FORT WORTH, Texas, July 9, 2020 /PRNewswire/ -- AZZ Inc. (NYSE:
AZZ), a global provider of metal coating solutions, welding
solutions, specialty electrical equipment and highly engineered
services today announced financial results for the first quarter of
fiscal year 2021, ended May 31,
2020.
First Quarter Overview:
- Effectively managed liquidity; $342
million of additional available credit
- Cash and cash equivalents at the end of the period were
$26.4 million versus $13.6 million
- Revenue of $213.3 million, down
26.2% versus last year's period.
- Metal Coatings Segment versus same quarter, prior year:
-
- Revenue of $119.0 million, down
2.6%
- Operating Income of $25.1
million, down 14.7%
- Margins were 21.1%, versus 24.1%
- Energy Segment versus same quarter, prior year:
-
- Revenue of $94.3 million, down
43.5%
- Operating Income of $(1.0)
million versus $12.6
million
- Margins were (1.1%) versus 7.5%
- Net Income of $5.5 million or
$0.21 per share versus $21.3, or $0.81 per
share.
- Declared quarterly cash dividend in the amount of $0.17 per common share.
Management Discussion
Tom Ferguson, President and Chief
Executive Officer of AZZ, commented, "The worldwide COVID-19
pandemic disrupted our first quarter operations, but our Metal
Coatings Segment still delivered solid results. Revenue for
the quarter declined 26.2% compared to last year's comparable
quarter. In light of the global business shutdown brought on by the
virus, our Energy Segment was particularly impacted with a 43%
revenue decrease to $94.3 million,
versus last year's first quarter. Our Industrial Solutions Platform
experienced postponement of most of its scheduled work for the
first quarter as refiners deferred turnarounds amid the global
pandemic. Although it is still early, we are optimistic for an
improved second half of the year as we are seeing more quoting
activity for turnarounds.
"Our Metal Coatings Segment delivered solid operating results in
this difficult environment with sales of $119 million, down slightly at 2.6%, and
operating margin of 21.1% versus 24.1% in last year's first
quarter. Designated an essential business, we were able to keep all
our galvanizing plants open and operating during this pandemic.
While the galvanizing business experienced rather minimal
disruption as infrastructure projects proceeded, our Surface
Technologies plants were negatively impacted by several customers
slowing or stopping operations for a large portion of the
quarter. It is important to note, our DGS (digital
galvanizing systems), which is deployed at all our galvanizing
plants, continues to play an important part in the safety of our
employees and customers by reducing the need for direct onsite
contact, yet allowing for a seamless workflow.
"Given the extraordinary circumstances, the safety and
well-being of our employees and supporting our customers remain top
priorities. I have the utmost confidence in our team to navigate
through this crisis and to emerge as a stronger company thanks to
their commitment. I want to thank all our employees for their
hard work and dedication in continuing to deliver outstanding
service to our customers through this unprecedented time. Our
focus for the balance of this year is structuring our operations
and footprint to be safe, efficient and effective. This
effort will include increased emphasis on divesting non-core
businesses, and investing more heavily in ensuring our core
businesses have the technology and resources to excel in the
post-COVID era."
First Quarter Results
For the first quarter of fiscal year 2021, the Company reported
revenues of $213.3 million compared
to $289.1 million for the comparable
period last year, a decrease of 26.2%. Reported operating
income decreased to $14.3 million, or
53.8% compared to $31.0 million in
last year's comparable three month period. Net income for the three
months decreased to $5.5 million, or
$0.21 per diluted share on a reported
basis, compared to $21.3 million, or
$0.81 per diluted share compared to
the same quarter in the prior fiscal year. The provision for
income taxes of $4.7 million reflects
an effective tax rate of 45.8% for the three months ended
May 31, 2020 as compared to
$5.7 million, or 21.1% for the prior
year comparable period. The increase is attributable to
uncertain tax positions related to research and development tax
credits and losses in foreign jurisdictions for which the Company
does not anticipate being able to recognize the benefit. Bookings
for the three-month period declined to $174.9 million, compared to $256.3 million for the same quarter last
year. Backlog at the end of the quarter was $205.4 million, a decrease of 31.6% as compared
to backlog at the end of the same quarter in the prior year.
Approximately 20% of the current backlog is expected to be
delivered outside the U.S., compared to 44% in the first quarter of
fiscal 2020.
