Attached files
| file | filename |
|---|---|
| EX-99.1 - ATKR 1Q17 EXHIBIT 99.1 - Atkore Inc. | atkr1q17exhibit991.htm |
| 8-K - ATKR 1Q17 FORM 8-K - Atkore Inc. | atkr1q17form8-k.htm |
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First Quarter 2017 Earnings Presentation
February 7, 2017
1
Cautionary statements
This presentation contains forward-looking statements that are subject to known and unknown risks and uncertainties, many of which are beyond our control. All statements other than statements of historical
fact included in this presentation are forward-looking statements. Forward-looking statements appearing throughout this presentation include, without limitation, statements regarding our intentions, beliefs,
assumptions or current expectations concerning, among other things, financial position; results of operations; cash flows; prospects; growth strategies or expectations; customer retention; the outcome (by
judgment or settlement) and costs of legal, administrative or regulatory proceedings, investigations or inspections, including, without limitation, collective, representative or any other litigation; and the impact of
prevailing economic conditions. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “believes,”
“expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,” “anticipates” and other comparable terms. We caution you that forward-looking
statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and
the development of the market in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this presentation. In addition, even if our results of
operations, financial condition and cash flows, and the development of the market in which we operate, are consistent with the forward-looking statements contained in this presentation, those results or
developments may not be indicative of results or developments in subsequent periods. A number of important factors, including, without limitation, the risks and uncertainties discussed under the captions “Risk
Factors” in the Annual Report on Form 10-K for the fiscal year ended September 30, 2016, filed with the U.S. Securities and Exchange Commission on November 29, 2016 (File No. 001-37793)and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Quarterly Report on Form 10-Q for the fiscal quarter ended December 30, 2016, filed with the U.S. Securities
and Exchange Commission on February 7, 2017 (File No. 001-37793), could cause actual results and outcomes to differ materially from those reflected in the forward-looking statements.
Because of these risks, we caution that you should not place undue reliance on any of our forward-looking statements. New risks and uncertainties arise from time to time, and it is impossible for us to predict
those events or how they may affect us. Further, any forward-looking statement speaks only as of the date on which it is made. We undertake no obligation to revise the forward-looking statements in this
presentation after the date of this presentation.
Market data and industry information used throughout this presentation are based on management’s knowledge of the industry and the good faith estimates of management. We also relied, to the extent
available, upon management’s review of independent industry surveys, forecasts and publications and other publicly available information prepared by a number of third party sources. All of the market data
and industry information used in this presentation involves a number of assumptions and limitations which we believe to be reasonable, and you are cautioned not to give undue weight to such estimates.
Although we believe that these sources are reliable, we cannot guarantee the accuracy or completeness of this information, and we have not independently verified this information. While we believe the
estimated market position, market opportunity and market size information included in this presentation are generally reliable, such information, which is derived in part from management’s estimates and
beliefs, is inherently uncertain and imprecise. Projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are subject to a high degree of
uncertainty and risk due to a variety of factors, including those described above. These and other factors could cause results to differ materially from those expressed in our estimates and beliefs and in the
estimates prepared by independent parties.
We present Adjusted net sales, Adjusted EBITDA. Adjusted EBITDA margin, Adjusted net income, Adjusted earnings per share, Net debt (total debt less cash and cash equivalents), and Leverage ratio (net
debt or total debt less cash and cash equivalents over Adjusted EBITDA on trailing twelve month basis) to help us describe our operating and financial performance. Adjusted net sales, Adjusted EBITDA,
Adjusted EBITDA margin, Adjusted net income, Adjusted earnings per share, and Leverage ratio are non-GAAP financial measures commonly used in our industry and have certain limitations and should not
be construed as alternatives to net income, net sales and other income data measures (as determined in accordance with generally accepted accounting principles in the United States, or GAAP), or as better
indicators of operating performance. Adjusted net sales, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, Adjusted earnings per share, Net debt (total debt less cash and cash equivalents),
and Leverage ratio (net debt or total debt less cash and cash equivalents over Adjusted EBITDA on a trailing twelve month basis), as defined by us may not be comparable to similar non-GAAP measures
presented by other issuers. Our presentation of such measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. See the appendix to this
presentation for a reconciliation of Adjusted net sales to net sales, Adjusted EBITDA to net income, Adjusted net income to net earnings per share to earnings per share, and net debt over Adjusted EBITDA on
a trailing twelve month basis.
