HARVEY, Ill. — Atkore International Group Inc. announced earnings for its fiscal 2016 full-year and fourth quarter ended September 30, 2016.
Fiscal 2016 Highlights
- Net income per diluted share increased $1.02 to $0.94; Adjusted Net income per diluted share increased $1.12 to $1.32
- Net income increased by $64 million; Adjusted EBITDA increased by 43.3% to $235 million
- Net income margin of 3.9%; Adjusted EBITDA Margin increased by 490 basis points to 15.5%
- Gross profit increased by 35.2% to $369 million
- Gross margin expanded by 840 basis points to 24.2%
- Total debt to Adjusted EBITDA improved to 2.7x, down from 4.0x. Leverage ratio improved to 1.8x, down from 3.5x
Fourth-Quarter Highlights
- Net sales of $416 million; Adjusted net sales increased 5.0%, driven by higher selling prices and volume
- Gross profit increased by 31.8% to $93 million
- Gross margin expanded by 620 basis points to 22.4%
- Net income increased by $42.6 million; Adjusted EBITDA increased by 13.6% to $61 million
- Net income margin of 3.7%; Adjusted EBITDA Margin increased by 110 basis points to 14.7%
“We are pleased with our fourth quarter and full fiscal year results, which delivered expanded earnings, increased margins and improved cash flow compared to the same periods in 2015,” commented John Williamson, Atkore’s President and CEO. “Our continued focus on product quality, service levels, and business value strengthened the customer experience and drove greater shareholder return, despite raw material pricing volatility and changing market dynamics.”
Fiscal 2016 Full-Year Results
Net sales for fiscal 2016 decreased to $1,523.4 million, a decline of 11.9% compared to $1,729.2 million for fiscal 2015. Adjusted net sales, which exclude the Fence and Sprinkler product lines, which the Company exited in the first quarter of fiscal 2016, decreased 2.3%, compared to fiscal 2015 due to the impact of lower commodity costs, which we passed through to our customers, offset in part by the impact of an additional week during fiscal 2016.
Gross profit increased by $95.9 million to $368.7 million for fiscal 2016. Despite the challenges of year-over-year volatility in commodity costs and changing market dynamics, gross margin expanded from 15.8% in fiscal 2015 to 24.2% in fiscal 2016 due to the Company’s focus on strategic pricing, improved manufacturing productivity and lower freight and warehousing costs.
SG&A expenses increased $33.6 million, or 18.1%, to $219.4 million for fiscal 2016, as compared to $185.8 million for fiscal 2015, largely driven by costs associated with the Company’s initial public offering, which occurred during the third quarter of fiscal 2016.
Net income increased by $63.8 million to $58.8 million for fiscal 2016, as compared to net loss of $5.0 million for fiscal 2015. Adjusted net income increased $70.0 million to $82.6 million for fiscal 2016 compared to $12.7 million for fiscal 2015. The increase in both net income and adjusted net income was primarily driven by expanded operating margins.
Adjusted EBITDA increased by $71.1 million, or 43.3%, to $235.0 million for fiscal 2016, as compared to $164.0 million for fiscal 2015. Net income margin increased to 3.9% for fiscal 2016 and Adjusted EBITDA Margin increased from 10.6% for fiscal 2015 to 15.5% for fiscal 2016. These increases are tied to Atkore’s strategic pricing initiatives while meeting customer expectations of product availability, delivery service levels and co-loading capabilities.
Basic and diluted earnings per share on a GAAP basis were $0.94 for fiscal 2016, an increase of $1.02 from fiscal 2015. Adjusted diluted earnings per share was $1.32 per share for fiscal 2016 compared to $0.20 for fiscal 2015.
The ratio of total debt to Adjusted EBITDA improved to 2.7x at September 30, 2016, down from 4.0x at September 25, 2015. The Company’s leverage ratio, defined as the ratio of net debt to Adjusted EBITDA on a trailing twelve month basis, improved to 1.8x at September 30, 2016, from 3.5x at September 25, 2015.
2016 Fourth Quarter Results
Net sales for the fourth quarter of 2016 decreased to $416.2 million, a decline of 4.9% compared to $437.8 million for the prior-year period.