Metal Coatings Segment
For the first quarter of fiscal year 2021, Metal Coatings
Segment revenues decreased 2.6% to $119.0
million and operating income decreased 14.7% to $25.1 million compared to $122.2 million and $29.4
million respectively, for the same period in the prior
fiscal year. The lower revenue for the quarter was
attributable to lower volumes of steel processed in our
kettles. Operating margins for the quarter were 21.1%
compared to 24.1% in the first quarter of fiscal year 2020.
Operating margins were most significantly impacted by plant
closures in our Surface Technologies division as a result of
reduced customer demand due to the COVID pandemic, and
inefficiencies driven by our safety and security measures taken to
protect our employees.
Energy Segment
For the first quarter of fiscal year 2021, Energy Segment
revenues decreased 43.5% to $94.3
million as compared to $167.0
million in the same quarter of the prior year. Our
operating loss for the first quarter of fiscal year 2021 of
$(1.0) million compared to our
operating income $12.6 million in the
prior year's quarter. The decrease in net sales and operating
income for the three-month period was primarily attributable to
several COVID-related factors, including significant reductions in
turnaround activity in both the U.S. and international markets,
project delays in the large high voltage bus project in
China, and a marked slow-down of
planned orders for our electrical products as customers temporarily
shuttered facilities.
Fiscal Year 2021 Guidance
Mr. Ferguson added, "Due to the continued uncertainty associated
with the COVID-19 pandemic on many of our end markets, we cannot
provide an update to our previously suspended fiscal 2021 sales and
earnings guidance range at this time. As previously stated, we
continue to operate as an 'essential business' in supporting
critical infrastructure needs during these unprecedented
times. Our low debt level and ample borrowing capacity,
combined with our consistent ability to generate cash, provides
confidence that we will be able to successfully manage both debt
and liquidity satisfactorily throughout fiscal year 2021. We
continue to be prudent with our cash by focusing capital
expenditures on core growth initiatives and safety-related
spending, paying a dividend, reducing debt, and repurchasing shares
to minimize dilution due to employee stock compensation
plans. We are also carefully managing our workforce to ensure
a safe and healthy operating environment, while flexing our
capacity to better match our demand. Additionally, we did not
experience any unusual slowdown in customer payments as we
navigated our first quarter in the midst of the pandemic. We will
continue to drive operational efficiencies aggressively, and
maintain active M&A activities in support of our strategic
growth initiatives. However, some M&A efforts have been
impacted by our inability to meet with prospective parties due to
the COVID-19 pandemic.
"We hope to be able to re-establish our financial guidance as we
get to the back half of this fiscal year. In the interim we
will work to provide as much context to our outlook as possible.
The risks we are focused on managing are: fully
integrating the Galvanizing and Surface Technologies platforms to
drive market share growth and operating efficiencies; building
backlog in our core Electrical Businesses; ensuring our ability to
deploy resources effectively during, what appears to be, a
strengthening fall turnaround season; and managing our cash well to
ensure we enter FY2022 in a great position."
Conference Call Details
AZZ Inc. will conduct a conference call to discuss financial
results for the first quarter of fiscal year 2021 today,
Thursday, July 9, 2020, at
11:00 A.M. ET. Interested parties can
access the conference call by dialing (844) 855-9499 or (412)
317-5497 (international). A webcast of the call will be available
on the Company's Investor Relations page 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 #
10145425, or for 30 days at
http://www.azz.com/investor-relations.
There will be a slide presentation accompanying today's event.
The Company's slide presentation for the call will be available on
the Investor Relations page at
http://www.azz.com/investor-relations.
About AZZ Inc.
AZZ Inc. is a global provider of metal coating solutions,
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. Certain factors could
affect the outcome of the matters described herein. This press
release may contain forward-looking statements that involve risks
and uncertainties including, but not limited to, changes in
customer demand for our products and services, including demand by
the power generation markets, electrical transmission and
distribution markets, the industrial markets, and the metal
coatings markets. In addition, within each of the markets we
serve, our customers and our operations could potentially be
adversely impacted by the ongoing COVID-19 pandemic. We could
also experience fluctuations in prices and raw material cost,
including zinc and natural gas which are used in the hot dip
galvanizing process; supply-chain vendor delays ; customer
requested delays of our products or services; delays in additional
acquisition opportunities; currency exchange rates; adequacy of
financing; availability of experienced management and employees to
implement AZZ's growth strategy; a downturn in market conditions in
any industry relating to the products we inventory or sell or the
services that we provide; economic volatility or changes in the
political stability in the United
States and other foreign markets in which we operate; acts
of war or terrorism inside the United
States or abroad; and other changes in economic and
financial conditions. 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, 2020 and other filings with the
Securities and Exchange Commission ("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.
