FORT WORTH, Texas, Jan. 11, 2021 /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 third quarter of
fiscal year 2021, ended November 30,
2020.
Third Quarter Overview and Recent Highlights:
- Earnings per share of $0.76 and
net income of $19.7 million; which
includes net charges of $1.6 million,
or $0.06 cents per share, primarily
related to the loss on the divestiture of Southern Mechanical
Services (SMS).
- Sales of $226.6 million,
increased sequentially by 11.4% from the second quarter
-
- Metal Coatings segment results versus same quarter, prior
year:
-
- Sales of $115.6 million, down
10.5%, with galvanizing sales down 8.8%
- Operating income of $28.7
million, up 5.2%
- Operating margin of 24.8%, versus 21.1%, or 370 bps
improvement
- Infrastructure Solutions segment results versus same quarter,
prior year:
-
- Sales of $111.0 million up 28.6%
sequentially; down 31.5%
- Operating income of $8.7 million,
down 49.9%
- Operating margin of 7.9% versus 10.8%
- Acquisition of Acme Galvanizing to continue strategic emphasis
on Metal Coatings
- Repurchased over 652,000 shares during the quarter.
- Board authorized a new $100
million share repurchase program.
Management Discussion
Tom Ferguson, President and Chief
Executive Officer of AZZ, commented, "During the third quarter, the
COVID-19 pandemic continued to significantly impact our operations
and financial results. Despite the challenging global
macroeconomic environment, we achieved sequential operating
performance improvement as our businesses steadily adapted to
operating in the current environment. We were able to maintain
solid profitability with sales of $226.6
million and net income of $19.7
million, or $0.76 per diluted
share, and return capital to our shareholders by purchasing more
than 652,000 AZZ common shares in the open market during the third
quarter.
I am pleased that our Metal Coatings segment continues to
deliver solid operating results with sales of $115.6 million, and operating margins of 24.8%,
an improvement of 370 basis points over the same quarter the prior
year. Within our Infrastructure Solutions segment, we experienced
mixed results. End-market demand for medium voltage switchgear
continues to exceed prior year results, while electrical enclosure
orders were consistent with the third quarter of last year.
However, the ongoing impact of pandemic-related travel
restrictions, coupled with the effects of weak oil demand, has
resulted in significantly lower refining turnaround projects as
customers continued to delay or defer maintenance. We are
cautiously optimistic for improvement in the refining market, and
are positioning our welding solutions operations for a solid fiscal
year 2022. We are already seeing signs of improvement including
earlier and increased quoting activity for the 2021 spring
turnaround season.
As we previously communicated during the quarter, due to
shifting industry and customer dynamics, and the protracted impact
from the COVID-19 pandemic, we are taking the necessary steps to
strategically restructure our portfolio of businesses to become a
focused metal coatings business. As part of this process, we
previously announced several actions including the divestiture of
SMS, for which we recorded a loss on the sale of subsidiary of
$1.9 million, the recent acquisition
of Acme Galvanizing as part of our strategy to continue to grow
Metal Coatings, and a comprehensive Board-led review of our
businesses with the assistance of leading independent financial,
legal and tax advisors. Our review of the Infrastructure
Solutions businesses and associated assets, and the exploration of
additional capital allocation opportunities to maximize shareholder
value, is ongoing and I am pleased with the progress the team has
made during the quarter.
I am extremely proud of AZZ's resiliency and execution as we
continue to navigate the pandemic and again I want to express
my sincere gratitude to all our employees for their hard work and
dedication during this unprecedented time. We expect to emerge from
this year a much stronger company, well-positioned to excel in the
post-COVID era."
Third Quarter Results
Sales for the third quarter of fiscal year 2021 were
$226.6 million, compared to
$291.1 million for the comparable
period last year, a decrease of 22.2%. Net income for the
quarter was $19.7 million, or
$0.76 per share on a diluted basis,
down $2.3 million from the prior
year, same quarter. Incoming orders for the three-month
period declined to $194.4 million, as
compared to $263.7 million for the
same quarter last year. The book-to-sales ratio declined
slightly to 0.86, compared to 0.91 in last year's comparable
period. Backlog at the end of the quarter was $174.4 million, a decrease of 36.5% as compared
to backlog at the end of the same quarter in the prior year, due to
lower orders in China as the
Company previously stated its plan to decrease sales efforts in
this region, along with the effects on the business from the
pandemic.
