Advanced Drainage Systems(US:WMS)2023-11-02 20:05Financial Performance - Net sales for Q2 Fiscal 2024 decreased by $104.0 million, or 11.8%, to $780.2 million compared to $884.2 million in the prior year quarter[57] - Year-to-date net sales decreased by 13.4% to $1.6 billion, with net income down 9.0% to $310.9 million[61] - Consolidated net sales for the six months ended September 30, 2023, decreased by $240.1 million, or 13.4%, compared to the same period in fiscal 2022, primarily due to lower demand in the U.S. construction and agriculture markets[76] - International sales decreased by $4.0 million, or 5.5%, to $69.4 million, indicating a decline in global demand[57] Profitability - Gross profit decreased by $17.3 million, or 5.4%, to $302.7 million, primarily due to decreased volume and unfavorable fixed cost absorption[58] - Total gross profit for the six months ended September 30, 2023, decreased by $37.9 million, or 5.6%, with a consolidated cost of goods sold decreasing by $202.2 million, or 18.0%[78] - Adjusted EBITDA decreased by $17.0 million, or 6.4%, to $246.3 million, with an Adjusted EBITDA margin of 31.6% compared to 29.8% in the prior year[58] - Adjusted EBITDA for the six months ended September 30, 2023, was $527.6 million, with an adjusted EBITDA margin of 33.9%[87] Expenses - Selling, general and administrative expenses increased to $91.7 million, or 11.8% of net sales, reflecting investments in engineering and innovation initiatives[70] - Selling, general and administrative expenses increased by $3.1 million to $178.2 million, representing 11.4% of net sales, up from 9.7% in the prior year[79] - Interest expense increased by $3.7 million due to rising interest rates[71] - Interest expense rose by $14.3 million due to increased average debt levels and higher interest rates[80] Cash Flow and Capital Expenditures - Free cash flow increased by 4.1% to $376.2 million, reflecting improved cash generation despite lower sales[61] - Free cash flow for the six months ended September 30, 2023, was $376.2 million, compared to $361.5 million in the same period of 2022[91] - Cash provided by operating activities increased by $21.8 million to $458.9 million during the six months ended September 30, 2023, primarily driven by changes in net working capital[95] - Capital expenditures for the six months ended September 30, 2023, totaled $82.6 million, with anticipated capital expenditures of approximately $200 to $225 million for fiscal year 2024[97][98] Debt and Compliance - Total debt as of September 30, 2023, was $1.32 billion, with a leverage ratio of 1.0[92] - Working capital increased to $804.0 million as of September 30, 2023, from $638.7 million as of March 31, 2023[94] - As of September 30, 2023, the company is in compliance with its debt covenants and has no changes in debt disclosures from the Fiscal 2023 Form 10-K[102] - The South American Joint Venture has approximately $1.4 million of outstanding debt subject to the company's guarantees, which is not expected to impact financial condition or liquidity[103] Interest Rate Risks - A 1.0% increase in interest rates on variable-rate debt would increase annual forecasted interest expense by approximately $4.2 million based on borrowings as of September 30, 2023[110] - If the Revolving Credit Facility is fully drawn, each 1.0% change in the applicable interest rate would alter interest expense by approximately $10.2 million for the twelve months ended September 30, 2023[110] Forward-Looking Statements and Market Risks - Forward-looking statements include expectations regarding consolidated results of operations, financial condition, and growth strategies, but are subject to risks and uncertainties[105] - The company cautions that actual results may differ materially from forward-looking statements due to various factors, including competition and economic conditions[106] - Market risks include changes in interest rates, credit, raw material supply prices, and foreign currency exchange rates, with no material change in exposure reported[109] - The company does not engage in speculative, non-operating transactions, limiting exposure to market risks to normal business operations[109] - The company does not undertake any obligation to update forward-looking statements beyond legal requirements[108]