Company Contact:
David Nark,
Vice President of Marketing and Communications
AZZ Inc.
(817) 810-0095
www.azz.com
Investor Contact:
Joe
Dorame, Managing Partner
Lytham Partners
(602) 889-9700
www.lythampartners.com
---Financial tables on the following
page---
AZZ
Inc.
|
Condensed
Consolidated Statements of Income
|
(in thousands, except
per share data)
|
(unaudited)
|
|
|
Three Months Ended
May 31,
|
|
2020
|
|
2019
|
|
|
|
|
Net sales
|
$
|
213,293
|
|
|
$
|
289,123
|
|
Costs of
sales
|
171,085
|
|
|
223,016
|
|
Gross margin
|
42,208
|
|
|
66,107
|
|
|
|
|
|
Selling, general and
administrative
|
27,890
|
|
|
35,133
|
|
Operating income
|
14,318
|
|
|
30,974
|
|
|
|
|
|
Interest
expense
|
2,634
|
|
|
3,584
|
|
Other expense,
net
|
1,456
|
|
|
424
|
|
Income before income
taxes
|
10,228
|
|
|
26,966
|
|
Income tax
expense
|
4,687
|
|
|
5,682
|
|
Net income
|
$
|
5,541
|
|
|
$
|
21,284
|
|
Earnings per common
share
|
|
|
|
Basic
|
$
|
0.21
|
|
|
$
|
0.81
|
|
Diluted
|
$
|
0.21
|
|
|
$
|
0.81
|
|
|
|
|
|
Diluted average
shares outstanding
|
26,192
|
|
|
26,193
|
|
AZZ
Inc.
|
Segment
Reporting
|
(in
thousands)
|
(unaudited)
|
|
|
Three Months Ended
May 31,
|
|
2020
|
|
2019
|
Net sales:
|
|
|
|
Metal
Coatings
|
$
|
118,991
|
|
|
$
|
122,154
|
|
Energy
|
94,302
|
|
|
166,969
|
|
|
$
|
213,293
|
|
|
$
|
289,123
|
|
|
|
|
|
Segment operating
income (loss):
|
|
|
|
Metal
Coatings
|
$
|
25,085
|
|
|
$
|
29,392
|
|
Energy
|
(1,048)
|
|
|
12,571
|
|
Corporate
|
(9,719)
|
|
|
(10,989)
|
|
|
$
|
14,318
|
|
|
$
|
30,974
|
|
AZZ
Inc.
|
Condensed
Consolidated Balance Sheets
|
(in
thousands)
|
(unaudited)
|
|
|
May 31,
2020
|
|
February 29,
2020
|
|
|
|
|
Assets:
|
|
|
|
Current
assets
|
$
|
335,029
|
|
|
$
|
354,562
|
|
Net property, plant
and equipment
|
214,965
|
|
|
213,104
|
|
Other assets,
net
|
500,779
|
|
|
506,165
|
|
Total
assets
|
$
|
1,050,773
|
|
|
$
|
1,073,831
|
|
|
|
|
|
Liabilities and
shareholders' equity:
|
|
|
|
Current
liabilities
|
$
|
239,574
|
|
|
$
|
280,613
|
|
Long term debt due
after one year, net
|
93,911
|
|
|
77,878
|
|
Other
liabilities
|
81,589
|
|
|
80,974
|
|
Shareholders'
equity
|
635,656
|
|
|
634,366
|
|
Total liabilities and
shareholders' equity
|
$
|
1,050,773
|
|
|
$
|
1,073,831
|
|
AZZ
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(in
thousands)
|
(unaudited)
|
|
|
Three Months Ended
May 31,
|
|
2020
|
|
2019
|
|
|
|
|
Net cash used in
operating activities
|
$
|
(11,184)
|
|
|
$
|
(17,896)
|
|
Net cash used in
investing activities
|
(10,847)
|
|
|
(43,469)
|
|
Net cash provided by
financing activities
|
11,036
|
|
|
50,869
|
|
Effect of exchange
rate changes on cash
|
722
|
|
|
77
|
|
Net decrease in cash
and cash equivalents
|
$
|
(10,273)
|
|
|
$
|
(10,419)
|
|
Cash and cash
equivalents at beginning of period
|
36,687
|
|
|
24,005
|
|
Cash and cash
equivalents at end of period
|
$
|
26,414
|
|
|
$
|
13,586
|
|
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SOURCE AZZ Inc.