Metal Coatings Segment
For the third quarter of fiscal year 2021, Metal Coatings
segment sales decreased 10.5% to $115.6
million and operating income increased $1.4 million, or 5.2% to $28.7 million versus the comparable prior year
quarter. Operating margins improved to 24.8% of sales, which
was 370 basis points higher than the comparable prior year
quarterly operating margin. On a year-to-date basis, adjusted
operating income of $80.4 million was
$4.9 million, or 5.8% lower than the
comparable prior year-to-date period.
Infrastructure Solutions Segment (formerly the Energy
Segment)
For the third quarter of fiscal year 2021, Infrastructure
Solutions segment sales decreased to $111.0
million, or 31.5% as compared to $161.9 million in the same quarter of the prior
year. Infrastructure Solutions operating income
of $8.7 million was 49.9% lower than
the comparable prior year quarter. Operating margin decreased
to 7.9% compared to prior year quarter operating margin of
10.8%. On a year-to-date basis, adjusted operating income of
$12.6 million was $21.6 million, or 63.2%, lower than the
comparable prior year-to-date period. Adjusted year-to-date
operating margin was 4.3% compared to 7.8% in the prior year.
The decrease in net sales and operating income was primarily
attributable to several COVID-related factors, including travel
restrictions within certain key geographical areas served by our
Infrastructure Solutions teams, significant reductions in
turnaround activity in both the U.S. and international markets, and
a reduction of orders for some of our electrical products.
The following chart provides an overview of operating income for
both our Metal Coatings and Infrastructure Solutions segments, as
adjusted for the impairment charges recorded during the
quarter:
AZZ
Inc.
|
Segment
Reporting
|
(dollars in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
November 30,
|
|
Nine Months
Ended
November 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Metal Coatings
Segment
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
115,616
|
|
|
$
|
129,196
|
|
|
$
|
351,643
|
|
|
$
|
376,193
|
|
|
Segment operating
income:
|
|
|
|
|
|
|
|
|
Metal Coatings, as
reported
|
|
28,671
|
|
|
27,258
|
|
|
69,355
|
|
|
85,323
|
|
|
Impact of
restructuring and impairment
|
|
(281)
|
|
|
—
|
|
|
11,043
|
|
|
—
|
|
|
Metal Coatings, as
adjusted
|
|
$
|
28,390
|
|
|
$
|
27,258
|
|
|
$
|
80,398
|
|
|
$
|
85,323
|
|
|
Adjusted operating
income as a % of revenue
|
|
24.6
|
%
|
|
21.1
|
%
|
|
22.9
|
%
|
|
22.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Infrastructure
Solutions Segment
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
111,007
|
|
|
$
|
161,943
|
|
|
$
|
291,644
|
|
|
$
|
440,259
|
|
|
Segment operating
income:
|
|
|
|
|
|
|
|
|
Infrastructure
Solutions, as reported
|
|
8,722
|
|
|
17,421
|
|
|
3,364
|
|
|
34,231
|
|
|
Impact of
restructuring and impairment
|
|
1,857
|
|
|
—
|
|
|
9,226
|
|
|
—
|
|
|
Infrastructure
Solutions, as adjusted
|
|
$
|
10,579
|
|
|
$
|
17,421
|
|
|
$
|
12,590
|
|
|
$
|
34,231
|
|
|
Adjusted operating
income as a % of revenue
|
|
9.5
|
%
|
|
10.8
|
%
|
|
4.3
|
%
|
|
7.8
|
%
|
|
Fiscal Year 2021 Guidance
Mr. Ferguson added, "Given the ongoing disruption from COVID-19
we will continue to suspend our guidance for fiscal 2021. Based
upon the evaluation of information currently available to
management, we anticipate fiscal 2021 fourth quarter financial
results to exceed the fiscal 2020 fourth quarter adjusted earnings
per share of $0.47 per diluted share,
but we expect fourth quarter results to be below the third quarter
results. We continue to experience COVID-related travel
restrictions within certain geographical areas served by our
Infrastructure Solutions teams, particularly in some key
international markets where we have projects scheduled for
completion during the fourth quarter.
