1

PART I. FINANCIAL INFORMATION

    Item 1. Financial Statements

ATKORE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Three months ended
(in thousands, except per share data)	Note	December 30, 2022		December 24, 2021
Net sales		$	833,821	$	840,801
Cost of sales		499,468		485,993
Gross profit		334,353		354,808
Selling, general and administrative		89,977		78,151
Intangible asset amortization	11	12,796		8,229
Operating income		231,580		268,428
Interest expense, net		9,488		6,918
Other (income) and expense, net	5	41		(308)
Income before income taxes		222,051		261,818
Income tax expense	6	48,559		56,975
Net income		$	173,492	$	204,843
Net income per share
Basic	7	$	4.26	$	4.38
Diluted	7	$	4.20	$	4.32

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 30, 2022		December 24, 2021
Net income		$	173,492	$	204,843
Other comprehensive (loss) income, net of tax:
Change in foreign currency translation adjustment		11,262		(1,458)
Change in unrecognized loss related to pension benefit plans	4	62		125
Total other comprehensive (loss) income	8	11,324		(1,333)
Comprehensive income		$	184,816	$	203,510

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 30, 2022		September 30, 2022
Assets
Current Assets:
Cash and cash equivalents		$	307,827	$	388,751
Accounts receivable, less allowance for current and expected credit losses of $2,488 and $2,544, respectively		506,854		528,904
Inventories, net	9	445,780		454,511
Prepaid expenses and other current assets		63,342		80,654
Total current assets		1,323,803		1,452,820
Property, plant and equipment, net	10	418,550		390,220
Intangible assets, net	11	426,900		382,706
Goodwill	11	323,214		289,330
Right-of-use assets, net		69,733		71,035
Deferred tax assets	6	5,683		9,409
Other long-term assets		3,481		3,476
Total Assets		$	2,571,364	$	2,598,996
Liabilities and Equity
Current Liabilities:
Accounts payable		210,850		244,100
Income tax payable		12,941		5,521
Accrued compensation and employee benefits		29,903		61,273
Customer liabilities		111,154		99,447
Lease obligations		13,850		13,789
Other current liabilities		68,326		77,781
Total current liabilities		447,024		501,911
Long-term debt	12	761,074		760,537
Long-term lease obligations		56,835		57,975
Deferred tax liabilities	6	16,152		15,640
Other long-term liabilities		15,237		13,146
Total Liabilities		1,296,322		1,349,209
Equity:
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 39,867,895 and 41,351,350 shares issued and outstanding, respectively		400		415
Treasury stock, held at cost, 260,900 and 260,900 shares, respectively		(2,580)		(2,580)
Additional paid-in capital		490,611		500,117
Retained earnings		825,433		801,981
Accumulated other comprehensive loss	8	(38,822)		(50,146)
Total Equity		1,275,042		1,249,787
Total Liabilities and Equity		$	2,571,364	$	2,598,996

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 30, 2022		December 24, 2021
Operating activities:
Net income		$	173,492	$	204,843
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		25,967		20,046
Deferred income taxes	6	3,275		(5,720)
Stock-based compensation		5,270		3,427
Amortization of right-of-use assets		3,538		3,124
Other non-cash adjustments to net income		1,410		4,050
Changes in operating assets and liabilities, net of effects from acquisitions
Accounts receivable		26,841		(12,301)
Inventories		11,565		(75,091)
Prepaid expenses and other current assets		(6,930)		(11,591)
Accounts payable		(48,826)		(13,335)
Accrued and other liabilities		(36,070)		(23,171)
Income taxes		38,787		1,823
Other, net		532		1,088
Net cash provided by operating activities		198,851		97,192
Investing activities:
Capital expenditures		(35,006)		(9,358)
Proceeds from sale of properties and equipment		—		432
Acquisition of businesses, net of cash acquired		(82,181)		(36,098)
Net cash used in investing activities		(117,187)		(45,024)
Financing activities:
Issuance of common stock, net of shares withheld for tax		(14,775)		(24,505)
Repurchase of common stock		(150,056)		(104,543)
Net cash used for financing activities		(164,831)		(129,048)
Effects of foreign exchange rate changes on cash and cash equivalents		2,243		(450)
Decrease in cash and cash equivalents		(80,924)		(77,330)
Cash and cash equivalents at beginning of period		388,751		576,289
Cash and cash equivalents at end of period		$	307,827	$	498,959
Supplementary Cash Flow information
Capital expenditures, not yet paid		$	7,227	$	1,501
Operating lease right-of-use assets obtained in exchange for lease liabilities		$	1,181	$	1,066
Acquisitions of businesses, not yet paid		14,125		$	2,864

