10-Q 1 azek-10q_20220331.htm 10-Q azek-10q_20220331.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

Commission File Number: 001-39322

 

The AZEK Company Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

90-1017663

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

1330 W Fulton Street, Suite 350, Chicago, Illinois

60607

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (877) 275-2935

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol

 

Name of each exchange

on which registered

Class A Common Stock, par value $0.001 per share

 

AZEK

 

The New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 

As of April 29, 2022, the registrant had 155,155,235 shares of Class A Common Stock, $0.001 par value per share, and 100 shares of Class B Common Stock, $0.001 par value per share, outstanding.


 

 

 

Page

PART I.

Financial Information

3

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

4

 

Condensed Consolidated Statements of Stockholders’ Equity

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

38

Item 4.

Controls and Procedures

39

PART II.

Other Information

40

Item 1.

Legal Proceedings

40

Item 1A.

Risk Factors

40

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 3.

Defaults Upon Senior Securities

40

Item 4.

Mine Safety Disclosures

40

Item 5.

Other Information

40

Item 6.

Exhibits

41

Signatures

42

 

2


 

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

 

The AZEK Company Inc.

Condensed Consolidated Balance Sheets

(In thousands of U.S. dollars, except for share and per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

in thousands

 

March 31,

2022

 

 

September 30,

2021

 

ASSETS:

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

25,812

 

 

$

250,536

 

Trade receivables, net of allowances

 

 

171,685

 

 

 

77,316

 

Inventories

 

 

299,160

 

 

 

188,888

 

Prepaid expenses

 

 

18,203

 

 

 

14,212

 

Other current assets

 

 

5,991

 

 

 

1,446

 

Total current assets

 

 

520,851

 

 

 

532,398

 

Property, plant and equipment - net

 

 

474,340

 

 

 

391,012

 

Goodwill

 

 

987,440

 

 

 

951,390

 

Intangible assets - net

 

 

260,128

 

 

 

242,572

 

Other assets

 

 

76,721

 

 

 

70,462

 

Total assets

 

$

2,319,480

 

 

$

2,187,834

 

LIABILITIES AND STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

76,228

 

 

$

69,474

 

Accrued rebates

 

 

31,723

 

 

 

44,339

 

Accrued interest

 

 

46

 

 

 

72

 

Current portion of long-term debt obligations

 

 

 

 

 

 

Accrued expenses and other liabilities

 

 

65,586

 

 

 

56,522

 

Total current liabilities

 

 

173,583

 

 

 

170,407

 

Deferred income taxes

 

 

61,505

 

 

 

46,371

 

Long-term debt—less current portion

 

 

505,284

 

 

 

464,715

 

Other non-current liabilities

 

 

86,074

 

 

 

79,177

 

Total liabilities

 

 

826,446

 

 

 

760,670

 

Commitments and contingencies (See Note 17)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 1,000,000 shares authorized and no shares issued

   or outstanding at March 31, 2022 and September 30, 2021, respectively

 

 

 

 

Class A common stock, $0.001 par value; 1,100,000,000 shares authorized,

   155,108,627 shares issued and outstanding at March 31, 2022 and

   154,866,313 shares issued and outstanding at September 30, 2021

 

 

155

 

 

 

155

 

Class B common stock, $0.001 par value; 100,000,000 shares authorized,

   100 shares issued and outstanding at March 31, 2022 and at September 30, 2021,

   respectively

 

 

 

 

 

 

Additional paid‑in capital

 

 

1,628,581

 

 

 

1,615,236

 

Accumulated deficit

 

 

(135,702

)

 

 

(188,227

)

Total stockholders' equity

 

 

1,493,034

 

 

 

1,427,164

 

Total liabilities and stockholders' equity

 

$

2,319,480

 

 

$

2,187,834

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

3


The AZEK Company Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands of U.S. dollars, except for share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

Six Months Ended March 31,

 

in thousands

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net sales

 

$

396,255

 

 

$

293,121

 

 

$

655,963

 

 

$

505,399

 

Cost of sales

 

 

273,795

 

 

 

195,272

 

 

 

444,894

 

 

 

334,572

 

Gross profit

 

 

122,460

 

 

 

97,849

 

 

 

211,069

 

 

 

170,827

 

Selling, general and administrative expenses

 

 

70,822

 

 

 

60,155

 

 

 

133,991

 

 

 

113,602

 

Other general expenses

 

 

 

 

 

1,149

 

 

 

 

 

 

1,149

 

Operating income (loss)

 

 

51,638

 

 

 

36,545

 

 

 

77,078

 

 

 

56,076

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

4,010

 

 

 

6,348

 

 

 

8,158

 

 

 

12,374

 

Total other expenses

 

 

4,010

 

 

 

6,348

 

 

