HARVEY, Ill. — Atkore International Group Inc. announced earnings for its fiscal third quarter-ended June 24, 2016 of the fiscal year ending September 30, 2016.
“We are very pleased with our third quarter results, which generated volume growth and expanded earnings and margins compared to the third quarter of 2015. We were also able to demonstrate our ability to manage and grow margins during a period in which our raw material costs were sequentially increasing, as our gross and Adjusted EBITDA margins expanded sequentially despite incurring higher raw material input prices than in the second quarter of 2016,” said John Williamson, Atkore’s President and CEO. “We are excited to be reporting our results for the first time as a public company following our IPO in June. As we look forward, we remain focused on serving our customers while executing on our strategic priorities to drive growth, expand our margins, and deliver cash flows through our earnings. We are focused on these objectives given our leading market positions, superior customer value proposition, opportunities for product innovation, acquisitions, and importantly, our strong team that is built to outperform,” Williamson added.
2016 Third Quarter Results
Net sales for the third quarter of 2016 decreased to $395.7 million, a decline of 8.5% compared to $432.4 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 2.2%, as compared to the third quarter of 2015, driven primarily by 5.3% volume growth.
Gross profit increased by $32.8 million to $111.5 million for the third quarter of 2016, as compared to $78.7 million for the prior-year period. Gross margin expanded from 18.2% in the prior-year period to 28.2% in the third quarter.
SG&A expenses increased $18.5 million, or 40.3%, to $64.4 million for the third quarter, as compared to $45.9 million for the prior-year period. The increase was largely driven by approximately $15 million of costs associated with the Company’s IPO which occurred during the quarter.
Net income increased by $1.6 million, or 8.3%, to $20.6 million for the third quarter, as compared to $19.1 million for the prior-year period. Adjusted net income increased $6.6 million or 34%, as compared to $19.5 million for prior-year period.
Adjusted EBITDA increased by $20.5 million, or 44.0%, to $67.2 million for the third quarter, as compared to $46.7 million for the prior-year period, and Adjusted EBITDA margin increased from 12.1% to 17.0%.
Earnings per share (basic and diluted) on a GAAP basis were $0.33 for the quarter, but were negatively impacted by the aforementioned unusual costs associated with the IPO. Adjusted earnings per share, which exclude certain unusual and non-cash items, such as the IPO-related costs, increased by $0.11, or 35.5% to $0.42 per share for the third quarter as compared to $0.31 per share for the prior-year period.
The Company’s leverage ratio, defined as the ratio of net debt to Adjusted EBITDA on a trailing twelve month basis, improved to 2.2x at June 24, 2016, from 3.5x at September 25, 2015.
Segment Results
Electrical Raceway
Electrical Raceway net sales increased $8.0 million, or 3.2%, to $259.8 for the third quarter, as compared to $251.9 million for the prior-year period and included volume growth of 5.3%.
Adjusted EBITDA increased $21.3 million, or 68.6%, to $52.4 million for the third quarter, as compared to $31.1 million for the prior-year period and Adjusted EBITDA margin increased from 12.3% to 20.2%.
Mechanical Products & Solutions
MP&S net sales declined $44.4 million, or 24.5%, to $136.5 million for the third quarter, as compared to $180.9 million for the prior-year period. Adjusted net sales, which exclude the Fence and Sprinkler businesses, increased $0.9 million, or 0.7%. Overall, volume grew 5.2% during the quarter.
Adjusted EBITDA increased $0.7 million, or 3.2%, to $23.0 million for the quarter as compared to the prior year. Adjusted EBITDA margin increased to 16.9% from 16.5% in the third quarter of 2015.
2016 Financial Outlook
Mr. Williamson added, “We have confidence in the continued momentum that our business has experienced over the first nine months of the year. For the full year, we now expect 2016 Adjusted EBITDA to be in the range of $226 million to $236 million. The Electrical Raceway segment is expected to contribute between $170 million and $180 million of Adjusted EBITDA while the Mechanical Products & Solutions segment is expected to contribute between $76 million and $86 million.”
Reconciliation of the forward-looking full-year 2016 Adjusted EBITDA outlook is not being provided as the Company does not currently have sufficient data to accurately estimate the variables and individual adjustments for such reconciliation.
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