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, 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

	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, 2021	45,997	$	461	$	(2,580)	$	506,921	$	388,660	$	(28,726)	$	864,736
Net income	—	—		—		—		204,843		—		204,843
Other comprehensive loss	—	—		—		—		—		(1,333)		(1,333)
Stock-based compensation	—	—		—		3,427		—		—		3,427
Issuance of common stock, net of shares withheld for tax	355	4		—		(24,509)		—		—		(24,505)
Repurchase of common stock	(958)	(10)		—				(104,537)		—		(104,547)
Balance as of December 24, 2021	45,394	$	455	$	(2,580)	$	485,839	$	488,966	$	(30,059)	$	942,621

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 30, 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 31, 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, 2022, filed with the U.S. Securities and Exchange Commission (the “SEC”) on November 18, 2022, 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

Atkore has not adopted any accounting standards in the current fiscal year. There are no accounting standards with adoption dates in the next fiscal year that are applicable to the Company.

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.

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. 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.

Fiscal 2023

On November 7, 2022, Atkore International Inc., acquired the assets of Elite Polymer Solutions (“Elite”), for a purchase price of $89,981. 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 $30,806 of goodwill, $55,260 of identifiable intangible assets, of which $55,000 relates to customer relationships with an estimated useful life of 7 years, and $3,915 of working capital and other net tangible assets. As of December 30, 2022, the purchase price allocation has not been finalized as the Company is finalizing working capital, inventory, intangible assets, deferred tax assets and liabilities and fixed asset fair values.

The acquisition in fiscal 2023 was funded using cash-on-hand. The Company incurred approximately $839 in acquisition-related expenses for this acquisition, 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,

8

the Company did not include the pro forma results of operations for this acquisition for the current period or the previous interim period.

Fiscal 2022

On August 31, 2022, Atkore International Inc., and Atkore HDPE, LLC, wholly-owned subsidiaries of the Company, acquired the outstanding stock of two separate, but related, companies doing business as Cascade Poly Pipe & Conduit (“Cascade”) and Northwest Polymers, for a total purchase price of $62,100, of which $52,738 was paid at closing and an additional purchase price payable of $9,362 was accrued. In the first quarter of fiscal 2023, the Company paid $3,111 of the accrued purchase price. Cascade is a manufacturer specializing in smooth wall HDPE conduit made from recycled materials, primarily serving the telecommunications, utility and datacom markets. Northwest Polymers is a leading recycler of PVC, HDPE and other plastics and a strategic supply partner to Cascade and other manufacturers. The purchase price allocation has not been finalized as the Company is finalizing working capital, inventory, intangible assets, deferred tax assets and liabilities and fixed asset fair values.

On June 22, 2022, Atkore International Inc., a wholly-owned subsidiary of the Company acquired all of the outstanding stock of United Poly Systems, LLC (“United Poly”), for a purchase price of $227,234. United Poly is a manufacturer of high density polyethylene (“HDPE”) pressure pipe and conduit, primarily serving the telecommunications, water infrastructure, renewables and energy markets. The purchase price allocation has not been finalized as the Company is finalizing working capital, inventory, intangible asset, deferred tax asset and liabilities and fixed asset fair values.

On May 19, 2022, Allied Tube and Conduit Corporation, wholly-owned subsidiary of the Company acquired the assets of Talon Products, LLC (“Talon”), for a purchase price of $4,193. Included in Talon’s purchase price is a purchase price payable of $402. Talon is a manufacturer of non-metallic, injection molded cable cleats, primarily serving the power distribution markets. The Company finalized the purchase price allocation of Talon in the fourth quarter of fiscal 2022.

On December 21, 2021, Atkore HDPE, LLC and Allied Tube and Conduit Corporation, wholly-owned subsidiaries of the Company, acquired the assets of Four Star Industries LLC (“Four Star”), for a purchase price of $23,195. Four Star is a manufacturer of high density polyethylene (HDPE) conduit, primarily serving the telecommunications, utility, infrastructure and datacom markets. The Company finalized the purchase price allocation of Four Star in the third quarter of fiscal 2022.

