Atkore (US:ATKR)2020-11-19 15:52Financial Data and Key Metrics Changes - Atkore reported record earnings in Q4 and for the full fiscal year 2020, with double-digit year-over-year improvements in net income, adjusted EBITDA, and adjusted EPS, despite a 5% decline in revenues during the quarter [5][6] - For the full year, net income and adjusted EBITDA increased despite an 8% decline in sales due to the COVID-19 pandemic [6][8] - Adjusted EBITDA for Q4 increased to $98 million, resulting in an adjusted EBITDA margin of approximately 21%, up 290 basis points year-over-year [9][10] Business Line Data and Key Metrics Changes - The Electrical Raceway segment led profit and margin improvement with adjusted EBITDA of $13 million and adjusted EBITDA margins above 25%, despite a nearly 3% decline in net sales [10] - The Mechanical Products & Solutions segment experienced a more than 11% decline in net sales primarily due to lower volumes, although overall profitability remained satisfactory [11] Market Data and Key Metrics Changes - Net sales declined by $24 million due to lower volumes, partially offset by higher selling prices in PVC products [9][10] - The company noted strong performance in residential markets and data centers, which are expected to offset slower growth in markets like hotels [16][18] Company Strategy and Development Direction - Atkore acquired the assets of Queen City Plastics to expand its PVC business, indicating a commitment to growth and investment in new opportunities [7] - The company plans to invest approximately $50 million to $55 million in CapEx to enhance digital and customer projects, reflecting a focus on future growth [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving growth in net sales, adjusted EBITDA, and adjusted EPS for fiscal year 2021, with expectations of a 2% to 6% increase in net sales [13][14] - The company anticipates a strong Q1, with a modest increase in net sales and a significant increase in adjusted EBITDA, while acknowledging potential fluctuations throughout the year [14][29] Other Important Information - Atkore ended FY 2020 with $284 million in cash, up $161 million year-over-year, and repaid $40 million of debt, resulting in a net leverage ratio of 1.6x [11][12] - The company improved its global safety incident rating by more than 20% during the year, highlighting a commitment to employee safety [6] Q&A Session Summary Question: Can you share key assumptions for EPS guidance? - Management noted slight increases in markets, particularly in residential and data centers, which are expected to offset slower growth in other areas [16][18] Question: Any comments on inventory levels in the channel? - Management indicated that distributors are managing inventory well, targeting around six weeks of inventory, which may lead to slight increases in stocking as the market grows [22] Question: How do you view the impact of the new administration on your business? - Management expressed optimism about potential infrastructure investments and support for solar energy, which could benefit Atkore's mechanical business [40] Question: What is the outlook for new construction versus renovation? - Management expects low single-digit growth in new construction, with stronger growth anticipated in renovation markets [32][34] Question: Why reduce debt instead of increasing share buybacks? - Management emphasized the importance of reducing gross debt for financial prudence, especially in light of future refinancing needs [36]