FORT WORTH, Texas, Oct. 3, 2017 /PRNewswire/ -- AZZ Inc.
(NYSE:AZZ), a global provider of metal coating services, welding
solutions, specialty electrical equipment and highly engineered
services, today announced financial results for the three month
period ended August 31, 2017.
Management Discussion
Tom Ferguson, president and chief
executive officer of AZZ Inc., commented, "The second quarter
fiscal 2018 financial performance reflected the challenges of the
current markets conditions. The Westinghouse bankruptcy has
proven to be more disruptive to some of our Energy business units,
and was compounded by the closure of the VC Summer Nuclear
Project. Given these headwinds, our business units were
unable to mitigate the impact of these unexpected events, resulting
in lower than expected margins in our Electrical and Industrial
platforms. Historically, the second quarter is a slower
period for our Industrial platform, but operational performance was
further impacted by the delay of a couple of large projects that
moved into the first half of fiscal 2019. Finally, Hurricane
Harvey caused us to shut down three galvanizing facilities as well
as our industrial lighting business during the quarter. Despite
these challenges, AZZ has a track record of long-term success and
we fully expect to continue on that trend for years to come."
Mr. Ferguson continued, "Our Energy Segment, experienced
operational and market issues that impacted margins, including
lower than expected utility spending in Saudi
Arabia. We have taken the appropriate realignment
actions that included a change in leadership with the appointment
of a very seasoned and successful executive, Ken Lavelle, as president of the Electrical
platform. Mr. Lavelle has moved quickly to strengthen the
Electrical leadership team, restructure the sales effort, and
increase emphasis on operational excellence and customer
satisfaction. We are already seeing important signs of
improvement, but acknowledge it will be early fiscal 2019 before we
see this platform return to normal margins. As we noted in
the guidance update announcement last week, the weak refinery
turnaround activity is anticipated for the balance of this fiscal
year due to the impact of hurricanes which resulted in lowering our
expectations for our Industrial platform. The Specialty
Welding business was restructured during the quarter to better
align its cost structure with the available work for the balance of
this year. As part of the realignment, we invested in the selling
organization to help drive WSI's unique value proposition and
improve the outlook for fiscal 2019."
Mr. Ferguson concluded, "Despite the current market conditions,
we are cautiously optimistic that our Metal Coatings Segment is
gaining traction on its organic growth initiatives and will be able
to leverage the recent acquisition of Enhanced Powder Coatings,
Ltd., in addition to the opening of a new powder coating facility
in Crowley, Texas. We remain
committed to delivering on the investments we have made for organic
growth, driving operational efficiencies more aggressively, and
maintaining an active M&A program to support our strategic
growth initiatives. We are gaining confidence in our outlook
for fiscal 2019 as we see improving market activity in
infrastructure spending, solar energy and refinery turnaround
activity. Additionally, we should experience improved operational
performance with our realigned sales team along with our recent
acquisition of Powergrid Solutions, Inc. As announced last week, we
adjusted our fiscal year 2018 guidance with earnings per share to
be in the range of $1.80 to $2.30 per
diluted share and annual sales to be in the range of $825 million to $885 million."
Second Quarter Results
Revenues for the second quarter of fiscal 2018 were $190.4 million compared to $195.0 million for the same quarter last year, a
decrease of 2.4%. Net income for the second quarter decreased 16.9%
to $8.3 million, or $0.32 per diluted share, compared to net income
of $10.0 million, or $0.38 per diluted share, for the second quarter
of fiscal 2017.
Gross margins for the quarter were 21.8% compared to 21.5% in
the second quarter of fiscal 2017. SG&A costs were down
2.2% versus the second quarter of fiscal 2017 primarily on charges
taken for realignment in the second quarter last year.
Additionally, the effective tax rate rose to more normalized level
of 26.9% in the current quarter compared to 10.4% in the second
quarter of the prior year, primarily on issues related to the
realignment taken in fiscal year 2017.
Incoming orders for the quarter were $189.9 million while shipments for the quarter
totaled $190.4 million, resulting in
a book to ship ratio of 1.00. In the second quarter a year
earlier, incoming orders were $193.7
million, resulting in a book to ship ratio of 0.99. Our
backlog at the end of the second quarter of fiscal 2018 decreased
6.1% to $331.2 million compared to
backlog at the end of the prior year second quarter of $352.8 million and was consistent compared to
first quarter fiscal 2018 of 331.6 million. Approximately 42% of
the backlog is expected to be delivered outside the U.S., compared
to 27% in the second quarter of fiscal 2017.
Metal Coatings Segment
Revenues for the Metal Coatings Segment for the second quarter
were $99.0 million, an increase of
1.6%, compared to the $97.4 million
in the same period last year. Operating income increased 55.7% to
$23.4 million compared to
$15.0 million in the prior period, as
result of the $7.3 million in charges
taken by the segment in the second quarter of fiscal 2017. As a
result, operating margins for the second quarter increased to
23.6%, compared to 15.4% in the same period last year.
Energy Segment
Revenues for the Energy Segment for the second quarter of fiscal
2018 were $91.4 million as compared
to $97.6 million for the same quarter
last year, a decrease of 6.4%. Operating income for the
segment fell to $0.0 million compared
to $8.2 million in the same period
last year. Operating margins for the second quarter fell to 0.0% as
compared to 8.4% in the prior year period. This was a direct result
of product mix from lower revenues and higher operating costs in
certain operations.