Fiscal Periods - The Company has a fiscal year that ends on September 30th. It is the Company's practice to establish quarterly closings using a 4-5-4 calendar. The Company's fiscal quarters end on the last
Friday in December, March and June.
2
Key Takeaways
• Increasing 2017 adjusted earnings per share guidance range by $0.15 to $1.55 - $1.70;
Driven primarily by favorable debt refinancing outcome and Q1 tax rate
• Q1 activity in Electrical Raceway Segment markets consistent with Q4 2016 levels;
Mechanical Products and Solutions segment volume up 4% excluding solar impact
• Leading indicators and feedback from channel partners point to a strengthening non-
residential market and a strong second half to 2017
• The Atkore team continues to outperform market inputs; Our ability to generate
productivity savings, improve our margins through innovation, and pass through
material cost increases is driving improved earnings results
3
Financial Highlights – Q1 2017
($’s in millions)
Q1
2017
Q1
2016
Y/Y
Change
Net Sales $337.6 $358.4 (5.8%)
Adjusted Net Sales(1) $337.6 $350.6 (3.7%)
Net Income $17.4 $8.6 102.8%
Adjusted EBITDA(1) $49.9 $48.1 3.8%
Net Income Margin 5.1% 2.4% +270 bps
Adjusted EBITDA
Margin(1)
14.8% 13.7% +110 bps
Net Income per Share $0.26 $0.14 185.7%
Adjusted Net Income
per Share(1)
$0.28 $0.23 21.7%
• Improvement in average selling
prices successfully offsetting input
cost increases
• Construction demand remained
sluggish and tough solar
comparisons in quarter
• Atkore Business System driving
productivity momentum in conversion
cost, freight, and warehousing
• Year-over-year margin and per share
improvement continues
Productivity Savings, Portfolio
Management, and Pricing
Initiatives Drive Earnings
(1) See non-GAAP reconciliation in appendix
4
Electrical Raceway Segment - Q1 Highlights
• Average selling prices up 7% from
pass through of input costs, and
favorable impact from innovative
products
• Volume down 8% driven by sluggish
Non-Res markets and 1 less billing
day
• Year-over-year market activity in line
with Q4 2016 excluding 53rd week;
Forward indicators are positive
• Adjusted EBITDA of $40 million, up
17%; Adjusted EBITDA margin of
18%, up 270 basis points
Steel Conduit
PVC Conduit
Armored Cable
Flexible and
Liquidtight Conduit
Cable Tray, Cable
Ladder & Fittings
($’s in millions)
Q1
2017
Q1
2016
Y/Y
Change
Net Sales $223.0 $223.6 (0.3%)
Adjusted EBITDA $40.3 $34.4 17.1%
Adjusted EBITDA
Margin
18.1% 15.4% +270bps
Earnings Momentum Continues
in Soft Non-Residential Market
5
Mechanical Products & Solutions Segment Highlights
• Average selling prices up 4% from
mix management, pass through of
input costs, and favorable impact
from innovative products
• Volume down 9% due to extension
of solar federal tax credit and
1 less billing day
• Volume up 4% excluding solar
impact
• Productivity initiatives helping in
conversion cost, freight, and
warehousing
• Q1 Adjusted EBITDA margins up
10 bps
($’s in millions)
Q1
2017
Q1
2016
Y/Y
Change
Net Sales $115.2 $135.1 (14.7%)
Adjusted Net Sales(1) $115.2 $127.3 (9.5%)
Adjusted EBITDA(1) $17.6 $19.4 (9.3%)
Adjusted EBITDA
Margin(1)
15.3% 15.2% +10bps
Metal Framing &
Related Fittings
In-Line Galvanized
Mechanical Tube
Construction Design
& Services
Solar Headwinds Partially Offset
by Growth Initiatives and Savings
(1) See non-GAAP reconciliation in appendix
6
Key Balance Sheet and Cash Flow Metrics
($mm)
12/30/2016
Cash and cash equivalents $88.0
Total Debt $493.7
CapEx $4.0
Net cash from operating activities $32.2
TTM Adjusted EBITDA $236.8
Adjusted EBITDA less Capital
Expenditures
$232.8
Leverage Ratio (1)
Total debt / TTM Adjusted EBITDA(1)
2.1x
Net debt / TTM Adjusted EBITDA(1) 1.7x
Metrics Net debt / Adjusted EBITDA
1. Leverage ratio is defined as net debt (total debt less cash and cash equivalents) divided by the Adjusted EBITDA on a trailing twelve month
(TTM) basis or December 26 ,2015 to December 30, 2016. Total debt was $692.9mm, $652.2mm, and $630.3mm, as of September 26, 2014,
September 25, 2015, and September 30, 2016, respectively. Cash and cash equivalents were $33.4mm, $80.6mm, and $200.3mm as of
September 26, 2014, September 25, 2015, and September 30, 2016, respectively. Leverage ratio for all periods above and TTM Adjusted
EBITDA for the TTM ended December 30, 2016 is reconciled in the appendix.
