Atkore (ATKR) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) The unaudited financial statements for Q1 FY2024 show decreased net sales and net income, with stable assets and strong but lower operating cash flow Condensed Consolidated Statements of Operations Net sales decreased 4.2% to $798.5 million, leading to a 24.2% drop in operating income and a 20.2% decline in net income Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three months ended Dec 29, 2023 | Three months ended Dec 30, 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Net sales | $798,481 | $833,821 | -4.2% | | Gross profit | $290,540 | $334,353 | -13.1% | | Operating income | $175,458 | $231,580 | -24.2% | | Net income | $138,381 | $173,492 | -20.2% | | Diluted EPS | $3.61 | $4.20 | -14.0% | Condensed Consolidated Balance Sheets Total assets remained stable at $2.935 billion, with a slight decrease in liabilities and an increase in total equity Balance Sheet Summary (in thousands) | Account | Dec 29, 2023 | Sep 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $380,922 | $388,114 | | Total current assets | $1,498,144 | $1,538,490 | | Total Assets | $2,935,392 | $2,935,009 | | Total current liabilities | $505,357 | $564,604 | | Long-term debt | $763,225 | $762,687 | | Total Liabilities | $1,433,047 | $1,466,890 | | Total Equity | $1,502,345 | $1,468,119 | Condensed Consolidated Statements of Cash Flows Operating cash flow decreased to $158.1 million, while investing activities used less cash due to lower acquisition spending Cash Flow Summary (in thousands) | Activity | Three months ended Dec 29, 2023 | Three months ended Dec 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $158,106 | $198,851 | | Net cash used in investing activities | ($50,304) | ($117,187) | | Net cash used for financing activities | ($118,154) | ($164,831) | | Decrease in cash and cash equivalents | ($7,192) | ($80,924) | Notes to Condensed Consolidated Financial Statements Detailed notes cover accounting policies, segment performance, and the impact of solar tax credits, with no new acquisitions this quarter - The company operates through two main segments: - Electrical: Manufactures products for electrical power systems like conduit and cable, serving contractors via the wholesale channel - Safety & Infrastructure: Designs and manufactures solutions like metal framing, mechanical pipe, and perimeter security for critical infrastructure[27] - Under the Inflation Reduction Act (IRA), the company recognizes transferable solar tax credits, resulting in a $14.9 million reduction to revenue and a $19.1 million benefit (reduction) to cost of sales within the Safety & Infrastructure segment[35][36][37] - No acquisition activity occurred during the three months ended December 29, 2023, though the company paid out $6.0 million related to a prior-year acquisition[41] - Subsequent to the quarter's end, the company repurchased 148.4 thousand shares for $22.8 million and declared a quarterly cash dividend of $0.32 per share[95] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 4.2% net sales decrease driven by lower prices despite higher volume, impacting net income and segment profitability Results of Operations Net sales declined 4.2% due to lower prices, despite volume gains, resulting in reduced gross profit, operating income, and net income Drivers of Net Sales Change (YoY) | Driver | % Change | | :--- | :--- | | Volume | 12.6% | | Average selling prices | (15.5)% | | Solar tax credits | (1.8)% | | Foreign exchange | 0.2% | | Acquisitions | 0.3% | | Total Net Sales | (4.2)% | - The increase in Cost of Sales was primarily due to higher sales volume ($72.7 million) and freight costs ($11.1 million), partially offset by lower input costs for steel, copper, and PVC resin ($62.3 million) and the benefit of solar tax credits ($19.1 million)[104] - The effective income tax rate decreased to 17.5% from 21.9% in the prior year, mainly due to a larger excess tax benefit associated with stock compensation[106] Segment Results Electrical segment sales declined due to price drops, while Safety & Infrastructure sales grew on volume, but both saw EBITDA margins decrease Electrical Segment Performance (in thousands) | Metric | Q1 FY2024 | Q1 FY2023 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $593,661 | $638,705 | (7.1)% | | Adjusted EBITDA | $204,360 | $243,836 | (16.2)% | | Adjusted EBITDA margin | 34.4% | 38.2% | -3.8 p.p. | Safety & Infrastructure Segment Performance (in thousands) | Metric | Q1 FY2024 | Q1 FY2023 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $205,127 | $195,259 | 5.1% | | Adjusted EBITDA | $19,512 | $33,404 | (41.6)% | | Adjusted EBITDA margin | 9.5% | 17.1% | -7.6 p.p. | Liquidity and Capital Resources The company maintains strong liquidity with $380.9 million in cash and full availability on its $325 million ABL credit facility - Cash and cash equivalents totaled $380.9 million as of December 29, 2023[115] - The company has access to an ABL Credit Facility with aggregate commitments of $325.0 million, with approximately $322.4 million available and no outstanding borrowings as of quarter-end[116] Summary of Cash Flows (in thousands) | Activity | Three months ended Dec 29, 2023 | Three months ended Dec 30, 2022 | | :--- | :--- | :--- | | Operating activities | $158,106 | $198,851 | | Investing activities | ($50,304) | ($117,187) | | Financing activities | ($118,154) | ($164,831) | Quantitative and Qualitative Disclosures about Market Risk No material changes to quantitative and qualitative market risk disclosures have occurred since the latest Annual Report on Form 10-K - There have been no material changes to the quantitative and qualitative disclosures about market risks previously disclosed in the Annual Report on Form 10-K[133] Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Based on an evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[135] - There were no changes to the company's internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[135] PART II. OTHER INFORMATION Legal Proceedings The company refers to Note 14 for legal proceedings, noting no pending 'Special Products Claims' due to indemnification - The company refers to Note 14 of the financial statements for discussion of legal proceedings[137] - Historically, the company faced lawsuits related to anti-microbial coated steel sprinkler pipe ('Special Products Claims'), for which Johnson Controls, Inc. (formerly Tyco) indemnifies the company, with no such claims currently pending[77][78] Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K have occurred - There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K[137] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 721,000 shares under its $1.3 billion program, with $212.7 million remaining available - The board of directors has authorized a share repurchase program for up to $1.3 billion of its common stock, with $212.7 million remaining available as of December 29, 2023[137] Issuer Purchases of Equity Securities (Q1 FY2024) | Period | Total Shares Purchased (thousands) | Avg. Price Paid Per Share | | :--- | :--- | :--- | | Oct 28 - Dec 1, 2023 | 494 | $129.41 | | Dec 2 - Dec 29, 2023 | 227 | $143.12 | | Total | 721 | N/A | Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - During the quarter ended December 29, 2023, no trading arrangements were adopted or terminated by directors or officers of the Company[141] Exhibits This section lists exhibits, including CEO and CFO certifications required by Sarbanes-Oxley Act and XBRL data files - The report includes required certifications from the CEO and CFO pursuant to Sarbanes-Oxley Act Sections 302 and 906[143] - Interactive Data Files (XBRL documents) are included as part of the filing[143]