Atkore Inc. - FORM 10-Q - August 6, 2018

Attached files

file	filename
EX-32 - EXHIBIT 32 - Atkore Inc.	a3q18exhibit32.htm
EX-31 - EXHIBIT 31 - Atkore Inc.	a3q18exhibit31.htm
EX-10.3 - EXHIBIT 10.3 - Atkore Inc.	firstamendmenttowilliams.htm
EX-10.2 - EXHIBIT 10.2 - Atkore Inc.	williamsonretirementagre.htm
EX-10.1 - EXHIBIT 10.1 - Atkore Inc.	waltzofferletter.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________

FORM 10-Q

_________________________________________



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

For the quarterly period ended June 29, 2018



o	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)

_________________________________________

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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. (Check one):



Large accelerated filer	x		Accelerated filer	o

Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	o

			Emerging growth company	o
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 7(a)(2)(B) of the Securities Act. o

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

As of July 27, 2018, there were 46,036,941 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	22
Item 3. Quantitative and Qualitative Disclosures about Market Risk	34
Item 4. Controls and Procedures	34

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	36
Item 1A. Risk Factors	36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3. Defaults Upon Senior Securities	36
Item 4. Mine Safety Disclosures	36
Item 5. Other Information	36
Item 6. Exhibits	37
Signatures	38

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 29, 2018			June 30, 2017 As Adjusted*			June 29, 2018			June 30, 2017 As Adjusted*
Net sales		$	498,014		$	397,745		$	1,357,572		$	1,108,127
Cost of sales		377,685			305,260			1,031,219			836,369
Gross profit		120,329			92,485			326,353			271,758
Selling, general and administrative		57,482			42,491			169,195			138,143
Intangible asset amortization	12	7,694			5,546			24,146			16,628
Operating income		55,153			44,448			133,012			116,987
Interest expense, net		12,442			5,811			28,322			20,872
Loss on extinguishment of debt		—			—			—			9,805
Other income, net	6	(1,840		)	(259		)	(27,516		)	(6,785		)
Income before income taxes		44,551			38,896			132,206			93,095
Income tax expense	7	10,352			11,431			28,260			29,313
Net income		$	34,199		$	27,465		$	103,946		$	63,782

Net income per share
Basic	8	$	0.73		$	0.43		$	1.92		$	1.01
Diluted	8	$	0.70		$	0.41		$	1.84		$	0.96

* Adjusted due to the adoption of ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. See Note 1, ''Basis of Presentation and Summary of Significant Accounting Policies'' for additional information.

See Notes to unaudited condensed consolidated financial statements.

ATKORE INTERNATIONAL GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



		Three months ended					Nine months ended
(in thousands)	Note	June 29, 2018			June 30, 2017		June 29, 2018			June 30, 2017
Net income		$	34,199		$	27,465	$	103,946		$	63,782
Other comprehensive income, net of tax:
Change in foreign currency translation adjustment		(3,293		)	916		(1,793		)	(75		)
Change in unrecognized loss related to pension benefit plans		65			326		194			977
Total other comprehensive (loss) income	9	(3,228		)	1,242		(1,599		)	902
Comprehensive income		$	30,971		$	28,707	$	102,347		$	64,684

See Notes to unaudited condensed consolidated financial statements.

ATKORE INTERNATIONAL GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



(in thousands, except share and per share data)	Note	June 29, 2018			September 30, 2017
Assets
Current Assets:
Cash and cash equivalents		$	109,519		$	45,718
Accounts receivable, less allowance for doubtful accounts of $1,547 and $1,239, respectively		260,564			224,427
Inventories, net	10	207,535			200,003
Prepaid expenses and other current assets		26,854			35,611
Total current assets		604,472			505,759
Property, plant and equipment, net	11	212,585			208,619
Intangible assets, net	12	300,406			344,289
Goodwill	12	170,340			147,716
Deferred tax assets	7	—			1,657
Non-trade receivables		6,452			7,052
Total Assets		$	1,294,255		$	1,215,092
Liabilities and Equity
Current Liabilities:
Short-term debt and current maturities of long-term debt	13	$	7,630		$	4,215
Accounts payable		154,331			125,618
Income tax payable		1,808			2,581
Accrued compensation and employee benefits		29,997			26,387
Other current liabilities		59,111			53,036
Total current liabilities		252,877			211,837
Long-term debt	13	898,509			571,863
Deferred tax liabilities	7	19,100			17,464
Other long-term tax liabilities		6,544			6,771
Pension liabilities		23,200			25,239
Other long-term liabilities		20,262			21,047
Total Liabilities		1,220,492			854,221
Equity:
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 45,972,141 and 63,305,434 shares issued and outstanding, respectively		461			634
Treasury stock, held at cost, 260,900 and 260,900 shares, respectively		(2,580		)	(2,580		)
Additional paid-in capital		443,918			423,232
Accumulated deficit		(348,455		)	(42,433		)
Accumulated other comprehensive loss	9	(19,581		)	(17,982		)
Total Equity		73,763			360,871
Total Liabilities and Equity		$	1,294,255		$	1,215,092

See Notes to unaudited condensed consolidated financial statements.

