Atkore Tops Q4 Earnings and Revenue Estimates

HARVEY, Ill. — Atkore International Group Inc. announced earnings for its fiscal 2018 full-year and fourth quarter ended September 30, 2018.

Fiscal 2018 Highlights

• Net income per diluted share increased 95% from $1.27 to $2.48; Adjusted Net income per diluted share increased $1.13 to $2.78
• Net income increased by $52 million to $137 million; Adjusted EBITDA of $272 million
• Net income margin increased 180 basis points to 7.4%; Adjusted EBITDA Margin of 14.8%

Fourth-Quarter Highlights

• Net income per diluted share increased 113% to $0.66; Adjusted Net income per diluted share of $0.79
• Net income increased by $11.8 million to $32.7 million; Adjusted EBITDA of $71.1 million
• Net income margin increased 150 basis points to 6.8%; Adjusted EBITDA Margin of 14.9%

“For Fiscal Year 2018, we are pleased to deliver strong financial results with double digit growth in Net sales, Adjusted EBITDA and Earnings per share on a year over year basis. Our focus on serving customers combined with the disciplined use of our business system help drive traction on key initiatives, which enables Atkore to continue to meet its commitments to our customers, ourselves and our shareholders,” commented Bill Waltz, Atkore President and Chief Executive Officer.

Fiscal 2018 Full-Year Results

Net sales for fiscal 2018 increased $331.2 million to $1,835.1 million, an increase of 22.0% compared to $1,503.9 million for fiscal 2017. Net sales increased by $165.6 million due to increased average market prices for the Metal and PVC electrical conduit and fittings product categories and the pass-through impact of higher average input costs of steel, copper, and freight. Additionally, net sales increased $118.5 million due to the acquisitions of Marco Cable Management, Flexicon Limited, Calpipe Industries, LLC during fiscal 2017 and Cii during fiscal 2018, partially offset by a decrease in net sales of $10.0 million resulting from the divestiture of Flexhead Industries, Inc. and SprinkFLEX, LLC (together “Flexhead”). Lastly, net sales increased by $51.8 million due to higher volume of products from the mechanical pipe and metal framing and fittings product categories sold within the Mechanical Products & Solutions segment.

Gross profit increased by $76.8 million to $438.1 million for fiscal 2018, an increase 21.3% compared to $361.3 million for fiscal 2017. Gross margins increased primarily due to increased average market prices for the Metal and PVC electrical conduit and fittings product categories, partially offset by the pass-through impact of higher average input costs of steel, copper and freight costs. Gross margin remained flat at 23.9% in fiscal 2018 compared to 24.0% in fiscal 2017.

Selling, general and administrative expenses increased $43.4 million, or 23.7% to $226.3 million for fiscal 2018 compared to $182.9 million for fiscal 2017. The Company had $26.0 million in additional expenses due to the acquisitions of Marco Cable Management, Flexicon Limited, Calpipe Industries, LLC during fiscal 2017 and Cii during fiscal 2018, partially offset by a decrease in expenses of $1.5 million resulting from the divestiture of Flexhead. Incentive-based compensation and stock-based compensation expense increased $9.9 million and $1.9 million, respectively during fiscal 2018 compared to fiscal 2017. Additionally, the Company recorded $5.0 million of higher commissions expense resulting from the increased sales volume compared to the prior year. The increase in expense is partially offset by the $7.2 million pre-tax reversal of expense related to the Antidumping Duty Order for Malleable Iron Pipe Fittings.

Net income increased by $52.0 million to $136.6 million for fiscal 2018, as compared to $84.6 million for fiscal 2017. Adjusted net income increased $40.7 million to $150.4 million for fiscal 2018 compared to $109.7 million for fiscal 2017. The increase in both net income and adjusted net income was primarily driven by higher operating income of $14.1 million, the gain on the sale of Flexhead of $27.6 million, and lower tax expense of $11.8 million.

Adjusted EBITDA increased by $43.9 million or 19.3%, to $271.5 million for fiscal 2018, as compared to $227.6 million for fiscal 2017. The increase was primarily due to higher gross profit, partially offset by higher selling, general and administrative expenses attributed to acquisitions in fiscal 2018 and 2017.

Diluted earnings per share on a GAAP basis was $2.48 for fiscal 2018, an increase of $1.21 from fiscal 2017. Adjusted diluted earnings per share was $2.78 per share for fiscal 2018 compared to $1.65 for fiscal 2017.