 

8,158

 

 

 

12,374

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

47,628

 

 

 

30,197

 

 

 

68,920

 

 

 

43,702

 

Income tax expense (benefit)

 

 

11,810

 

 

 

7,557

 

 

 

16,395

 

 

 

10,914

 

Net income (loss)

 

$

35,818

 

 

$

22,640

 

 

$

52,525

 

 

$

32,788

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share - basic

 

$

0.23

 

 

$

0.15

 

 

$

0.34

 

 

$

0.21

 

Net income (loss) per common share - diluted

 

 

0.23

 

 

 

0.14

 

 

 

0.34

 

 

 

0.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$

35,818

 

 

$

22,640

 

 

$

52,525

 

 

$

32,788

 

Weighted-average common shares outstanding - basic and diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

154,661,277

 

 

 

153,509,612

 

 

 

154,551,589

 

 

 

153,366,516

 

Diluted

 

 

156,121,476

 

 

 

156,747,514

 

 

 

156,560,502

 

 

 

156,377,902

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

4


 

The AZEK Company Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands of U.S. dollars, except for share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

Additional

 

 

 

 

 

 

 

 

Total

 

 

 

Class A

 

 

Class B

 

 

 

Paid-In

 

 

 

Accumulated

 

 

 

Stockholders'

 

 

 

Shares

 

 

 

Amount

 

 

Shares

 

 

 

Amount

 

 

 

Capital

 

 

 

Deficit

 

 

 

Equity

 

Balance – December 31, 2021

 

 

155,032,377

 

 

$

155

 

 

100

 

 

$

 

 

 

$

 

1,622,516

 

 

$

 

(171,520

)

 

$

 

1,451,151

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,818

 

 

 

 

35,818

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,881

 

 

 

 

 

 

 

 

4,881

 

Exercise of stock options

 

 

70,149

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,613

 

 

 

 

 

 

 

 

1,613

 

Cancellation of restricted stock awards

 

 

(6,174

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee stock plan, net of shares withheld for taxes

 

 

12,275

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(429

)

 

 

 

 

 

 

 

(429

)

Balance – March 31, 2022

 

 

155,108,627

 

 

$

 

155

 

 

 

100

 

 

$

 

 

 

$

 

1,628,581

 

 

$

 

(135,702

)

 

$

 

1,493,034

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance – September 30, 2021

 

 

154,866,313

 

 

$

155

 

 

100

 

 

$

 

 

 

$

 

1,615,236

 

 

$

 

(188,227

)

 

$

 

1,427,164

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52,525

 

 

 

 

52,525

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,851

 

 

 

 

 

 

 

 

8,851

 

Exercise of vested stock options

 

 

214,041

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,923

 

 

 

 

 

 

 

 

4,923

 

Cancellation of restricted stock awards

 

 

(10,573

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee stock plan, net of shares withheld for taxes

 

 

38,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(429

)

 

 

 

 

 

 

 

(429

)

Balance –  March 31, 2022

 

 

155,108,627

 

 

$

 

155

 

 

 

100

 

 

$

 

 

 

$

 

1,628,581

 

 

$

 

(135,702

)

 

$

 

1,493,034

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

Additional

 

 

 

 

 

 

 

 

Total

 

 

 

Class A

 

 

Class B

 

 

 

Paid-In

 

 

 

Accumulated

 

 

 

Stockholders'

 

 

 

Shares

 

 

 

Amount

 

 

Shares

 

 

 

Amount

 

 

 

Capital

 

 

 

Deficit

 

 

 

Equity

 

Balance –  December 31, 2020

 

 

154,735,617

 

 

$

155

 

 

 

100

 

 

$

 

 

 

$

 

1,592,240

 

 

$

 

(271,229

)

 

$

 

1,321,166

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,640

 

 

 

 

22,640

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,052

 

 

 

 

 

 

 

 

7,052

 

Exercise of stock options

 

 

25,616

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

590

 

 

 

 

 

 

 

 

590

 

Cancellation of restricted stock awards

 

 

(21,995

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance – March 31, 2021

 

 

154,739,238

 

 

$

 

155

 

 

 

100

 

 

$

 

 

 

$

 

1,599,882

 

 

$

 

(248,589

)

 

$

 

1,351,448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance –  September 30, 2020

 

 

154,637,240

 

 

$

155

 

 

 

100

 

 

$

 

 

 

$

 

1,587,208

 

 

$

 

(283,475

)

 

$

 

1,303,888

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,788

 

 

 

 

32,788

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,931

 

 

 

 

 

 

 

 

9,931

 

Exercise of vested stock options

 

 

123,993

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,953

 

 

 

 

 

 

 

 

2,953

 

Cancellation of restricted stock awards

 

 

(21,995

)