Atkore Inc. — FY2023 Form 10-K Summary
Business context and reporting period. Atkore manufactures electrical products and Safety & Infrastructure products, primarily for construction, renovation and industrial markets. This annual report covers the fiscal year ended September 30, 2023; it does not provide a standalone fiscal fourth-quarter summary or quarterly results.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Net sales | $3.519 billion | $3.914 billion | (10.1%) |
| Gross profit / margin | $1.340 billion / 38.1% | $1.640 billion / 41.9% | Profit (18.3%) |
| Operating income | $893.5 million | $1.234 billion | (27.6%) |
| Net income / diluted EPS | $689.9 million / $17.27 | $913.4 million / $20.30 | Net income (24.5%) |
| Cash from operations | $807.6 million | $786.8 million | +$20.8 million |
| Capital expenditures | $218.9 million | $135.8 million | +$83.1 million |
| Cash and cash equivalents | $388.1 million | $388.8 million | Down $0.6 million |
| Long-term debt, including current portion | $771.7 million | $771.4 million | Up slightly |
Operating cash flow less capital expenditures was approximately $588.7 million, compared with $651.1 million in FY2022. At year-end, the company reported $322.4 million of available ABL borrowing capacity and no ABL borrowings, excluding $2.6 million of letters of credit. Cash less reported debt was approximately $383.6 million. The current ratio was approximately 2.7.
Segments
- Electrical: Sales were $2.675 billion, down 11.2%; Adjusted EBITDA was $1.005 billion, down 21.1%, with margin declining to 37.6% from 42.3%.
- Safety & Infrastructure: Sales were $844.2 million, down 6.3%; Adjusted EBITDA was $103.2 million, down 25.4%, with margin declining to 12.2% from 15.4%.
Material changes and drivers
- Lower average selling prices were the primary driver of lower sales: management cited a $646.6 million decline. Acquisitions and higher overall volume partly offset the decline.
- Steel, copper and PVC resin input costs fell by $337.8 million, but selling prices declined faster than related input costs, compressing gross profit and segment margins.
- SG&A increased 4.9% to $388.2 million, reflecting higher headcount, digital initiatives and acquisition costs, partly offset by lower variable compensation and sales commissions. Intangible amortization rose 59.8% to $57.8 million, principally due to acquisitions.
- Interest expense increased 14.9% to $35.2 million amid higher rates. The effective tax rate fell to 18.9% from 24.1%, primarily because of solar tax credits.
- The company repurchased $491.0 million of stock in FY2023. Its authorization had $309.1 million remaining at year-end.
Liquidity, debt and capital allocation
Debt comprised $400 million of 4.25% Senior Notes due 2031 and approximately $373 million of term-loan principal due 2028. The term loan bears a floating rate; management estimated that a one-percentage-point rate change would affect annual interest expense by about $3.8 million. The company said cash, operating cash flow and ABL availability should fund operations, planned capital expenditures and liquidity needs for at least the next 12 months. Debt agreements include restrictions on additional debt, distributions and other actions.
On November 17, 2023, after fiscal year-end, the board approved a quarterly dividend program. The filing does not state a dividend amount; each payment remains subject to board approval and contractual restrictions.
Outlook, risks and unusual items
- Outlook: No numerical FY2024 guidance is provided in the supplied filing text. Management highlights potential demand from non-residential construction, infrastructure, solar, data centers and electrification, while noting economic uncertainty, higher interest rates and geopolitical and supply-chain risks.
- Key risks: Construction-market cyclicality; commodity-price and selling-price volatility; customer concentration; freight, energy and labor costs; imports and competition; weather and facility disruptions; cybersecurity; environmental compliance; and debt service and interest-rate exposure. One customer accounted for more than 10% of FY2023 sales; the top ten represented approximately 38%.
- Solar credits: FY2023 included a $39.5 million income-tax benefit from solar tax credits and a $30.4 million reduction of revenue for economic value passed to customers. The accounting was identified as a critical audit matter.
- Russia exit: The company recorded a $7.5 million impairment related to plans to exit and sell its Russian operations.
- Contingencies: The company estimates reasonably possible losses of $1 million to $8 million for specified legacy product claims and other product liabilities, and says it does not expect the proceedings to have a material adverse effect. It also disclosed ongoing environmental remediation and investigation matters, which management currently does not expect to be material.
- Controls and audit: Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. The audit identified solar tax-credit accounting as a critical audit matter; management excluded acquired Elite Polymer Solutions from its internal-control assessment.
Important facts for investors to verify
- Whether selling prices and margins stabilize, and how price changes compare with raw-material cost movements.
- Current demand trends in non-residential construction and the contribution of acquisitions, solar, data centers and other growth markets.
- Cash conversion and capital spending, including whether investment produces expected returns and preserves liquidity.
- Debt balances, floating-rate exposure, covenant capacity and the constraints on dividends and other capital returns.
- Execution and financial impact of the Russia exit, solar-credit arrangements and disclosed environmental and product-liability matters.
- Any subsequent dividend declarations and changes to the share-repurchase program; the announced dividend program is discretionary and does not specify a payment amount.