Atkore Inc. — Q2 FY2021 Form 10-Q
Reporting period: Quarter and six months ended March 26, 2021; comparisons are with the periods ended March 27, 2020. Atkore manufactures electrical products and Safety & Infrastructure solutions. Amounts below are in millions except per-share data and percentages.
Financial performance
| Metric | Q2 FY2021 | Q2 FY2020 | Six months FY2021 | Six months FY2020 |
|---|---|---|---|---|
| Net sales | $639.5 | $455.7 | $1,150.6 | $903.1 |
| Gross profit | $239.8 | $131.6 | $429.0 | $248.4 |
| Gross margin | 37.5% | 28.9% | 37.3% | 27.5% |
| Operating income | $164.4 | $61.2 | $284.3 | $113.7 |
| Net income | $124.9 | $39.2 | $210.0 | $74.0 |
| Diluted EPS | $2.58 | $0.80 | $4.33 | $1.50 |
| Operating cash flow | — | $153.2 | $49.3 |
Q2 sales rose 40.4%, while six-month sales rose 27.4%. Management attributed growth chiefly to higher selling prices—especially PVC electrical conduit—and, to a lesser extent, acquisitions. For the first six months, average selling prices contributed 27.1 percentage points to sales growth; volume declined 3.0%. Higher selling prices relative to input-cost changes, operational efficiencies, and acquisition contributions drove stronger Electrical segment profitability. The filing does not provide a consolidated gross-margin outlook.
- Q2 segments: Electrical sales were $487.5 million and Adjusted EBITDA was $188.8 million (38.7% margin), versus $323.2 million and $77.2 million (23.9%) a year earlier. Safety & Infrastructure sales were $152.7 million and Adjusted EBITDA was $16.2 million (10.6%), versus $133.1 million and $17.9 million (13.4%). Segment results reflect the filing’s revised segment presentation.
- Six-month cash flows: Investing used $60.9 million, including acquisitions; financing used $75.4 million, including $40.0 million of debt repayment and $35.0 million of share repurchases. Cash increased $20.0 million to $304.5 million.
Liquidity, debt, and balance sheet
At March 26, 2021, cash was $304.5 million, current assets $1,018.4 million, and current liabilities $325.9 million. Long-term debt, net of financing costs, was $765.0 million, down from $803.7 million at September 30, 2020; cash less reported debt was approximately $460.6 million. No borrowings were outstanding under the ABL facility, with approximately $315.5 million available. The company reported covenant compliance and expects cash, operations, and ABL availability to fund requirements for at least the next 12 months. Six-month operating cash flow benefited from higher earnings but included a $79.7 million increase in cash used in working capital, primarily reflecting higher sales.
Material changes, outlook, and risks
- Q2 selling prices increased substantially, while raw-material costs also rose. Six-month cost of sales increased 10.2%, less than sales growth, but management noted that PVC pricing is expected to return toward more normal historical levels over time; timing is uncertain.
- Safety & Infrastructure profitability weakened: six-month Adjusted EBITDA declined 16.9%, and margin fell to 11.0% from 14.3%. Management cited steel-cost timing lags and constrained steel supply; Q2 volume was also affected by project delays and COVID-related supply disruption.
- COVID-19 continued to create uncertainty around customer work timing, construction-site delays, and end-market conditions. At filing, there were no COVID-related facility closures. Management cautioned that future effects remained uncertain.
- Other income included a $6.0 million business-interruption insurance recovery related to a prior-year facility flood. It also included foreign-currency effects and a $0.7 million gain on purchase of a business. The insurance recovery is an unusual item and increased reported earnings.
- Acquisitions included Queen City Plastics and FRE Composites Group; FRE’s preliminary purchase price was $37.1 million, and its purchase-price allocation was not finalized at quarter-end. The company also realigned segment reporting; comparative segment data was revised, without changing consolidated results.
- The board authorized up to $100 million of common-stock repurchases in January; $100 million remained available at March 26. Product-liability reserves for the cited claims were $0.7 million, with reasonably possible aggregate losses estimated at $1–8 million. Management said it did not expect the proceedings to have a material adverse effect; it also reported other ordinary-course claims.
No specific earnings or sales guidance was provided in the supplied filing text. Management’s stated expectations include sufficient liquidity for at least the next 12 months; its price-normalization outlook has no specified timing.
Important facts for investors to verify
- How much of the exceptional earnings and margin growth is sustainable as selling prices and input costs change, particularly for PVC products.
- Whether Electrical strength can persist and Safety & Infrastructure can recover margins amid steel-cost and supply constraints.
- Working-capital and cash conversion trends as sales grow, alongside acquisition integration and final FRE purchase accounting.
- Debt repayment, ABL availability, and the pace and funding of share repurchases.
- Potential effects of COVID-19, customer/project delays, legal contingencies, and the nonrecurring insurance recovery on future results.