5.2x
3.5x
1.8x 1.7x
FY 2014 FY 2015 FY 2016 TTM 12/30/16
Strong Cash Flow and Leverage Ratio
Support M&A Strategy
7
2017 Financial Outlook Summary
Electrical Raceway
Segment
Consolidated Atkore
Mechanical Products &
Solutions Segment
Prior Outlook Updated Outlook
Volume 1 to 5% 1 to 5%
Adjusted EBITDA $175 - $190mm $182 - $192mm
Volume (2) to 2% (2) to 2%
Adjusted EBITDA $85 - $90mm $83 - $88mm
Adjusted EBITDA $235 - $250 $235 - $250*
Adjusted EPS $1.40 - $1.55 $1.55 - $1.70
Capital Expenditures $32mm $32mm
Interest Expense $39mm $27mm
Tax Rate 36% 33%
Diluted Shares**
- 66
* Reconciliation of the forward-looking full-year 2017 outlook for Adjusted EBITDA and Adjusted EPS is not being provided as the Company does not currently have
sufficient data to accurately estimate the variables and individual adjustments for such reconciliation.
** Represents weighted-average shares outstanding in millions used in calculation of Adjusted EPS guidance
8
Key Takeaways
• Increasing 2017 adjusted earnings per share guidance range by $0.15 to $1.55 - $1.70;
Driven primarily by favorable debt refinancing outcome and Q1 tax rate
• Q1 activity in Electrical Raceway Segment markets consistent with Q4 2016 levels;
Mechanical Products and Solutions segment volume up 4% excluding solar impact
• Leading indicators and feedback from channel partners point to a strengthening non-
residential market and a strong second half to 2017
• The Atkore team continues to outperform market inputs; Our ability to generate
productivity savings, improve our margins through innovation, and pass through
material cost increases is driving improved earnings results
Appendix
10
Adjusted net sales reconciliation
A
B
C
D
E
F
G
H
Consolidated Atkore International Group Inc.
Three months ended
($ in thousands) December 30, 2016 December 25, 2015 Change % Change
Net sales $ 337,591 $ 358,375 $ (20,784 ) (5.8 )%
Impact of Fence and Sprinkler exit — (7,816 ) 7,816 (100.0 )%
Adjusted net sales $ 337,591 $ 350,559 $ (12,968 ) (2.3 )%
Adjusted EBITDA $ 49,891 $ 48,053 $ 1,838 3.8 %
Adjusted EBITDA Margin 14.8 % 13.7 %
11
Segment Information
A
B
C
D
E
F
G
H
Three months ended
December 30, 2016 December 25, 2015
(in thousands)
External Net
Sales
Adjusted
EBITDA
Adjusted
EBITDA
Margin
External Net
Sales
Impact of
Fence and
Sprinkler
exit
Adjusted
net sales
Adjusted
EBITDA
Adjusted
EBITDA
Margin
Electrical Raceway $ 222,963 $ 40,318 18.1 % $ 223,605 $ — $ 223,605 $ 34,433 15.4 %
Mechanical Products &
Solutions 115,178
$ 17,577
15.3 % 135,102
(7,816 ) 127,286
$ 19,377
15.2 %
Eliminations (550 ) (332 ) — (332 )
Consolidated
operations $ 337,591
$ 358,375
$ (7,816 ) $ 350,559
12
Adjusted earnings per share reconciliation
A
B
C
D
E
F
G
H
Consolidated Atkore International Group Inc.