ATKORE INTERNATIONAL GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



		Nine months ended
(in thousands)	Note	June 29, 2018			June 30, 2017
Operating activities:
Net income		$	103,946		$	63,782
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		49,255			40,242
Deferred income taxes	7	(4,354		)	(1,748		)
Gain on sale of a business	6	(27,575		)	—
Loss on extinguishment of debt		—			9,805
Stock-based compensation		9,828			9,368
Other adjustments to net income		4,642			(2,457		)
Changes in operating assets and liabilities, net of effects from acquisitions
Accounts receivable		(40,160		)	(16,481		)
Inventories	10	(18,038		)	(17,486		)
Accounts payable		29,420			2,918
Other, net		13,614			(22,160		)
Net cash provided by operating activities		120,578			65,783
Investing activities:
Capital expenditures		(26,314		)	(15,284		)
Divestiture of business		42,631			—
Acquisition of businesses, net of cash acquired		(3,350		)	(19,606		)
Proceeds from sale of assets held for sale		—			3,024
Other, net		1,475			74
Net cash provided by (used in) investing activities		14,442			(31,792		)
Financing activities:
Borrowings under credit facility	13	309,000			—
Repayments under credit facility	13	(394,000		)	—
Repayments of short-term debt	13	(5,850		)	(4,200		)
Repayments of long-term debt	13	(1,217		)	(639,850		)
Issuance of long-term debt	13	426,217			498,750
Payment for debt financing costs and fees		(5,801		)	(4,375		)
Issuance of common stock		10,874			12,069
Repurchase of common stock		(410,157		)	—
Other, net		(114		)	(15		)
Net cash used for financing activities		(71,048		)	(137,621		)
Effects of foreign exchange rate changes on cash and cash equivalents		(171		)	(449		)
Increase (decrease) in cash and cash equivalents		63,801			(104,079		)
Cash and cash equivalents at beginning of period		45,718			200,279
Cash and cash equivalents at end of period		$	109,519		$	96,200
Supplementary Cash Flow information
Capital expenditures, not yet paid		$	363		$	90

See Notes to unaudited condensed consolidated financial statements.

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			Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Equity
Balance as of September 25, 2015	62,453		$	626		$	(2,580	)	$	352,505	$	(173,241	)	$	(21,033	)	$	156,277
Net income	—		—			—			—		58,796			—			58,796
Cumulative effect adjustment for a change in accounting principle	—		—			—			—		1,303			—			1,303
Other comprehensive loss	—		—			—			—		—			(4,917		)	(4,917		)
Modification of liability award to equity-based compensation	—		—			—			43,870		—			—			43,870
Stock-based compensation	—		—			—			1,865		—			—			1,865
Issuance of common stock	5		—			—			52		—			—			52
Balance as of September 30, 2016	62,458		626			(2,580		)	398,292		(113,142		)	(25,950		)	257,246
Net income	—		—			—			—		84,639			—			84,639
Other comprehensive income	—		—			—			—		—			7,968			7,968
Stock-based compensation	—		—			—			12,788		—			—			12,788
Issuance of common stock	1,628		16			—			12,152		—			—			12,168
Repurchase of common stock	(781	)	(8		)	—			—		(13,930		)	—			(13,938		)
Balance as of September 30, 2017	63,305		634			(2,580		)	423,232		(42,433		)	(17,982		)	360,871
Net income	—		—			—			—		103,946			—			103,946
Other comprehensive income	—		—			—			—		—			(1,599		)	(1,599		)
Stock-based compensation	—		—			—			9,828		—			—			9,828
Issuance of common stock	14,844		16			—			10,858		—			—			10,874
Repurchase of common stock	(32,177	)	(189		)	—			—		(409,968		)	—			(410,157		)
Balance as of June 29, 2018	45,972		$	461		$	(2,580	)	$	443,918	$	(348,455	)	$	(19,581	)	$	73,763

See Notes to unaudited condensed consolidated financial statements.

