Atkore Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended September 30, 2021. This is an annual filing; it does not provide a clear standalone fourth-quarter results summary. Unless noted otherwise, comparisons are with FY2020.
Business context
Atkore manufactures electrical products and Safety & Infrastructure solutions, primarily for construction, renovation and industrial markets. About 90% of FY2021 sales were to U.S. customers. The company reorganized and renamed its two reportable segments during FY2021; prior segment results were recast for comparability.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Net sales | $2,928.0 million | $1,765.4 million | +65.9% |
| Gross profit / margin | $1,125.6 million / 38.4% | $491.3 million / 27.8% | Margin +10.6 percentage points |
| Operating income / margin | $799.0 million / 27.3% | $239.6 million / 13.6% | +233.5% |
| Net income | $587.9 million | $152.3 million | +286.0% |
| Diluted EPS | $12.19 | $3.10 | — |
| Operating cash flow | $572.9 million | $248.8 million | +130.3% |
| Capital expenditures | $64.5 million | $33.8 million | — |
Operating cash flow less capital expenditures was approximately $508.4 million. Cash and equivalents were $576.3 million at year-end, including $75.5 million held by non-U.S. subsidiaries. Working capital was approximately $896.5 million; the current ratio was approximately 2.7.
Reported long-term debt, including current portion, was approximately $771.1 million; cash exceeded this amount by approximately $194.8 million. The debt balance comprised $400 million of 4.25% senior notes due 2031 and a $371.1 million senior secured term loan due 2028, net of deferred financing costs. The $325 million ABL facility had no borrowings and approximately $315.5 million available. The company reported $135.1 million of share repurchases in FY2021 and authorized a new $400 million repurchase program after year-end.
Electrical segment sales were $2,233.3 million and Adjusted EBITDA was $873.9 million, with a 39.1% margin. Safety & Infrastructure sales were $698.3 million and Adjusted EBITDA was $81.8 million, with an 11.7% margin; its margin declined from 13.6% in FY2020.
Material changes and unusual items
- Sales growth reflected higher average selling prices, contributing about 55.4 percentage points of reported growth, alongside volume, foreign exchange and acquisitions. Management attributed much of the pricing increase to PVC products and said pricing was expected to move toward more normal historical levels over time, but timing was uncertain.
- Higher steel, copper and PVC resin costs increased cost of sales by approximately $386.5 million. PVC resin suppliers declared force majeure during the year, constraining availability.
- Other income included a $15.5 million business-interruption insurance recovery related to a prior-year facility flood. LIFO inventory liquidation reduced cost of sales and increased operating income by approximately $6.6 million.
- In May 2021, Atkore refinanced its former term loan with the new term loan and senior notes; the transaction produced a $4.2 million debt-extinguishment loss. Cash flow benefited from stronger earnings but was partly offset by a $137.7 million increase in net working capital.
- Acquisitions included FRE Composites and Queen City Plastics; FY2021 acquisition cash outflow was $43.2 million.
Outlook, risks and contingencies
Management said cash on hand, operating cash flow and ABL availability were expected to meet operating, capital expenditure and debt-service needs for at least the next 12 months. The filing provides no specific earnings or revenue guidance. Management described uncertainty from commodity prices and pass-through timing, supply and freight constraints, labor availability and costs, non-residential construction conditions, and continuing COVID-19 effects.
Other material risks include customer concentration (the top ten represented about 37% of sales), variable-rate debt exposure, environmental compliance and remediation, and product-liability claims. The company cited a reasonably possible loss range of $1 million to $8 million for certain sprinkler-pipe and other product-liability claims, while stating it did not expect the matters to have a material adverse effect. It also reported ongoing zinc-discharge compliance work at its Harvey, Illinois facility and groundwater monitoring at a Michigan site; management did not expect current obligations to be material. Deloitte issued unqualified opinions on the financial statements and internal controls. Goodwill impairment was not recorded, though the Europe, Middle East and Africa reporting unit was identified as a critical audit matter because its fair-value cushion was comparatively low.
Investor verification priorities
- Assess how much of FY2021’s exceptional sales and margin expansion came from temporary pricing and whether price-cost spreads remain favorable as commodity prices normalize.
- Check subsequent working-capital trends, especially receivables and inventory, and whether cash generation continues to track reported earnings.
- Review segment performance, particularly the lower Safety & Infrastructure margin and Electrical’s unusually high margin.
- Evaluate debt service, variable-rate exposure, refinancing capacity and the effect of the new share-repurchase authorization on liquidity.
- Monitor product claims, Harvey zinc-permit compliance, other remediation obligations, and the assumptions supporting goodwill valuations.