2018 Fourth Quarter Results

Net sales for the fourth quarter of 2018 increased to $477.6 million, an increase of 20.7% compared to $395.8 million for the prior-year period, driven primarily by higher net average selling prices of $63.2 million resulting from the pass-through impact of higher average input costs of steel, copper and freight, and increased average market prices for Metal and PVC electrical conduit and fittings product categories. Additionally, net sales increased $26.4 million due to the acquisitions of Marco Cable Management, Flexicon Limited, Calpipe Industries, LLC during fiscal 2017 and Cii during fiscal 2018, partially offset by a decrease in net sales of $4.3 million resulting from the divestiture of Flexhead.

Gross profit increased by $22.2 million to $111.7 million for the fourth quarter of 2018, as compared to $89.5 million for the prior year. Gross margins increased primarily due to increased average market prices for the Metal and PVC electrical conduit and fittings product categories, partially offset by the pass-through impact of higher average input costs of steel, copper and freight costs. Gross margins increased from 22.6% in the prior-year period to 23.4% in the fourth quarter fiscal 2018.

SG&A expenses increased $12.3 million or 27.5%, to $57.1 million for fiscal 2018, as compared to $44.8 million for fiscal 2017, largely driven by $5.1 million of higher expense resulting from the fiscal 2018 and 2017 acquisitions, $2.8 million of higher incentive-based compensation expense, and $1.4 million higher stock-based compensation expense during the fourth quarter of fiscal 2018.

Net income increased by $11.8 million to $32.7 million for the fourth quarter, as compared to $20.9 million for the prior-year period due to lower income tax expense of $10.7 million. Adjusted net income increased $11.5 million to $38.3 million compared to $26.8 million for the prior-year period.

Adjusted EBITDA increased by $11.5 million, or 19.3%, to $71.1 million for the fourth quarter, as compared to $59.6 million for the prior-year period. Net income margin increased from 5.3% in the prior-year period to 6.8% and Adjusted EBITDA Margin decreased 10 basis points from 15.0% to 14.9%.

Diluted earnings per share on a GAAP basis was $0.66 for the fourth quarter fiscal 2018, an increase of $0.35 from fiscal 2017. Adjusted diluted earnings per share was $0.79 per share for fiscal 2018 compared to $0.40 for fiscal 2017.

Segment Results

Electrical Raceway

Electrical Raceway net sales increased $61.8 million, or 21.1%, to $355.0 million for the fourth quarter, as compared to $293.1 million for the prior-year period. The increase was primarily due to increased average market prices for the Metal and PVC electrical conduit and fittings product categories and the pass-through impact of higher average input costs of steel, copper and freight of $47.1 million. Additionally, net sales increased by $26.4 million resulting from acquisitions during fiscal 2017 and fiscal 2018. The increase in net sales was partially offset by lower volume of products sold of $9.8 million primarily from the armored cable and fittings and flexible electrical conduit and fittings product categories.

Adjusted EBITDA increased $17.3 million, or 34.1%, to $68.2 million for the fourth quarter, as compared to $50.9 million for the prior-year period, and Adjusted EBITDA Margin increased from 17.4% to 19.2%. The increase in Adjusted EBITDA was largely due to the pass-through impact of higher average input costs of steel, copper and freight and incremental Adjusted EBITDA resulting from acquisitions. The increase in EBITDA was partially offset by an increase in freight costs and lower volume of products from the armored cable and fittings and flexible electrical conduit and fittings product categories sold.

Mechanical Products & Solutions

MP&S net sales increased $20.0 million, or 19.4%, to $123.0 million for the fourth quarter, as compared to $103.0 million for the prior-year period. The increase was primarily due to $8.4 million of higher volume of products sold within the mechanical pipe and metal framing and fittings product categories as well as higher average selling prices of $16.1 million, partly offset by a decrease in net sales of $4.3 million resulting from the Flexhead divestiture.

Adjusted EBITDA declined $3.3 million, or 21.8%, to $11.8 million for the fourth quarter, as compared to $15.1 million for the prior-year period. Adjusted EBITDA Margin decreased to 9.6% from 14.6%. Adjusted EBITDA decreased due to an increase in average input costs, which exceeded the increase in average selling prices, partially offset by higher volume of product categories sold.

Full Year 2019 Guidance¹

The Company expects fiscal year 2019 Adjusted EBITDA to be in the range of $285 – $305 million and Adjusted EPS to be in the range of $3.00 – $3.30.

Fiscal 2019 First Quarter Guidance¹

The Company expects the first quarter of fiscal 2019 Adjusted EBITDA to be in the range of $67 – $72 million and Adjusted EPS to be in the range of $0.65 – $0.75.

¹ Reconciliations of the forward-looking full-year and fiscal first quarter 2018 outlook for Adjusted EBITDA and Adjusted EPS are not being provided as the Company does not currently have sufficient data to accurately estimate the variables and individual adjustments for such reconciliations.