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" or "Atkore") 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, 2017 filed with the U.S. Securities and Exchange Commission (the "SEC") on November 29, 2017, 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 14, ''Fair Value Measurements'' for further detail.

Recent Accounting Pronouncements

A summary of recently adopted accounting guidance are 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
2017-07 Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost	The ASU requires an entity to report the service cost component of pension cost and postretirement benefit cost as compensation expense during the employee's service period. The other components of net periodic pension benefit costs will be presented outside a subtotal of income from operations.	Prior to the adoption of ASU 2017-07, pension costs were reported as cost of sales and selling, general and administrative expenses on the Company's condensed consolidated statements of income. As a result of the early adoption of ASU 2017-07, the Company reclassified a net credit of $376 and $1,128 from operating income to other income, net on the condensed consolidated statements of operations for the three and nine months ended June 30, 2017, respectively.	4	2018
2017-09 Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting	The ASU does not require an entity to apply modification accounting if the fair value, vesting conditions and classification of the awards do not change.	No material impact on the consolidated financial statements.		2018

A summary of accounting guidance not yet adopted are 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
ASU 2018-02 Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income	The ASU provided entities the option to reclassify tax effects stranded in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act to retained earnings.	Under evaluation.	2020
2014-09 Revenue from Contracts with Customers	The 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 will adopt the guidance in the first quarter of 2019 using the modified retrospective method. Based on the reviews and assessments performed to date, the Company expects the pattern of revenue recognition for substantially all of its businesses to be unchanged. The Company anticipates an immaterial impact to retained earnings upon adoption.	2019
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 and is currently evaluating the impact of adoption of this ASU on its consolidated financial statements.	2020

2. 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 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.

The Company acquired all of the outstanding stock of Calpipe Industries, LLC ("Calpipe") on September 29, 2017 and Flexicon Limited ("Flexicon") on September 1, 2017. The Company incurred approximately $0 and $558 for acquisition-related expenses for Calpipe which were recorded as a component of selling, general and administrative expenses for the three and nine months ended June 29, 2018. On May 18, 2017, Unistrut, Ltd, a wholly-owned indirect subsidiary of the Company acquired all of the outstanding stock of Marco Cable Management.

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 2017:



(in thousands)	Calpipe			Other			Total
Fair value of consideration transferred:
Cash consideration	$	110,155		$	87,649		$	197,804
Working capital adjustment	120			—			120
Purchase price payable	2,278			—			2,278
Settlement of pre-existing relationship	(382		)	—			(382		)
Total consideration transferred	112,171			87,649			199,820
Fair value of assets acquired and liabilities assumed:
Cash	5,051			8,830			13,881
Accounts receivable	10,369			7,589			17,958
Inventories	18,360			7,221			25,581
Intangible assets	54,860			40,100			94,960
Fixed assets	3,245			11,242			14,487
Accounts payable	(1,601		)	(1,550		)	(3,151		)
Other	(8,263		)	(11,485		)	(19,748		)
Net assets acquired	82,021			61,947			143,968
Excess purchase price attributed to goodwill acquired	$	30,150		$	25,702		$	55,852

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



	Calpipe			Other
($ in thousands)	Fair Value		Weighted Average Useful Life (Years)	Fair Value		Weighted Average Useful Life (Years)
Customer relationships	$	50,680	9.9	$	37,341	10.0
Other	4,180		8.4	2,759		8.0
Total intangible assets	$	54,860	9.9	$	40,100	9.9

The purchase price allocation, intangible asset values and related estimates of useful lives for Flexicon, Calpipe and Cii are preliminary, as the Company is finalizing its fair value estimates of intangible assets, fixed assets and working capital items.

The following table presents unaudited pro forma results of operations for the three and nine months ended June 30, 2017 as if the Calpipe acquisition had occurred as of the first day of fiscal 2017:



	Three months ended		Nine months ended
(in thousands)	June 30, 2017		June 30, 2017
Pro forma net sales	$	415,047	$	1,160,032
Pro forma net income	27,597		64,178

3. 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	$	42,631
Net assets divested	15,056
Gain on sale of a business	$	27,575

Gain on sale of a business includes a working capital adjustment of $838 for the three months ended June 29, 2018. Net assets divested included $2,626 of goodwill.