On December 20, 2021, Columbia-MBF Inc., a wholly-owned subsidiary of the Company acquired all of the outstanding stock of Sasco Tubes & Roll Forming Inc. (“Sasco”), for a purchase price of $16,184, of which $13,320 was paid at closing and additional purchase price payable of $2,864 was accrued. Sasco is a Canadian manufacturer of metal framing and related products serving the electrical, mechanical, construction and solar industries. The Company finalized the purchase price allocation of Sasco in the third quarter of fiscal 2022.

The acquisitions in fiscal 2022 were funded using cash-on-hand. The Company incurred approximately $3,424 in acquisition-related expenses for these acquisitions, which were recorded as a component of selling, general and administrative expenses.

9

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 for fiscal 2022:

(in thousands)	United Poly		Other		Total
Fair value of consideration transferred:
Cash consideration	$	227,234	$	93,044	$	320,278
Purchase price payable	—		12,628		12,628
Total consideration transferred	$	227,234	$	105,672	$	332,906
Fair value of assets acquired and liabilities assumed:
Cash	11,639		126		11,765
Accounts receivable	23,679		9,291		32,970
Inventories	13,455		8,111		21,566
Intangible assets	128,840		54,330		183,170
Fixed assets	13,648		8,533		22,181
Accounts payable	(11,940)		(5,086)		(17,026)
Income taxes	(15,542)		(2,075)		(17,617)
Other	(1,742)		244		(1,498)
Net assets acquired	162,037		73,474		235,511
Excess purchase price attributed to goodwill acquired	$	65,197	$	32,198	$	97,395

The Company estimates $31.1 million of the goodwill recognized by the fiscal 2022 acquisitions is deductible for tax purposes, $11.7 million that relates to United Poly and $19.4 million that relates to Cascade and Northwest Polymer. The Company estimates Goodwill recognized from the acquisitions in fiscal 2022 consists largely of the synergies and economies of scale from integrating this company with existing businesses.

The following table summarizes the fair value of intangible assets as of the acquisition date:

	United Poly			Other
(in thousands)	Fair Value		Weighted Average Useful Life (Years)	Fair Value		Weighted Average Useful Life (Years)
Customer relationships	$	111,700	11	$	50,020	9
Other	17,140		8	4,310		8
Total intangible assets	$	128,840		$	54,330

Net sales and net income of the acquired companies are included in the consolidated statement of operations for the post-acquisition period. Due to the immaterial nature of the acquisitions acquired in the first quarter of fiscal 2022, the Company did not include the pro forma results of operations for these acquisitions for the current period or the previous interim period.

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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 30, 2022		December 24, 2021
Interest cost		$	1,294	$	739
Expected return on plan assets		(1,257)		(1,348)
Amortization of actuarial loss		167		158
Net periodic benefit cost (credit)	5	$	204	$	(451)

5. OTHER (INCOME) AND EXPENSE, NET

Other (income) and expense, net consisted of the following:

	Three months ended
(in thousands)	December 30, 2022		December 24, 2021
Undesignated foreign currency derivative instruments	(14)		(176)
Foreign exchange loss (gain) on intercompany loans	(149)		319
Pension-related benefits	204		(451)
Other (income) and expense, net	$	41	$	(308)

6. INCOME TAXES    

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law. The IRA contains significant tax law changes, including a corporate alternative minimum tax of 15% on adjusted financial statement income, which if applicable for the Company would be effective beginning October 1, 2023, a 1% excise tax on stock repurchases after December 31, 2022, and various tax incentives which include, but are not limited to, credits related to the manufacturing of solar powered energy which will take effect January 1, 2023. The Company is currently evaluating this legislation and determining what impact it would have to the Company’s financial statements.

For the three months ended December 30, 2022 and December 24, 2021, the Company’s effective tax rate attributable to income before income taxes was 21.9% and 21.8%, respectively. For the three months ended December 30, 2022 and December 24, 2021, the Company’s income tax expense was $48,559 and $56,975 respectively. The increase in the current period effective tax rate was driven by a decrease in the excess tax benefit associated with stock compensation offset by a decrease in state tax expense.

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.

11

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 we have determined are more likely than not to be realized upon examination. We record interest and penalties related to unrecognized tax benefits as a component of income tax expense. During the three months ended December 30, 2022, the balance of unrecognized tax benefits increased by $1,671 primarily due to uncertain tax positions in various state jurisdictions.

For the three months ended December 30, 2022, 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.