Conference Call
AZZ Inc. will conduct a conference call to discuss financial
results for the second quarter of fiscal year 2018 at 11:00 A.M. ET on Tuesday,
October 3, 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 #10112385, or for 30 days at
http://www.azz.com/investor-relations.
About AZZ Inc.
AZZ Inc. is a global provider of metal coating 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
Metal Coatings 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 28, 2017 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
August 31,
|
|
Six Months Ended
August 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
190,407
|
|
|
$
|
195,045
|
|
|
$
|
398,958
|
|
|
$
|
437,712
|
|
Costs of
sales
|
148,938
|
|
|
153,159
|
|
|
308,223
|
|
|
332,499
|
|
Gross margin
|
41,469
|
|
|
41,886
|
|
|
90,735
|
|
|
105,213
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
26,413
|
|
|
26,997
|
|
|
53,772
|
|
|
55,816
|
|
Operating income
|
15,056
|
|
|
14,889
|
|
|
36,963
|
|
|
49,397
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
3,400
|
|
|
3,580
|
|
|
6,760
|
|
|
7,505
|
|
Net loss on sale
property, plant and equipment and
insurance proceeds
|
654
|
|
|
192
|
|
|
554
|
|
|
82
|
|
Other income,
net
|
(394)
|
|
|
(68)
|
|
|
(479)
|
|
|
(190)
|
|
Income before income
taxes
|
11,396
|
|
|
11,185
|
|
|
30,128
|
|
|
42,000
|
|
Income tax
expense
|
3,067
|
|
|
1,162
|
|
|
8,559
|
|
|
10,914
|
|
Net income
|
$
|
8,329
|
|
|
$
|
10,023
|
|
|
$
|
21,569
|
|
|
$
|
31,086
|
|
Earnings per common
share
|
|
|
|
|
|
|
|
Basic
|
$
|
0.32
|
|
|
$
|
0.39
|
|
|
$
|
0.83
|
|
|
$
|
1.20
|
|
Diluted
|
$
|
0.32
|
|
|
$
|
0.38
|
|
|
$
|
0.83
|
|
|
$
|
1.19
|
|
Diluted average shares
outstanding
|
26,036
|
|
|
26,119
|
|
|
26,065
|
|
|
26,081
|
|
Segment
Reporting
(in thousands)
|
|
|
Three Months Ended
August 31,
|
|
Six Months Ended
August 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
Energy
|
$
|
91,377
|
|
|
$
|
97,601
|
|
|
$
|
207,850
|
|
|
$
|
235,703
|
|
Metal
Coatings
|
99,030
|
|
|
97,444
|
|
|
191,108
|
|
|
202,009
|
|
|
$
|
190,407
|
|
|
$
|
195,045
|
|
|
$
|
398,958
|
|
|
$
|
437,712
|
|
|
|
|
|
|
|
|
|
Segment operating
income :
|
|
|
|
|
|
|
|
Energy
|
$
|
32
|
|
|
$
|
8,195
|
|
|
$
|
8,627
|
|
|
$
|
26,948
|
|
Metal
Coatings
|
23,409
|
|
|
15,032
|
|
|
44,651
|
|
|
39,334
|
|
Corporate
|
(8,385)
|
|
|
(8,338)
|
|
|
(16,315)
|
|
|
(16,885)
|
|
Total
segment operating income
|
$
|
15,056
|
|
|
$
|
14,889
|
|
|
$
|
36,963
|
|
|
$
|
49,397
|
|
Condensed
Consolidated Balance Sheet (in thousands)
|
|
|
August 31,
2017
|
|
February 28,
2017
|
|
(unaudited)
|
|
|
|
|
|
|
Assets:
|
|
|
|
Current
assets
|
$
|
325,007
|
|
|
$
|
296,537
|
|
Net property, plant
and equipment
|
230,314
|
|
|
228,610
|
|
Other assets,
net
|
456,080
|
|
|
452,692
|
|
Total
assets
|
$
|
1,011,401
|
|
|
$
|
977,839
|
|
|
|
|
|
Liabilities and
shareholders' equity:
|
|
|
|
Current
liabilities
|
$
|
126,273
|
|
|
$
|
141,850
|
|
Long term debt due
after one year, net
|
287,522
|
|
|
254,800
|
|
Other
liabilities
|
52,293
|
|
|
51,550
|
|
Shareholders'
equity
|
545,313
|
|
|
529,639
|
|
Total liabilities and
shareholders' equity
|
$
|
1,011,401
|
|
|
$
|
977,839
|
|
Condensed
Consolidated Statements of Cash Flows
(in
thousands)
|
|
|
Six Months Ended
August 31,
|
|
2017
|
|
2016
|
|
(unaudited)
|
|
|
|
|
Net cash provided by
operating activities
|
$
|
2,785
|
|
|
$
|
50,028
|
|
Net cash used in
investing activities
|
(26,709)
|
|
|
(42,119)
|
|
Net cash provided by
(used in) financing activities
|
15,966
|
|
|
(32,292)
|
|
Effect of exchange
rate changes on cash
|
205
|
|
|
106
|
|
Net decrease in cash
and cash equivalents
|
$
|
(7,753)
|
|
|
$
|
(24,277)
|
|
Cash and cash
equivalents at beginning of period
|
11,302
|
|
|
40,191
|
|
Cash and cash
equivalents at end of period
|
$
|
3,549
|
|
|
$
|
15,914
|
|
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SOURCE AZZ Inc.