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 cost was as follows:



		Three months ended						Nine months ended
(in thousands)	Note	June 29, 2018			June 30, 2017			June 29, 2018			June 30, 2017
Service cost		$	—		$	512		$	—		$	1,536
Interest cost		1,025			948			3,074			2,845
Expected return on plan assets		(1,604		)	(1,650		)	(4,811		)	(4,950		)
Amortization of actuarial loss		86			326			257			977
Net periodic benefit (credit) cost	6	$	(493	)	$	136		$	(1,480	)	$	408

During fiscal 2018, the Company adopted ASU 2017-07 Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. As a result, service costs are included as a component of cost of sales and selling, general and administrative expenses on the Company's condensed consolidated statements of operations. All other components of net periodic benefit costs are included as a component of other income, net on the Company's condensed consolidated statements of operations. Certain prior year amounts have been reclassified to conform to the current year presentation in our condensed consolidated financial statements. Prior to the adoption of ASU 2017-07, pension costs were reported as cost of sales and selling, general and administrative expenses on the Company's condensed consolidated statements of income. As a result of the early adoption of ASU 2017-07, the Company reclassified a net credit of $376 and $1,128 from operating income to other income, net on the condensed consolidated statements of operations for the three and nine months ended June 30, 2017, respectively.

5. 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			Other (a)			Severance			Other (a)			Severance			Total
Balance as of September 30, 2016	$	841		$	—		$	—		$	539		$	—		$	1,380
Charges	527			439			422			63			71			1,522
Utilization	(917		)	(209		)	(166		)	(556		)	(71		)	(1,919		)
Reversal	—			(230		)	—			(36		)	—			(266		)
Exchange rate effects	(2		)	—			22			—			—			20
Balance as of September 30, 2017	449			—			278			10			—			737
Charges	322			741			97			178			98			1,436
Utilization	(785		)	(681		)	(178		)	(158		)	(98		)	(1,900		)
Reversal	—			—			(191		)	—			—			(191		)
Exchange rate effects	14			—			(6		)	—			—			8
Balance as of June 29, 2018	$	—		$	60		$	—		$	30		$	—		$	90

(a) Primarily related to Atkore's commitment to close certain facilities as part of the Company's continuing effort to streamline its manufacturing footprint. The Company recorded restructuring charges to close facilities of $600 for the nine months ending June 29, 2018 and $298 for the year ending September 30, 2017. The Company does not anticipate incurring significant future charges under these facility closures.

The Company expects to utilize all restructuring accruals as of June 29, 2018 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					Nine months ended
(in thousands)	June 29, 2018		June 30, 2017			June 29, 2018		June 30, 2017
Total restructuring charges (credits), net	$	407	$	(101	)	$	1,245	$	700

6. OTHER INCOME, NET

Other income, net consisted of the following:



	Three months ended						Nine months ended
(in thousands)	June 29, 2018			June 30, 2017 As Adjusted*			June 29, 2018			June 30, 2017 As Adjusted*
Gain on sale of a business	$	(838	)	$	—		$	(27,575	)	$	—
Gain on sale of joint venture	—			—			—			(5,774		)
Undesignated foreign currency derivative instruments	(3,757		)	243			(22		)	243
Foreign exchange gain (loss) on intercompany loans	3,374			(126		)	795			(126		)
Debt modification costs	—			—			892			—
Pension-related benefits	(493		)	(376		)	(1,480		)	(1,128		)
Other	(126		)	—			(126		)	—
Other income, net	$	(1,840	)	$	(259	)	$	(27,516	)	$	(6,785	)

* Adjusted due to the adoption of ASU 2017-07 as of October 1, 2017. See Note 1, ''Basis of Presentation and Summary of Significant Accounting Policies'' for additional information.

7. INCOME TAXES

On December 22, 2017, "H.R.1," also known as the "Tax Cuts and Jobs Act," was signed into law. H.R.1 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 and the elimination of the domestic production activities deduction. 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 Company has estimated the impact of the new legislation on its financial position based on information currently available and will continue to assess the impact as the year progresses and additional guidance is received. As a fiscal year filer, the Company will have 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 following years. The value of the Company’s net deferred tax liability on the balance sheet decreased as a result of the newly enacted tax rates creating a tax benefit to the Company; the preliminary analysis of the impact as of the third quarter of fiscal year 2018 is an estimated decrease to the net deferred tax liability of $5,533. The Company has an accumulated earnings and profit deficit in the foreign jurisdictions in which it operates. As a result, it does not anticipate an income tax liability from the one-time transition tax on the deemed repatriation of its foreign earnings. The tax impact of the new legislation was based on the Company's best estimate. The provisional amounts incorporate assumptions made based upon the Company's current interpretation of H.R.1 and may change as the Company receives additional clarification and implementation guidance. Further adjustments to the provisional amount will be included in income from continuing operations as an adjustment to income tax expense on the Company's consolidated statements of operations through the first quarter of fiscal 2019.