The strong cash flow generated by our operations will continue
to help the Company manage both debt and liquidity effectively
throughout the remainder of fiscal 2021, and well beyond. We
continue to be prudent with our use of cash by focusing capital
expenditures on core growth initiatives and safety-related
spending, reducing debt, and repurchasing shares to enhance
shareholder value. We will also continue to carefully manage
our workforce to ensure a safe and healthy operating environment,
and adjust our capacity to match the fluidity of our customer
demands.
We are focused on executing the following opportunities:
fully integrate the recently announced acquisition of Acme
Galvanizing to drive market share growth and operating
efficiencies; build backlog in our Infrastructure Solutions
segment; complete additional acquisitions and dispositions in
support of our strategic initiatives and efficiently manage our
liquidity to ensure we enter fiscal year 2022 in a solid
position."
Conference Call Details
AZZ Inc. will conduct a conference call to discuss financial
results for the third quarter of fiscal year 2021 today,
Monday, January 11, 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 #10150822,
or for 30 days at http://www.azz.com/investor-relations.
There will be a slide presentation accompanying today's call.
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
Infrastructure Solutions (formerly 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, Senior Vice President of Marketing and Investor
Relations
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
|
(dollars in
thousands, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
November 30,
|
|
Nine Months
Ended
November 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net sales
|
|
$
|
226,623
|
|
|
$
|
291,139
|
|
|
$
|
643,287
|
|
|
$
|
816,452
|
|
Cost of
sales
|
|
171,948
|
|
|
223,808
|
|
|
500,311
|
|
|
630,328
|
|
Gross
margin
|
|
54,675
|
|
|
67,331
|
|
|
142,976
|
|
|
186,124
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
25,228
|
|
|
33,903
|
|
|
79,867
|
|
|
99,515
|
|
Restructuring and
impairment charges
|
|
1,576
|
|
|
—
|
|
|
20,269
|
|
|
—
|
|
Operating income
|
|
27,871
|
|
|
33,428
|
|
|
42,840
|
|
|
86,609
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
2,272
|
|
|
3,301
|
|
|
7,376
|
|
|
10,433
|
|
Other (income)
expense, net
|
|
(724)
|
|
|
(743)
|
|
|
823
|
|
|
367
|
|
Income before income
taxes
|
|
26,323
|
|
|
30,870
|
|
|
34,641
|
|
|
75,809
|
|
Income tax
expense
|
|
6,620
|
|
|
8,835
|
|
|
11,187
|
|
|
16,932
|
|
Net income
|
|
$
|
19,703
|
|
|
$
|
22,035
|
|
|
$
|
23,454
|
|
|
$
|
58,877
|
|
Earnings per common
share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.76
|
|
|
$
|
0.84
|
|
|
$
|
0.90
|
|
|
$
|
2.25
|
|
Diluted
|
|
$
|
0.76
|
|
|
$
|
0.84
|
|
|
$
|
0.90
|
|
|
$
|
2.24
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
26,051
|
|
|
26,263
|
|
|
26,177
|
|
|
26,246
|
|
AZZ
Inc.
