FORT
WORTH, Texas, July 11,
2022 /PRNewswire/ -- AZZ Inc. (NYSE: AZZ), a global
provider of metal coating solutions, coil coating solutions,
welding solutions, specialty electrical equipment and highly
engineered services today announced financial results for the first
quarter of fiscal year 2023, ended May 31, 2022.
First Quarter Overview:
- Year-over-year financial results
-
- Diluted earnings per share (EPS), as reported of $0.96, up 9.1%
- Diluted EPS, as adjusted of 1.40, up 59.1%
- Sales of $314.4 million, up
36.8%
- Net income, as reported, $24.1
million, up $1.7 million, or
7.8%
- Net income, as adjusted, of 36.0 million, up 61.0%
- EBITDA of $54.2 million, up
26.8%
- Metal Coatings segment versus same quarter, prior year:
-
- Sales of $160.8 million, up
25.9%
- EBITDA of $52.7 million, up
35.0%
- Operating income of $44.4
million, up 40.7%
- Operating margins of 27.6%, up 290 basis points
- Precoat Metals segment, acquired May 13,
2022:
-
- Sales of $43.7 million
- EBITDA of $9.8 million
- Operating income of $6.6
million
- Operating margins of 15.2%
- Infrastructure Solutions segment versus same quarter, prior
year:
-
- Sales of $109.9 million, up
7.6%
- EBITDA of $15.3 million, up
11.5%
- Operating income of $12.9
million, up 33.5%
- Operating margins of 11.7%, up 230 basis points
Management Discussion
Tom Ferguson, President and Chief
Executive Officer of AZZ, commented, "We are off to a very good
start in fiscal 2023 generating strong operating performance in the
first quarter, including sales increasing 36.8%, and operating
income up 29.9%. These results reflect the strength of our
businesses and our team's ability to execute at a high level, while
continuing to support our strategic transformation efforts."
"Our Metal Coatings segment continued to deliver great operating
results with record sales of $160.8
million, up 25.9%, and EBITDA of $52.7 million, up 35.0% versus the prior year's
first quarter. Improved sales were driven by increased volume
for hot-dip galvanizing within the renewables, utility, OEM, and
construction end markets, and includes the full-quarter results of
the recently completed acquisitions of both DAAM Galvanizing and
Steel Creek Galvanizing. I am pleased with the team's ability
to manage the increasing costs of materials and labor, through
pricing and operational improvement initiatives, while focusing on
providing outstanding customer service."
"Our new Precoat Metals segment, acquired May 13, 2022, generated sales of $43.7 million, and EBITDA of $9.8 million. While segment-level results
reflect just two weeks of performance as part of AZZ, I am pleased
with the team's performance thus far and, on a proforma basis, the
business is on track to deliver record-level sales and EBITDA
growth versus prior year. The segment should continue to
benefit from favorable market conditions, including growth in
import steel shipments, as well as the growing trend in
manufacturing toward the increasing use of pre-painted steel and
aluminum."
Mr. Ferguson continued, "During the first quarter, our
Infrastructure Solutions segment (AIS) generated sales of
$109.9 million, up 7.6% and EBITDA of
$15.3 million, up 11.5% as compared
to the same quarter, prior year. The solid start to the fiscal year
was led by both sales and operating income improvements within many
of our Electrical businesses, which continue to see growing
bookings and backlog. Our Industrial Solutions platform,
however, experienced slightly lower sales than the prior year, as
customers have deferred certain projects until later this year.
Infrastructure Solutions segment operating margin of 11.7%,
improved 230 basis points compared to an operating margin of 9.4%
for the same period last year. These improved results are a
testament to the dedication and hard work of our employees who were
able to deliver these results and provide exceptional service to
our customers, while navigating supply chain and labor
constraints."
First Quarter Results
For the first quarter of fiscal year 2023, the Company reported
sales of $314.4 million compared to
$229.8 million for the comparable
period last year, an increase of 36.8%. Operating income
increased to $39.9 million, or by
$9.2 million, compared to operating
income of $30.7 million during last
year's comparable first quarter period. Net income for the
first quarter increased $1.7 million
to $24.1 million, or $0.96 per diluted share compared to net income of
$22.3 million, or $0.88 per diluted share for the first quarter in
the prior fiscal year, driven by stronger operational performance
in each of our segments, partially offset by higher interest
expense, higher depreciation and amortization, and $12.6 million in acquisition and
divestiture-related corporate costs. The provision for income taxes
of $7.6 million reflects an effective
tax rate of 23.9% for the three months ended May 31, 2022, as
compared to $7.6 million, or 25.5%,
for the prior year comparable period. Bookings for the
three-month period increased to $317.3
million, compared to $229.8
million for the first quarter last year. The book-to-sales
ratio improved to 1.01, compared to 1.00 in last year's comparable
period. Backlog at the end of the first quarter was
$307.4 million, an increase of 65.2%
as compared to backlog at the end of the first quarter in the prior
year. The increase in backlog of $121.3
million, to $307.4 million
versus prior year is largely attributable to growing demand for our
electrical products.
Subsequent Event
On June 23, 2022, AZZ and Fernweh
Group LLC ("Fernweh"), jointly announced that they entered into a
definitive agreement whereby AZZ will contribute its AZZ
Infrastructure Solutions segment to AIS Investment Holdings LLC
(the "AIS JV"), and sell a 60% interest in the AIS JV to Fernweh at
an implied enterprise value of $300
million. The valuation represents approximately 8.1x AIS LTM
2/28/2022 adjusted EBITDA of roughly
$37 million, and is expected to
result in cash proceeds to AZZ of approximately $228 million. The transaction is expected to
close before the end of 2022, and is subject to certain purchase
price adjustments, obtaining the requisite governmental approvals
and other customary closing conditions and approvals.