For the three months ended June 29, 2018 and June 30, 2017, the Company's effective tax rate attributable to income before income taxes was 23.2% and 29.4%, respectively. For the three months ended June 29, 2018 and June 30, 2017, the Company's income tax expense was $10,352 and $11,431, respectively. The decrease in the effective tax rate was primarily due to the enactment of new tax legislation, H.R.1. on December 22, 2017, which reduced the federal statutory rate from 35.0% to 21.0%. As a fiscal year filer, the Company will have 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 following years.

For the nine months ended June 29, 2018 and June 30, 2017, the Company's effective tax rate attributable to income before income taxes was 21.4% and 31.5%, respectively. For the nine months ended June 29, 2018 and June 30, 2017, the Company's income tax expense was $28,260 and $29,313 respectively. The decrease in the effective tax rate was primarily due to the tax rate reduction together with the tax benefit of the revaluation of the Company's deferred tax liabilities as a result of the enactment of H.R.1.

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. 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 three and nine months ended June 29, 2018, the balance of unrecognized tax benefits decreased by $0 and $227, respectively, due to a payment upon the resolution of a state audit item. The Company is fully indemnified by its former parent for uncertain tax positions taken prior to December 22, 2010.

For the nine months ended June 29, 2018, 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.

8. 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 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. Prior to the three months ended June 29, 2018, the Company calculated earnings per share by applying the treasury stock method as net income allocated to participating securities was not significant.

The following table sets forth the computation of basic and diluted earnings per share:



	Three months ended				Nine months ended
(in thousands, except per share data)	June 29, 2018		June 30, 2017		June 29, 2018		June 30, 2017
Numerator:
Net income	$	34,199	$	27,465	$	103,946	$	63,782
Less: Undistributed earnings allocated to participating securities	422		89		1,048		161
Net income available to common shareholders	$	33,777	$	27,376	$	102,898	$	63,621

Denominator:
Basic weighted average common shares outstanding	46,262		63,817		53,592		63,239
Effect of dilutive securities: Non-participating employee stock options ⁽¹⁾	2,150		3,073		2,423		3,346
Diluted weighted average common shares outstanding	48,412		66,890		56,015		66,585
Basic earnings per share	$	0.73	$	0.43	$	1.92	$	1.01
Diluted earnings per share	$	0.70	$	0.41	$	1.84	$	0.96


(1) Stock options to purchase approximately 0.4 million and 0.4 million shares of common stock were outstanding during the three and nine months ended June 29, 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 2.2 million and 0.2 million shares of common stock were outstanding during the three and nine months ended June 30, 2017, respectively, but were not included in the calculation of diluted earnings per share as the impact of these options would have been anti-dilutive.

9. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in accumulated other comprehensive loss by component, net of tax:



(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	—			(1,793		)	(1,793		)
Amounts reclassified from accumulated other comprehensive loss	194			—			194
Net current period other comprehensive (loss) income	194			(1,793		)	(1,599		)
Balance as of June 29, 2018	$	(10,251	)	$	(9,330	)	$	(19,581	)

10. 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 81% and 75% of the Company's inventories were valued at the lower of LIFO cost or market at June 29, 2018 and September 30, 2017, respectively. Interim LIFO determinations, including those at June 29, 2018, are based on management's estimates of future inventory levels and costs for the remainder of the current fiscal year.



(in thousands)	June 29, 2018		September 30, 2017
Purchased materials and manufactured parts, net	$	50,601	$	49,168
Work in process, net	21,452		17,598
Finished goods, net	135,482		133,237
Inventories, net	$	207,535	$	200,003

Total inventories would be $26,653 and $4,915 higher than reported as of June 29, 2018 and September 30, 2017, respectively, if the first-in, first-out method was used for all inventories. As of June 29, 2018 and September 30, 2017, the excess and obsolete inventory reserve was $8,118 and $8,432, respectively.