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 30, 2022		December 24, 2021
Numerator:
Net income	$	173,492	$	204,843
Less: Undistributed earnings allocated to participating securities	2,807		3,642
Net income available to common shareholders	$	170,685	$	201,201
Denominator:
Basic weighted average common shares outstanding	40,085		45,980
Effect of dilutive securities: Non-participating employee stock options (1)	528		595
Diluted weighted average common shares outstanding	40,613		46,575
Basic earnings per share	$	4.26	$	4.38
Diluted earnings per share	$	4.20	$	4.32
(1) Stock options to purchase shares of common stock that would have been anti-dilutive are not included in the calculation. There were zero anti-dilutive options outstanding during the three months ended December 30, 2022 and December 24, 2021, respectively.

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8. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in accumulated other comprehensive loss by component for the three months ended December 30, 2022 and December 24, 2021.

(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 (loss)	62		11,262		11,324
Balance as of December 30, 2022	$	(16,733)	$	(22,089)	$	(38,822)

(in thousands)	Defined Benefit Pension Items		Currency Translation Adjustments		Total
Balance as of September 30, 2021	$	(19,318)	$	(9,408)	$	(28,726)
Other comprehensive loss before reclassifications	—		(1,458)		(1,458)
Amounts reclassified from accumulated other comprehensive income, net of tax	125		—		125
Net current period other comprehensive income (loss)	125		(1,458)		(1,333)
Balance as of December 24, 2021	$	(19,193)	$	(10,866)	$	(30,059)

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 80% and 82% of the Company’s inventories were valued at the lower of LIFO cost or market at December 30, 2022 and September 30, 2022, respectively. Interim LIFO determinations, including those at December 30, 2022, are based on management’s estimates of future inventory levels and costs for the remainder of the current fiscal year.

(in thousands)	December 30, 2022		September 30, 2022
Purchased materials and manufactured parts, net	$	152,805	$	166,038
Work in process, net	50,059		61,182
Finished goods, net	242,916		227,291
Inventories, net	$	445,780	$	454,511

Total inventories would be $29,358 higher and $64,550 higher than reported as of December 30, 2022 and September 30, 2022, respectively, if the first-in, first-out method was used for all inventories. As of December 30, 2022, and September 30, 2022, the excess and obsolete inventory reserve was $19,598 and $18,996, respectively.

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10. PROPERTY, PLANT AND EQUIPMENT

As of December 30, 2022, and September 30, 2022, property, plant and equipment and accumulated depreciation were as follows:

(in thousands)	December 30, 2022		September 30, 2022
Land	$	26,696	$	22,113
Buildings and related improvements	171,799		172,633
Machinery and equipment	437,739		427,460
Leasehold improvements	12,101		10,512
Software	40,022		36,884
Construction in progress	123,863		99,491
Property, plant and equipment, at cost	812,220		769,093
Accumulated depreciation	(393,670)		(378,873)
Property, plant and equipment, net	$	418,550	$	390,220

Depreciation expense for the three months ended December 30, 2022 and December 24, 2021 totaled $13,171 and $11,817 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, 2022	$	236,708	$	52,622	$	289,330
Goodwill acquired during year	30,806		14		30,820
Exchange rate effects	2,996		68		3,064
Balance as of December 30, 2022	$	270,510	$	52,704	$	323,214

Goodwill balances as of September 30, 2022 and December 30, 2022 include $3,924 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.

`

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The following table provides the gross carrying value, accumulated amortization and net carrying value for each major class of intangible asset:

		December 30, 2022						September 30, 2022
(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	$	587,768	$	(281,404)	$	306,364	$	532,768	$	(267,940)	$	264,828
Other	8	39,328		(11,603)		27,725		35,681		(10,602)		25,079
Total		627,096		(293,007)		334,089		568,449		(278,542)		289,907
Indefinite-lived intangible assets:
Trade names		92,811		—		92,811		92,799		—		92,799
Total		$	719,907	$	(293,007)	$	426,900	$	661,248	$	(278,542)	$	382,706

Other intangible assets consist of definite-lived trade names, technology, non-compete agreements and backlogs. Amortization expense for the three months ended December 30, 2022 and December 24, 2021 was $12,796 and $8,229, respectively. Expected amortization expense for intangible assets for the remainder of fiscal 2023 and over the next five years and thereafter is as follows:

(in thousands)
Remaining 2023	$	41,749
2024	49,999
2025	37,538
2026	36,017
2027	35,093
2028	25,808
Thereafter	107,885

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 30, 2022 and September 30, 2022 was as follows:

(in thousands)	December 30, 2022		September 30, 2022
Senior Secured Term Loan Facility due May 26, 2028	$	371,452	$	371,381
Senior Notes due June 2031	400,000		400,000
Deferred financing costs	(10,378)		(10,844)
Long-term debt	$	761,074	$	760,537

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

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subsidiaries of the Company (other than AII) that are guarantors of the Senior Notes. AII’s availability under the ABL Credit Facility was $312,905 as of December 30, 2022 and September 30, 2022.