Three months ended
(in thousands, except per share data) December 30, 2016 December 25, 2015
Net income $ 17,382 $ 8,572
Stock-based compensation 2,720 2,045
Consulting fee — 875
Loss on extinguishment of debt 9,805 —
Other (a) (10,930 ) 5,507
Impact of Fence and Sprinkler exit — 811
Pre-tax adjustments to net income 1,595 9,238
Tax effect @ 35.8% (571 ) (3,307 )
Adjusted net income $ 18,406 $ 14,503
Weighted-Average Common Shares Outstanding
Basic 62,642 62,466
Diluted 65,920 62,466
Net income (loss) per share
Basic $ 0.28 $ 0.14
Diluted $ 0.26 $ 0.14
Adjusted Net income (loss) per share
Basic $ 0.29 $ 0.23
Diluted $ 0.28 $ 0.23
(a) Represents other items, such as lower-of-cost-or-market inventory adjustments and release of indemnified uncertain tax
positions.
13
Net Income to Adjusted EBITDA reconciliation
A
B
C
D
E
F
G
H
Consolidated Atkore International Group Inc.
Three months ended
(in thousands) December 30, 2016 December 25, 2015
Net income $ 17,382 $ 8,572
Interest expense, net 9,830 9,881
Income tax expense 5,507 4,598
Depreciation and amortization 13,628 13,493
Loss on extinguishment of debt 9,805 —
Restructuring & impairments 389 1,294
Net periodic pension benefit cost — 110
Stock-based compensation 2,720 2,045
ABF product liability impact — 212
Consulting fee — 875
Transa tion costs 1,560 655
Other (a) (10,930 ) 5,507
Impact of Fence and Sprinkler exit — 811
Adjusted EBITDA $ 49,891 $ 48,053
(a) Represents other items, such as lower-of-cost-or-market inventory adjustments and release of indemnified uncertain tax
positions.
14
Net debt / Adjusted EBITDA reconciliation
A
B
C
D
E
F
G
H
Consolidated Atkore International Group Inc.
($ in thousands)
December 30,
2016
September 30,
2016
September 25,
2015
September 26,
2014
Short-term debt and current maturities
of long-term debt $ 4,228
$ 1,267
$ 2,864
$ 42,887
Long-term debt 489,519 629,046 649,344 649,980
Total debt 493,747 630,313 652,208 692,867
Less cash and cash equivalents 87,973 200,279 80,598 33,360
Net debt $ 405,774 $ 430,034 $ 571,610 $ 659,507
TTM Adjusted EBITDA $ 236,840 $ 235,002 $ 163,949 $ 126,597
Total debt/TTM Adjusted EBITDA 2.1 x 2.7 x 4.0 x 5.5 x
Net debt/TTM Adjusted EBITDA 1.7 x 1.8 x 3.5 x 5.2 x
15
Net Income to Adjusted EBITDA reconciliation
A
B
C
D
E
F
G
H
Consolidated Atkore International Group Inc.
TTM Three months ended
(in thousands)
December
30, 2016
December
30, 2016
September
30, 2016
June 24,
2016
March 25,
2016
Net income $ 67,606 $ 17,382 $ 15,572 $ 20,645 $ 14,007
Interest expense, net 41,747 9,830 11,181 10,169 10,567
Income tax expense 28,894 5,507 3,892 10,749 8,746
Depreciation and amortization 55,152 13,628 14,953 13,322 13,249
Loss (gain) on extinguishment of debt 8,144 9,805 — — (1,661 )
Restructuring & impairments 3,191 389 1,701 326 775
Net periodic pension benefit cost 330 — 110 110 110
Stock-based compensation 21,802 2,720 4,230 4,854 9,998
ABF pr duct liability impact 637 — 212 212 213
Consulting fee 14,550 — — 13,675 875
Legal settlements 1,382 — 82 1,300 —
Transaction costs 8,737 1,560 2,484 1,917 2,776
Other (15,332 ) (10,930 ) 6,947 (10,055 ) (1,294 )
Adjusted EBITDA $ 236,840 $ 49,891 $ 61,364 $ 67,224 $ 58,361