11. PROPERTY, PLANT AND EQUIPMENT

As of June 29, 2018 and September 30, 2017, property, plant and equipment at cost and accumulated depreciation were as follows:



(in thousands)	June 29, 2018			September 30, 2017
Land	$	13,295		$	13,296
Buildings and related improvements	107,581			105,154
Machinery and equipment	275,630			263,575
Leasehold improvements	7,150			6,744
Construction in progress	26,868			16,160
Property, plant and equipment	430,524			404,929
Accumulated depreciation	(217,939		)	(196,310		)
Property, plant and equipment, net	$	212,585		$	208,619

Depreciation expense for the three months ended June 29, 2018 and June 30, 2017 totaled $8,498 and $7,795, respectively. Depreciation expense for the nine months ended June 29, 2018 and June 30, 2017 totaled $25,109 and $23,614, respectively.

12. 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, 2017	$	108,527	$	39,189		$	147,716
Goodwill divested during year	—		(2,626		)	(2,626		)
Goodwill acquired during year	827		—			827
Purchase price adjustments	24,376		—			24,376
Exchange rate effects	47		—			47
Balance as of June 29, 2018	$	133,777	$	36,563		$	170,340

Goodwill balances as of October 1, 2017 and June 29, 2018 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 Accounting Standards Codification 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. During the nine months ended June 29, 2018, the Company sold the assets of Flexhead, which represented a portion of a reporting unit. The Company allocated the goodwill of the reporting unit to Flexhead using a relative fair value approach. The sale represented a triggering event and required the Company to perform a goodwill impairment test for the related reporting unit. The results of the test did not indicate an impairment.

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



		June 29, 2018							September 30, 2017
($ 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	$	330,879	$	(133,833	)	$	197,046	$	350,129	$	(118,273	)	$	231,856
Other	8	16,003		(5,523		)	10,480		27,819		(9,266		)	18,553
Total		346,882		(139,356		)	207,526		377,948		(127,539		)	250,409
Indefinite-lived intangible assets:
Trade names		92,880		—			92,880		93,880		—			93,880
Total		$	439,762	$	(139,356	)	$	300,406	$	471,828	$	(127,539	)	$	344,289

Other intangible assets consist of definite-lived trade names, technology, non-compete agreements and backlogs. Amortization expense for the three months ended June 29, 2018 and June 30, 2017 was $7,694 and $5,546, respectively. Amortization expense for the nine months ended June 29, 2018 and June 30, 2017 was $24,146 and $16,628, respectively. Expected amortization expense for intangible assets for the remainder of fiscal 2018 and over the next five years and thereafter is as follows:



(in thousands)
Remaining 2018	$	7,505
2019	29,819
2020	29,260
2021	28,414
2022	28,325
2023	28,205
Thereafter	55,998

Actual amounts of amortization may differ from estimated amounts due to additional intangible asset acquisitions, impairment of intangible assets and other events.

13. DEBT

Debt as of June 29, 2018 and September 30, 2017 was as follows:



(in thousands)	June 29, 2018			September 30, 2017
First Lien Term Loan Facility due December 22, 2023	$	914,418		$	495,134
ABL Credit Facility	—			85,000
Deferred financing costs	(8,598		)	(4,496		)
Other	319			440
Total debt	$	906,139		$	576,078
Less: Current portion	7,630			4,215
Long-term debt	$	898,509		$	571,863

The asset based credit facility ("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 $286,159 and $172,994 as of June 29, 2018 and September 30, 2017, respectively.

On February 2, 2018, AII entered into the (i) First Amendment to Amended and Restated First Lien Credit Agreement, by and among AII, Deutsche Bank AG New York Branch, as administrative agent and collateral agent, and the other financial institutions party thereto to, among other things, decrease the interest margins applicable to the ABR Loans and Eurodollar Loans to LIBOR plus 2.75%, and (ii) Increase Supplement (the "Increase Supplement") to, among other things, incur incremental first lien secured term loans in aggregate principal amount of $425.0 million. The Company used the proceeds from the Increase Supplement to 1) repurchase approximately 17.2 million shares of common stock from CD&R Allied Holdings, L.P. ("the CD&R Investor") for a total purchase price of approximately $375 million, 2) repay $42.0 million of outstanding loans under the ABL Credit Facility and 3) pay $5.8 million in related fees and expenses. The revisions to the First Lien Term Loan were accounted for as a debt modification, resulting in immediate expensing of related financing costs of $892 within other income, net on the condensed consolidated statements of operations for the nine months ended June 29, 2018.

14. 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 five years. Short-term forward currency contracts are recorded in 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, net within the condensed consolidated statements of operations. See Note 6, ''Other Income, net'' for further detail.