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 (income) and expense, net within the condensed consolidated statements of operations. See Note 5, “Other (Income) and 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 30, 2022 or September 30, 2022, with the last such contract having expired in the third quarter of fiscal 2022.

The following table presents the Company’s assets and liabilities measured at fair value:

	December 30, 2022				September 30, 2022
(in thousands)	Level 1		Level 2		Level 1		Level 2
Assets
Cash equivalents	$	234,940	$	—	$	291,757	$	—

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:

	December 30, 2022				September 30, 2022
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Senior Secured Term Loan Facility due May 26, 2028	$	373,000	$	373,157	$	373,000	$	370,203
Senior Notes due June 2031	400,000		348,388		400,000		318,912
Total Debt	$	773,000	$	721,545	$	773,000	$	689,115

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.

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14. COMMITMENTS AND CONTINGENCIES

The Company has obligations related to commitments to purchase certain goods. As of December 30, 2022, such obligations were $262,500 for the rest of fiscal year 2023 and $9,067 for fiscal year 2024 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 September 30, 2022, the Company believes that the range of reasonably possible losses for Special Products Claims and other product liabilities is between $1,000 and $8,000.

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.

15. GUARANTEES

The Company had outstanding letters of credit totaling $12,095 supporting workers’ compensation and general liability insurance policies as of December 30, 2022. The Company also had surety bonds primarily related to performance guarantees on supply agreements and construction contracts, and payment of duties and taxes totaling $17,548 as of December 30, 2022.

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

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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, 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 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 30, 2022						December 24, 2021
(in thousands)	External Net Sales		Intersegment Sales		Adjusted EBITDA		External Net Sales		Intersegment Sales		Adjusted EBITDA
Electrical	$	638,705	$	—	$	243,836	$	640,344	$	1,339	$	279,547
Safety & Infrastructure	195,116		143		33,404		200,457		53		27,432
Eliminations	—		(143)				—		(1,392)
Consolidated operations	$	833,821	$	—			$	840,801	$	—

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Presented below is a reconciliation of operating Segment Adjusted EBITDA to Income before income taxes:

	Three months ended
(in thousands)	December 30, 2022		December 24, 2021
Operating segment Adjusted EBITDA
Electrical	$	243,836	$	279,547
Safety & Infrastructure	33,404		27,432
Total	$	277,240	$	306,979
Unallocated expenses (a)	(13,395)		(13,969)
Depreciation and amortization	(25,967)		(20,046)
Interest expense, net	(9,488)		(6,918)
Stock-based compensation	(5,270)		(3,427)
Other (b)	(1,069)		(801)
Income before income taxes	$	222,051	$	261,818
(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, 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 30, 2022 and December 24, 2021:

	Three months ended
(in thousands)	December 30, 2022		December 24, 2021
United States	$	750,087	$	757,398
Other Americas	20,554		22,487
Europe	52,030		50,454
Asia-Pacific	11,150		10,462
Total	$	833,821	$	840,801

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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 30, 2022 and December 24, 2021:

	Three months ended
(in thousands)	December 30, 2022		December 24, 2021
Metal Electrical Conduit and Fittings	$	111,158	$	149,876
Electrical Cable & Flexible Conduit	123,726		115,695
Plastic Pipe and Conduit	316,165		290,179
Other Electrical products	87,656		84,594
Electrical	638,705		640,344
Mechanical Pipe	78,774		111,243
Other Safety & Infrastructure products	116,342		89,214
Safety & Infrastructure	195,116		200,457
Net sales	$	833,821	$	840,801

17. SUBSEQUENT EVENTS

Subsequent to quarter end, the Company has repurchased 0.9 million shares at a cost of $102.6 million as of January 31, 2023.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this report. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward- looking statements. Factors that could cause or contribute to these differences include those factors discussed below and included or referenced elsewhere in this report, particularly in the sections entitled “Forward-Looking Statements” and “Risk Factors.”