|
Condensed
Consolidated Balance Sheets
|
(dollars in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
November 30,
2020
|
|
February 29,
2020
|
Assets:
|
|
|
|
|
Current assets
(including assets held for sale of $3,298)
|
|
$
|
324,710
|
|
|
$
|
354,562
|
|
Property, Plant and
Equipment, Net
|
|
201,178
|
|
|
213,104
|
|
Other assets,
net
|
|
483,981
|
|
|
506,165
|
|
Total
assets
|
|
$
|
1,009,869
|
|
|
$
|
1,073,831
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity:
|
|
|
|
|
Current liabilities
(including liabilities held for sale of $)
|
|
$
|
123,455
|
|
|
$
|
280,613
|
|
Long-term debt due
after one year, net
|
|
181,978
|
|
|
77,878
|
|
Other
liabilities
|
|
80,358
|
|
|
80,974
|
|
Shareholders'
equity
|
|
624,078
|
|
|
634,366
|
|
Total liabilities and
shareholders' equity
|
|
$
|
1,009,869
|
|
|
$
|
1,073,831
|
|
AZZ
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(dollars in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
Nine Months Ended
November 30,
|
|
|
2020
|
|
2019
|
Net cash provided by
operating activities
|
|
$
|
59,394
|
|
|
$
|
72,054
|
|
Net cash used in
investing activities
|
|
(14,987)
|
|
|
(82,834)
|
|
Net cash provided by
(used in) financing activities
|
|
(64,229)
|
|
|
1,209
|
|
Effect of exchange
rates on cash
|
|
2,330
|
|
|
(145)
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
$
|
(17,492)
|
|
|
$
|
(9,716)
|
|
Cash and cash
equivalents at beginning of period
|
|
36,687
|
|
|
24,005
|
|
Cash and cash
equivalents at end of period
|
|
$
|
19,195
|
|
|
$
|
14,289
|
|
AZZ Inc.
Non-GAAP
Disclosure
Adjusted Operating Income, Adjusted Earnings
and Adjusted Earnings Per Share
In addition to reporting financial results in accordance with
Generally Accepted Accounting Principles in the United States ("GAAP"), the Company has
provided adjusted operating income, adjusted earnings and adjusted
earnings per share (collectively, the "Adjusted Earnings
Measures"), which are non-GAAP measures. Management believes
that the presentation of these measures provides investors with a
greater transparency comparison of operating results across a broad
spectrum of companies, which provides a more complete understanding
of the Company's financial performance, competitive position and
prospects for the future. Management also believes that investors
regularly rely on non-GAAP financial measures, such as adjusted
operating income, adjusted earnings and adjusted earnings per
share, to assess operating performance and that such measures may
highlight trends in the Company's business that may not otherwise
be apparent when relying on financial measures calculated in
accordance with GAAP.
The following tables provides a reconciliation for the three and
nine months ended November 30, 2020
between the various measures calculated in accordance with GAAP to
the Adjusted Earnings Measures, which are shown net of tax (dollars
in thousands, except per share data):
|
|
Three Months
Ended
November 30, 2020
|
|
Nine Months
Ended
November 30, 2020
|
Operating
income
|
|
$
|
27,871
|
|
$
|
42,840
|
Restructuring and
impairment charges
|
|
1,576
|
|
20,269
|
Adjusted operating
income
|
|
$
|
29,447
|
|
$
|
63,109
|
|
|
Three Months
Ended
November 30, 2020
|
|
Nine Months
Ended
November 30, 2020
|
|
|
|
Amount
|
|
Per Diluted
Share(1)
|
|
Amount
|
|
Per Diluted
Share(1)
|
Net income and
diluted earnings per share
|
|
$
|
19,703
|
|
|
$
|
0.76
|
|
|
$
|
23,454
|
|
|
$
|
0.90
|
|
|
Adjustments (net of
tax):
|
|
|
|
|
|
|
|
|
Restructuring and
impairment charges:
|
|
|
|
|
|
|
|
|
Metal
Coatings
|
|
(281)
|
|
|
(0.01)
|
|
|
11,043
|
|
|
0.42
|
|
Infrastructure
Solutions
|
|
1,857
|
|
|
0.07
|
|
|
9,226
|
|
|
0.35
|
|
Subtotal
|
|
1,576
|
|
|
0.06
|
|
|
20,269
|
|
|
0.77
|
|
Tax benefit related to
restructuring and impairment charges
|
|
(367)
|
|
|
(0.01)
|
|
|
(4,717)
|
|
|
(0.18)
|
|
Total
adjustments
|
|
1,209
|
|
|
0.05
|
|
|
15,552
|
|
|
0.59
|
|
Adjusted earnings and
adjusted earnings per share share
|
|
$
|
20,912
|
|
|
$
|
0.80
|
|
|
$
|
39,006
|
|
|
$
|
1.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Earnings per share
amounts included in the table above may not sum due to rounding
differences
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SOURCE AZZ Inc.