The total notional amount of undesignated forward currency contracts were £48.3 million and £52.6 million as of June 29, 2018 and September 30, 2017, 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:



	June 29, 2018						September 30, 2017
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets
Cash equivalents	$	79,132	$	—	$	—	$	571	$	—	$	—
Liabilities
Forward currency contracts	—		2,612		—		—		2,936		—

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:



	June 29, 2018				September 30, 2017
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
First Lien Term Loan Facility due December 22, 2023	$	915,400	$	914,027	$	496,250	$	498,979

In determining the approximate fair value of its long-term debt, the Company used the trading value among financial institutions, which were classified 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.

15. COMMITMENTS AND CONTINGENCIES

The Company has obligations related to commitments to purchase certain goods. As of June 29, 2018, such obligations were $145,899 for the rest of fiscal year 2018 and $2,601 for fiscal year 2019. 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., 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 for Special Products Claims and other product liability matters were $4,763 and $5,872 as of June 29, 2018 and September 30, 2017, respectively. As of June 29, 2018, the Company believes that the range of losses for Special Products Claims and other product liabilities is between $3,000 and $10,000.

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 claims, including for Special Products Claims contingencies. However, it is possible that additional reserves could be required in the future that could have a material adverse effect on the Company's business, financial condition, results of operations or cash flows. This additional loss or range of losses cannot be recorded at this time, as it is not reasonably estimable.

During fiscal 2017, the U.S. Department of Commerce ruled on a scope request in relation to an Antidumping Duty Order for Malleable Iron Pipe Fittings from China. The ruling subjects certain of the Company's imports of conduit fittings within the Atkore Steel Components Inc. (ASCI) business (acquired in November 2014) to antidumping duties, which are incremental to the duties previously paid upon importation. The Company appealed the scope decision and established an accrual of $7,501 during second quarter of fiscal 2017 for the related contingent liability with the related expense recorded in selling, general and administrative expenses in the Company's condensed consolidated statements of operations which covers the post-acquisition period through the date of the scope ruling. On appeal, the Court of International Trade ordered the Department of Commerce to re-examine certain aspects of its prior scope ruling, and after doing so, the Department filed an amended scope ruling for the Court’s consideration. The amended scope ruling finds the ASCI products, at issue in the matter, outside the scope of the aforesaid Antidumping Duty Order. On August 3, 2018, the Court sustained Commerce’s new scope determination and entered judgment thereupon. As Commerce implements this new ruling with instructions to its offices at various ports, the Company will seek to recover certain anti-dumping duties. Commerce has a 60-day period to appeal the Court’s decision. The Company will review related accruals and adjust as deemed appropriate subject to the outcome of the appeal process.

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.

16. GUARANTEES

The Company had outstanding letters of credit totaling $9,881 supporting workers' compensation and general liability insurance policies as of June 29, 2018. The Company also had surety bonds primarily related to performance guarantees on supply agreements and construction contracts, and payment of duties and taxes totaling $27,543 as of June 29, 2018.

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.

17. RELATED PARTY TRANSACTIONS

On January 22, 2018, the Company announced a stock repurchase transaction whereby the Company agreed to repurchase from the CD&R Investor, a related party, approximately 17.2 million shares of the Company's common stock, par value $0.01 per share, at a per share price equal to $21.77, for a total purchase price of $375 million, subject to the terms and conditions set forth in the stock purchase agreement. Following the stock repurchase transaction and secondary offerings of the Company's common stock in February and May 2018, the CD&R Investor no longer owned any of the company's common stock as of June 29, 2018.

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 new construction and 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 before income taxes, adjusted to exclude unallocated expenses, depreciation and amortization, interest expense, net, loss (gain) on extinguishment of debt, restructuring and impairments, stock-based compensation, consulting fees, multi-employer pension withdrawal, certain legal matters, transaction costs, gain on sale of a business, gain on sale of joint venture and other items, such as inventory reserves and adjustments and realized or unrealized gain (loss) on foreign currency transactions.

Intersegment transactions primarily consist of product sales at designated transfer prices on an arms-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 due to the shared nature of activities. Recorded amounts represent a proportional amount of the quantity of product produced for each segment.