Adjusted net sales, which exclude the Fence and Sprinkler product lines which the Company exited in the first quarter of fiscal 2016, increased 5.0%, as compared to the fourth quarter of 2015, driven primarily by an additional week of activity during the fourth quarter of 2016.
Gross profit increased by $22.5 million to $93.3 million for the fourth quarter of 2016, as compared to $70.8 million for the prior-year period. Gross margin expanded from 16.1% in the prior-year period to 22.4% in the fourth quarter. Gross margin increased primarily due to the Company’s ability to pass through its material cost increases and execute our strategic pricing initiatives by meeting customer expectations and improved productivity in manufacturing freight and warehousing costs.
SG&A expenses increased $1.9 million, or 3.4%, to $57.0 million for the fourth quarter, as compared to $55.1 million for the prior-year period.
Net income increased by $42.6 million to net income of $15.6 million for the fourth quarter, as compared to net loss of $27.1 million for the prior-year period. Adjusted net income increased $34.6 million to adjusted net income of $22.5 million compared to an adjusted net loss of $12.1 million for prior-year period. The increase in both net income and adjusted net income was primarily driven by the Company’s expanded operating margins.
Adjusted EBITDA increased by $7.4 million, or 13.6%, to $61.4 million for the fourth quarter, as compared to $54.0 million for the prior-year period. Net income margin increased from a net loss margin of 6.2% to net income margin of 3.7% and Adjusted EBITDA Margin increased from 13.6% to 14.7%.
Basic and diluted earnings per share on a GAAP basis were $0.25 and $0.24, respectively, for the quarter. Adjusted diluted earnings per share increased by $0.11 to $0.35 per share for the fourth quarter as compared to diluted loss of $0.19 per share for the prior-year period.
Segment Results
Electrical Raceway
Electrical Raceway net sales increased $18.8 million, or 7.4%, to $273.4 million for the fourth quarter, as compared to $254.6 million for the prior-year period, primarily due to the additional week during the fourth quarter of fiscal 2016. Net sales decreased $17.5 million, or 1.7%, to $988.1 million for fiscal 2016 compared to $1,005.6 million for fiscal 2015.
Adjusted EBITDA increased $12.6 million, or 38.2%, to $45.5 million for the fourth quarter, as compared to $32.9 million for the prior-year period, and Adjusted EBITDA Margin increased from 12.9% to 16.7%. Adjusted EBITDA increased $67.9 million, or 63.6%, to $174.6 million for fiscal 2016 compared to $106.7 million for fiscal 2015. Adjusted EBITDA Margin increased from 10.6% to 17.7%. The quarterly and full-year increases were primarily attributable to our ability to maintain an average selling price, which decreased less than the decrease in raw material costs due to our ability to execute the Company’s strategic pricing strategy.
Mechanical Products & Solutions
MP&S net sales declined $40.2 million, or 21.9%, to $143.3 million for the fourth quarter, as compared to $183.6 million for the prior-year period. Adjusted net sales, which exclude the Fence and Sprinkler businesses, increased $1.2 million, or 0.8%, due to an additional week during the fourth quarter of fiscal 2016, offset in part by lower volume of products sold.
Net sales declined $187.6 million, or 25.9% to $537.1 million for fiscal 2016 compared to $724.8 million for fiscal 2015. Adjusted net sales, which exclude the Fence and Sprinkler businesses, declined $16.9 million, or 3.1% due to lower average selling prices and lower volume resulting from lower demand impacting certain end markets, offset in part by an additional week during fiscal 2016.
Adjusted EBITDA decreased $2.9 million, or 10.7%, to $23.8 million for the fourth quarter as compared to the prior-year period. Adjusted EBITDA Margin decreased to 16.6% from 18.8% in the fourth quarter of 2015 due to the mix of products sold.
Adjusted EBITDA increased $9.0 million, or 11.3%, to $88.6 million for fiscal 2016 compared to $79.6 million for fiscal 2015. Adjusted EBITDA Margin increased to 16.7% from 14.6% in fiscal 2015 due to improved productivity in manufacturing including lower freight and warehouse costs.
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