Incremental Market Uncertainties

We continue to monitor developments related to the novel coronavirus (“COVID-19”) pandemic to assess its impact on our business. Further uncertainty and delays in our end-markets could have a material adverse impact on the demand for our products. Some jurisdictions may raise taxes to help cover pandemic-related costs, and disruptions to or adverse conditions in the financial industry could affect our ability to obtain financing on favorable terms or at all.

Factors that contribute to our ability to adjust to the outbreak include benefiting from mostly localized supply chains and continuing to take actions within our control to minimize the disruptive impacts of the outbreak. However, there can be no assurance that we will not be materially and adversely impacted in the future.

In addition to the uncertainties brought about by COVID-19, recent events, including central bank interest rate increases, inflation and the Russia-Ukraine conflict, are creating additional uncertainty in the global economy, generally, and in the markets we operate in. COVID-19, the Russia-Ukraine conflict and other factors have had and will continue to have adverse effects on global supply chains, which may impact some aspects of our business. Furthermore, we are mindful of the effects that adverse weather can have on our domestic supply chain.

RESULTS OF OPERATIONS

The consolidated results of operations for the three months ended December 30, 2022 and December 24, 2021 were as follows:

	Three months ended
(in thousands)	December 30, 2022		December 24, 2021		Change		% Change
Net sales	$	833,821	$	840,801	$	(6,980)	(0.8)	%
Cost of sales	499,468		485,993		13,475		2.8	%
Gross profit	334,353		354,808		(20,455)		(5.8)	%
Selling, general and administrative	89,977		78,151		11,826		15.1	%
Intangible asset amortization	12,796		8,229		4,567		55.5	%
Operating income	231,580		268,428		(36,848)		(13.7)	%
Interest expense, net	9,488		6,918		2,570		37.1	%
Other (income) and expense, net	41		(308)		349		(113.3)	%
Income before income taxes	222,051		261,818		(39,767)		(15.2)	%
Income tax expense	48,559		56,975		(8,416)		(14.8)	%
Net income	$	173,492	$	204,843	$	(31,351)	(15.3)	%

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Net sales

	% Change
Volume	5.2	%
Average selling prices	(12.4)	%
Foreign exchange	(0.9)	%
Acquisitions	7.0	%
Other	0.3	%
Net sales	(0.8)	%

Net sales decreased by $7.0 million, or 0.8%, to $833.8 million for the three months ended December 30, 2022, compared to $840.8 million for the three months ended December 24, 2021. The decrease in net sales is primarily attributed to decreased average selling prices across the Company’s products of $108.3 million and the unfavorable impact of foreign exchange rates of $7.6 million. These decreases were partially offset by increased net sales of $61.3 million from companies acquired during fiscal 2022 and fiscal 2023 and increased sales volume of $45.6 million. Average selling prices have declined as the Company continues to see normalization of pricing.

Cost of sales

	% Change
Volume	6.0	%
Average input costs	(12.3)	%
Foreign exchange	(1.3)	%
Acquisitions	8.6	%
Other	1.8	%
Cost of sales	2.8	%

Cost of sales increased by $13.5 million, or 2.8%, to $499.5 million for the three months ended December 30, 2022 compared to $486.0 million for the three months ended December 24, 2021. The increase was primarily due to recent acquisitions during fiscal 2022 and fiscal 2023 of $41.2 million and higher sales volume of $29.0 million. This was partially offset by lower input costs of steel, copper and PVC resin of $59.2 million.

Selling, general and administrative

Selling, general and administrative expenses increased by $11.8 million, or 15.1%, to $90.0 million for the three months ended December 30, 2022 compared to $78.2 million for the three months ended December 24, 2021. The increase was primarily due to increased general spending on business improvement initiatives of $5.7 million, recent acquisitions in fiscal 2022 and 2023 of $5.5 million and $2.1 million spread across a variety of other spend categories, partially offset by lower variable compensation of $1.1 million and by lower transaction costs of $0.4 million,

Intangible asset amortization

Intangible asset amortization expense increased to $12.8 million for the three months ended December 30, 2022 compared to $8.2 million for the three months ended December 24, 2021. Increased amortization expense resulted from additional intangible assets acquired in business combinations in fiscal 2022 and 2023.

Interest expense, net

Interest expense, net increased by $2.6 million, or 37.1% to $9.5 million for the three months ended December 30, 2022 compared to $6.9 million for the three months ended December 24, 2021. The increase is primarily due to increased interest rates on our Senior Secured Term Loan Facility.

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Other (income) and expense, net