FORT WORTH, Texas, Jan. 6, 2017 /PRNewswire/ -- AZZ Inc.
(NYSE:AZZ), a global provider of galvanizing services, welding
solutions, specialty electrical equipment and highly engineered
services, today announced financial results for the three month
period ended November 30, 2016.
Management Discussion
Tom Ferguson, president and chief
executive officer of AZZ Inc., commented, "Our overall third
quarter financial performance was disappointing as we continued to
feel the effects of depressed markets in oil and gas,
petrochemical, and solar for our Galvanizing segment, and
experienced lower than expected refinery turnarounds and
maintenance in our Energy segment during the quarter. Sales in both
business segments were lower during the third quarter versus last
year's comparable quarter due to greater market headwinds than we
anticipated as we entered the quarter."
"Based on our observation of industrial market activity levels,
we believe that the North American galvanizing market will continue
to be challenging for the near term. However, our expectation is
that market conditions for the galvanizing business will begin to
improve in the second half of fiscal 2018 as infrastructure spend
improves. We will continue to closely monitor the market conditions
but are committed to funding our critical organic growth
initiatives to drive sustainable growth."
"In our Energy segment," Mr. Ferguson continued, "we experienced
lower refinery turnarounds and nuclear outages during the quarter,
as projects were deferred to the spring season. Those deferred
maintenance projects will have to be done some time in the near
future. During the quarter, we did experience strength in our other
markets, as incoming orders strengthened. Third quarter Energy
sales were slightly down compared to the third quarter last year,
but on a sequential basis sales improved significantly by 38.9%
versus the second quarter, which favorably compares to a sequential
increase of 22.8% over the same period in the last fiscal
year. Combined with strong bookings in the segment and a
favorable backlog compared to the third quarter last year, we
continue to see favorable opportunities for the Energy
segment."
"Despite the market headwinds, we continue to spend on research
and development and are in the process of introducing a new product
which will be manufactured in a repurposed galvanizing plant. AZZ's
new GalvaBarâ„¢ is corrosion resistant galvanized rebar treated with
a specialized zinc alloy that provides corrosion protection to
prevent concrete failure, with the added benefit of exceptional
formability. GalvaBar can be bent or stretched after the
galvanizing process is complete without cracking, peeling or
flaking. We expect GalvaBar to provide significantly greater value
for customers compared to the current competing products that lack
many of GalvaBar's attributes. We have also formed a working
partnership with Natina Products to produce Natina Steel ideally suited for our galvanized
products. Natina Steel is a surface
treatment that chemically reacts with galvanizing to create a
rustic brown finish that naturally blends into the
surroundings."
"Looking ahead, we think that both our energy and galvanizing
businesses can be positively impacted if new infrastructure
initiatives are undertaken by the incoming presidential
administration and Congress. Both of our segments are important
components in the development and upgrading of new infrastructure
projects. We know that these projects, should they be
green-lighted, will take some time to commence, but when they do we
will be ready to play an important role to move these projects
forward."
"I would also like to add that we are continuing to negotiate
with Westinghouse Electric Company, LLC regarding the previously
announced sale of our Nuclear Logistics LLC business, and a close
date has not yet been determined. We will update the market
regarding the status of the transaction as appropriate."
Mr. Ferguson concluded, "AZZ is well positioned for the future.
We remain committed to continue investing in our new organic growth
initiatives to drive future sales. We are focused on keeping
an active M&A program, growing our businesses to capture
organic growth and continuing to drive operational excellence."
Third Quarter Results
Revenues for the third quarter of fiscal 2017 were $227.5 million compared to $242.4 million for the same quarter last year, a
decrease of 6.2%. Net income for the third quarter decreased 22.5%
to $18.3 million, or $0.70 per diluted share, compared to net income
of $23.5 million, or $0.91 per diluted share, for the third quarter of
fiscal 2016.
Gross margins for the quarter were 23.7% compared to 25.8% in
the third quarter of fiscal 2016. SG&A costs were down
3.7% versus the third quarter of fiscal 2016. Additionally, the
effective tax rate increased to 29.7% in the current quarter
compared to 28.0% in the third quarter of the prior year.
Incoming orders for the quarter were $221.9 million while shipments for the quarter
totaled $227.5 million, resulting in
a book to ship ratio of 0.98. In the third quarter a year
earlier, incoming orders were $228.7
million, resulting in a book to ship ratio of 0.94. Our
backlog at the end of the third quarter of fiscal 2017 increased
7.1% to $347.3 million compared to
backlog at the end of the prior year third quarter of $324.4 million. Approximately 19% of the backlog
is expected to be delivered outside the U.S.