	Three months ended
	June 29, 2018							June 30, 2017
(in thousands)	External Net Sales		Intersegment Sales			Adjusted EBITDA		External Net Sales		Intersegment Sales			Adjusted EBITDA
Electrical Raceway	$	369,812	$	521		$	74,461	$	288,111	$	166		$	49,661
MP&S	128,202		37			$	12,013	109,634		30			$	17,363
Eliminations	—		(558		)			—		(196		)
Consolidated operations	$	498,014	$	—				$	397,745	$	—



	Nine months ended
	June 29, 2018							June 30, 2017
(in thousands)	External Net Sales		Intersegment Sales			Adjusted EBITDA		External Net Sales		Intersegment Sales			Adjusted EBITDA
Electrical Raceway	$	1,010,523	$	1,120		$	187,025	$	800,677	$	980		$	138,465
MP&S	347,049		74			$	39,544	307,450		75			$	48,601
Eliminations	—		(1,194		)			—		(1,055		)
Consolidated operations	$	1,357,572	$	—				$	1,108,127	$	—

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



	Three months ended						Nine months ended
(in thousands)	June 29, 2018			June 30, 2017			June 29, 2018			June 30, 2017
Operating segment Adjusted EBITDA
Electrical Raceway	$	74,461		$	49,661		$	187,025		$	138,465
MP&S	12,013			17,363			39,544			48,601
Total	86,474			67,024			226,569			187,066
Unallocated expenses ^(a)	(9,810		)	(4,991		)	(26,077		)	(19,020		)
Depreciation and amortization	(16,192		)	(13,341		)	(49,255		)	(40,242		)
Interest expense, net	(12,442		)	(5,811		)	(28,322		)	(20,872		)
Loss on extinguishment of debt	—			—			—			(9,805		)
Restructuring and impairments	(407		)	101			(1,245		)	(700		)
Stock-based compensation	(3,494		)	(3,064		)	(9,828		)	(9,368		)
Certain legal matters	—			—			(2,286		)	(7,501		)
Transaction costs	(768		)	(845		)	(2,676		)	(2,543		)
Gain on sale of a business	838			—			27,575			—
Gain on sale of joint venture	—			—			—			5,774
Other	352			(177		)	(2,249		)	10,306
Income before income taxes	$	44,551		$	38,896		$	132,206		$	93,095

(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.

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".

U.S. Federal Income Tax Reform

On December 22, 2017, Congress enacted H.R. 1, which reforms major aspects of the U.S. federal income tax law affecting the Company. See Note 7, ''Income Taxes'' to the Company's unaudited condensed consolidated financial statements for additional information.

Use of Non-GAAP Measures

Adjusted EBITDA and Adjusted EBITDA Margin

We use Adjusted EBITDA and Adjusted EBITDA Margin in evaluating the performance of our business, and we use each in the preparation of our annual operating budgets and as indicators of business performance and profitability. We believe Adjusted EBITDA and Adjusted EBITDA Margin allow us to readily view operating trends, perform analytical comparisons and identify strategies to improve operating performance.

We define Adjusted EBITDA as net income (loss) before: depreciation and amortization, interest expense, net, loss (gain) on extinguishment of debt, income tax expense (benefit), restructuring and impairments, stock-based compensation, consulting fees, multi-employer pension withdrawal, certain legal matters, transaction costs, gain on sale of a business, gain on sale of joint venture and other items, such as inventory reserves and adjustments and realized or unrealized gain (loss) on foreign currency transactions. We believe Adjusted EBITDA, when presented in conjunction with comparable accounting principles generally accepted in the United States of America ("GAAP") measures, is useful for investors because management uses Adjusted EBITDA in evaluating the performance of our business. We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of Net sales.

Adjusted EBITDA is not considered a measure of financial performance under GAAP and the items excluded therefrom are significant components in understanding and assessing our financial performance. Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation or as an alternative to such GAAP measures as net income (loss), cash flows provided by or used in operating, investing or financing activities or other financial statement data presented in our consolidated financial statements as an indicator of financial performance or liquidity. Some of these limitations are:


•	Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs;


•	Adjusted EBITDA does not reflect interest expense, net, or the requirements necessary to service interest or principal payments on debt;


•	Adjusted EBITDA does not reflect income tax expense (benefit) or the cash requirements to pay taxes;


•	Adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; and


•	although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

Because Adjusted EBITDA is not a measure determined in accordance with GAAP and is susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.

The following table sets forth a reconciliation of net income to Adjusted EBITDA for the three and nine months ended June 29, 2018 and June 30, 2017:



	Three months ended				Nine months ended
(in thousands)	June 29, 2018		June 30, 2017		June 29, 2018		June 30, 2017
Net income	$	34,199	$	27,465	$	103,946	$	63,782
Interest expense, net	12,442		5,811		28,322		20,872
Income tax expense	10,352		11,431		28,260		29,313
Depreciation and amortization	16,192		13,341		49,255		40,242
Loss on extinguishment of debt	—		—		—