Energy Segment
Revenues for the Energy Segment for the third quarter of fiscal
2017 were $135.6 million as compared
to $136.0 million for the same
quarter last year, a modest decrease of 0.3%. Operating
income for the segment fell 18.1% to $15.4
million compared to $18.8
million in the same period last year. Operating margins for
the third quarter fell to 11.4% as compared to 13.9% in the prior
year period as a result of lower gross margins from an unfavorable
mix shift from higher margin to lower margin business during the
quarter, partially offset by favorable SG&A expenses.
Galvanizing Segment
Revenues for the Galvanizing Segment for the third quarter were
$91.9 million, compared to the
$106.4 million in the same period
last year, a decrease of 13.7%. Operating income was $21.3 million as compared to $24.3 million in the prior period. As a result,
operating margins for the third quarter improved to 23.2%, compared
to 22.8% in the same period last year.
Conference Call
AZZ Inc. will conduct a conference call to discuss financial
results for the third quarter of fiscal year 2017 at 11:00 A.M. ET on Friday,
January 6, 2017. Interested parties can access the
conference call by dialing (844) 855-9499 or (412) 317-5497
(international). The call will be webcast via the Internet at
http://www.azz.com/investor-relations. A replay of the call
will be available for three days at (877) 344-7529 or (412)
317-0088 (international), confirmation #10098476, or for 30 days at
http://www.azz.com/investor-relations.
About AZZ Inc.
AZZ Inc. is a global provider of galvanizing services, welding
solutions, specialty electrical equipment and highly engineered
services to the markets of power generation, transmission,
distribution and industrial in protecting metal and electrical
systems used to build and enhance the world's infrastructure. AZZ
Galvanizing is a leading provider of metal finishing solutions for
corrosion protection, including hot dip galvanizing to the North
American steel fabrication industry. AZZ Energy is dedicated to
delivering safe and reliable transmission of power from generation
sources to end customers, and automated weld overlay solutions for
corrosion and erosion mitigation to critical infrastructure in the
energy markets worldwide.
Safe Harbor Statement
Certain statements herein about our expectations of
future events or results constitute forward-looking statements for
purposes of the safe harbor provisions of The Private Securities
Litigation Reform Act of 1995. You can identify forward-looking
statements by terminology such as, "may," "should," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts,"
"potential," "continue," or the negative of these terms or other
comparable terminology. Such forward-looking statements are based
on currently available competitive, financial and economic data and
management's views and assumptions regarding future events. Such
forward-looking statements are inherently uncertain, and investors
must recognize that actual results may differ from those expressed
or implied in the forward-looking statements. This release may
contain forward-looking statements that involve risks and
uncertainties including, but not limited to, changes in customer
demand and response to products and services offered by AZZ,
including demand by the power generation markets, electrical
transmission and distribution markets, the industrial markets, and
the hot dip galvanizing markets; prices and raw material cost,
including zinc and natural gas which are used in the hot dip
galvanizing process; changes in the political stability and
economic conditions of the various markets that AZZ serves, foreign
and domestic, customer requested delays of shipments, acquisition
opportunities, currency exchange rates, adequacy of financing, and
availability of experienced management and employees to implement
AZZ's growth strategy. AZZ has provided additional information
regarding risks associated with the business in AZZ's Annual Report
on Form 10-K for the fiscal year ended February 29, 2016 and other filings with the SEC,
available for viewing on AZZ's website at www.azz.com and on the
SEC's website at www.sec.gov. You are urged to consider these
factors carefully in evaluating the forward-looking statements
herein and are cautioned not to place undue reliance on such
forward-looking statements, which are qualified in their entirety
by this cautionary statement. These statements are based on
information as of the date hereof and AZZ assumes no
obligation to update any forward-looking statements, whether as a
result of new information, future events, or otherwise.
Contact:
|
Paul Fehlman, Senior
Vice President - Finance and CFO
|
|
AZZ Inc.
817-810-0095
|
|
Internet:
www.azz.com
|
|
|
|
Lytham Partners
602-889-9700
|
|
Joe Dorame, Robert
Blum or Joe Diaz
|
|
Internet:
www.lythampartners.com
|
---Financial tables on the following
page---
AZZ
Inc.
|
Condensed
Consolidated Statement of Income
|
(in thousands, except
per share data)
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
November 30,
2016
|
|
November 30,
2015
|
|
November 30,
2016
|
|
November 30,
2015
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
227,459
|
|
|
$
|
242,447
|
|
|
$
|
665,171
|
|
|
$
|
685,581
|
|
Costs of
sales
|
173,593
|
|
|
179,999
|
|
|
506,091
|
|
|
510,324
|
|
Gross margin
|
53,866
|
|
|
62,448
|
|
|
159,080
|
|
|
175,257
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
25,082
|
|
|
26,040
|
|
|
80,898
|
|
|
79,545
|
|
Operating income
|
28,784
|
|
|
36,408
|
|
|
78,182
|
|
|
95,712
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
3,654
|
|
|
3,743
|
|
|
11,159
|
|
|
11,612
|
|
Net (gain) loss on
sale property,
plant and equipment
and insurance proceeds
|
(57)
|
|
|
(16)
|
|
|
26
|
|
|
(465)
|
|
Other (income)
expense, net
|
(759)
|
|
|
(27)
|
|
|
(949)
|
|
|
828
|
|
Income before income
taxes
|
25,946
|
|
|
32,708
|
|
|
67,946
|
|
|
83,737
|
|
Income tax
expense
|
7,695
|
|
|
9,161
|
|
|
18,609
|
|
|
23,023
|
|
Net income
|
$
|
18,251
|
|
|
$
|
23,547
|
|
|
$
|
49,337
|
|
|
$
|
60,714
|
|
Earnings per common
share
|
|
|
|
|
|
|
|
Basic
|
$
|
0.70
|
|
|
$
|
0.91
|
|
|
$
|
1.90
|
|
|
$
|
2.35
|
|
Diluted
|
$
|
0.70
|
|
|
$
|
0.91
|
|
|
$
|
1.89
|
|
|
$
|
2.34
|
|
Diluted average shares
outstanding
|
26,133
|
|
|
25,977
|
|
|
26,104
|
|
|
25,920
|
|
Segment
Reporting
|
(in
thousands)
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
November 30,
2016
|
|
November 30,
2015
|
|
November 30,
2016
|
|
November 30,
2015
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
Energy
|
$
|
135,553
|
|
|
$
|
136,007
|
|
|
$
|
371,256
|
|
|
$
|
383,787
|
|
Galvanizing
|
91,906
|
|
|
106,440
|
|
|
293,915
|
|
|
301,794
|
|
|
$
|
227,459
|
|
|
$
|
242,447
|
|
|
$
|
665,171
|
|
|
$
|
685,581
|
|
|
|
|
|
|
|
|
|
Segment operating
income :
|
|
|
|
|
|
|
|
Energy
|
$
|
15,434
|
|
|
$
|
18,846
|
|
|
$
|
42,383
|
|
|
$
|
45,807
|
|
Galvanizing
|
21,345
|
|
|
24,264
|
|
|
60,679
|
|
|
71,689
|
|
Corporate
|
(7,995)
|
|
|
(6,702)
|
|
|
(24,880)
|
|
|
(21,784)
|
|
Total
segment operating income
|
$
|
28,784
|
|
|
$
|
36,408
|
|
|
$
|
78,182
|
|
|
$
|
95,712
|
|
Condensed
Consolidated Balance Sheet
|
(in
thousands)
|
|
|
|
|
|
November 30,
2016
|
|
February 29,
2016
|
|
(unaudited)
|
|
|
|
|
|
|
Assets:
|
|
|
|
Current
assets
|
$
|
337,284
|
|
|
$
|
309,334
|
|
Net property, plant
and equipment
|
224,092
|
|
|
226,333
|
|
Other assets,
net
|
456,299
|
|
|
446,343
|
|
Total
assets
|
$
|
1,017,675
|
|
|
$
|
982,010
|
|
|
|
|
|
Liabilities and
shareholders' equity:
|
|
|
|
Current
liabilities
|
$
|
156,540
|
|
|
$
|
148,405
|
|
Long term debt due
after one year, net
|
292,181
|
|
|
302,429
|
|
Other
liabilities
|
49,650
|
|
|
49,960
|
|
Shareholders'
equity
|
519,304
|
|
|
481,216
|
|
Total liabilities and
shareholders' equity
|
$
|
1,017,675
|
|
|
$
|
982,010
|
|
Condensed
Consolidated Statements of Cash Flows
|
(in
thousands)
|
|
|
|
Nine Months
Ended
|
|
November 30,
2016
|
|
November 30,
2015
|
|
(unaudited)
|
|
|
|
|
Net cash provided by
operating activities
|
$
|
57,275
|
|
|
$
|
104,158
|
|
Net cash used in
investing activities
|
(51,271)
|
|
|
(80,868)
|
|
Net cash used in
financing activities
|
(32,346)
|
|
|
(27,101)
|
|
Effect of exchange
rate changes on cash
|
(370)
|
|
|
(1,118)
|
|
Net decrease in cash
and cash equivalents
|
$
|
(26,712)
|
|
|
$
|
(4,929)
|
|
Cash and cash
equivalents at beginning of period
|
40,191
|
|
|
22,527
|
|
Cash and cash
equivalents at end of period
|
$
|
13,479
|
|
|
$
|
17,598
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/azz-inc-reports-financial-results-for-the-third-quarter-of-fiscal-year-2017-300386939.html
SOURCE AZZ Inc.