Fiscal Year 2023 Guidance
Mr. Ferguson added, "Due to the acquisition of Precoat Metals,
and the recently announced definitive agreement whereby AZZ will
divest a majority (60%) interest in the Company's Infrastructure
Solutions segment, via the AIS JV, we will not issue full-year
fiscal year 2023 guidance at this time. However, based upon
information currently available to management, we anticipate
2nd quarter sales to be within the range of $485 million and $510
million, and EBITDA within the range of $90 million to $110
million."
"As we have previously stated, for the balance of fiscal 2023,
we remain highly focused on executing upon our growth strategy and
various initiatives within both our Metal Coatings and Precoat
Metals segments, and on completing the recently announced
divestiture of a majority interest in AIS. The underlying
fundamentals of our business remain strong and provide us a good
foundation upon which to execute our strategic plan. As part
of our corporate commitment to Trust, Respect, Accountability,
Integrity, Teamwork and Sustainability ("TRAITS"), we continue to
carefully manage our workforce to ensure a safe and healthy
operating environment, while leveraging our operational capacity to
match our customers' demand for our products and
services."
"Previously, we have disclosed a desire for AZZ to become
predominately a metal coatings company to drive growth and enhance
shareholder value, and over the past two quarters we have
significantly advanced that commitment," concluded Mr.
Ferguson.
Conference Call Details
AZZ Inc. will conduct a conference call to discuss financial
results for the first quarter of fiscal year 2023 today, Monday,
July 11, 2022, 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 at (877) 344-7529 or
(412) 317-0088 (international), replay access code: 4637193,
through July 18, 2022, or by visiting
http://www.azz.com/investor-relations for the next 90
days.
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 galvanizing and a variety of
metal coating and coil coating solutions, welding solutions,
specialty electrical equipment and highly engineered services to a
broad range of markets, including but not limited to the power
generation, transmission, distribution, refining and industrial
markets. The Company's Metal Coatings segment is a leading
provider of metal finishing solutions for corrosion protection,
including hot dip galvanizing, spin galvanizing, powder coating,
anodizing and plating, to the North American steel fabrication
industry. The Company's Precoat Metals segment is the leading
independent provider of metal coil coating solutions in North
America. Precoat engages in the advanced application of
protective and decorative coatings and related value-added
services for steel and aluminum coil primarily
serving the construction, recreational vehicles appliance, heating,
ventilation and air conditioning (HVAC), container, transportation
and other end markets. The Company's Infrastructure Solutions
segment 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 and waste management 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 continue
to be adversely impacted by the ongoing COVID-19 pandemic,
including governmental issued mandates regarding the
same. We could also experience additional increases in
labor costs, components and raw materials, including zinc
which are used in our hot-dip galvanizing process and natural gas
which is used in our hot-dip galvanizing and coil coating
processes; supply-chain vendor delays; customer requested delays of
our products or services; currency exchange rates; 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 28,
2022, 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.
---Financial tables on the following
page---
AZZ
Inc.
|
Condensed
Consolidated Statements of Income
|
(dollars and shares in
thousands, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
May 31,
|
|
|
2022
|
|
2021
|
Sales
|
|
$
314,398
|
|
$
229,826
|
Cost of
sales
|
|
229,942
|
|
171,899
|
Gross margin
|
|
84,456
|
|
57,927
|
|
|
|
|
|
Selling, general and
administrative
|
|
44,546
|
|
27,215
|
Restructuring and
impairment charges
|
|
—
|
|
—
|
Operating
income
|
|
39,910
|
|
30,712
|
|
|
|
|
|
Interest
expense
|
|
7,473
|
|
1,697
|
Other (income) expense,
net
|
|
798
|
|
(969)
|
Income before income
taxes
|
|
31,639
|
|
29,984
|
Income tax
expense
|
|
7,562
|
|
7,647
|
Net income
|
|
$
24,077
|
|
$
22,337
|
|
|
|
|
|
Earnings per common
share
|
|
|
|
|
Basic
|
|
$
0.97
|
|
$
0.89
|
Diluted
|
|
$
0.96
|
|
$
0.88
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
25,675
|
|
25,270
|
AZZ
Inc.
|
Segment
Reporting
|
(dollars in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
May 31,
|
|
|
2022
|
|
2021
|
Sales:
|
|
|
|
|
Metal
Coatings
|
|
$
160,846
|
|
$
127,735
|
Precoat
Metals
|
|
43,691
|
|
—
|
Infrastructure
Solutions
|
|
109,861
|
|
102,091
|
Total sales
|
|
$
314,398
|
|
$
229,826
|
|
|
|
|
|
Operating
income:
|
|
|
|
|
Metal
Coatings
|
|
$
44,435
|
|
$
31,576
|
Precoat
Metals
|
|
6,648
|
|
—
|
Infrastructure
Solutions
|
|
12,851
|
|
9,624
|
Corporate
|
|
(24,024)
|
|
(10,488)
|
Total operating
income
|
|
$
39,910
|
|
$
30,712
|
AZZ
Inc.
|
Condensed
Consolidated Balance Sheets
|
(dollars in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
May 31,
2022
|
|
February 28,
2022
|
Assets:
|
|
|
|
|
Current
Assets(1)
|
|
$
720,396
|
|
$
386,533
|
Property, Plant and
Equipment, Net
|
|
491,722
|
|
230,848
|
Other assets,
net
|
|
1,570,174
|
|
515,647
|
Total assets
|
|
$
2,782,292
|
|
$
1,133,028
|
|
|
|
|
|
Liabilities and
Shareholders' Equity:
|
|
|
|
|
Current
liabilities
|
|
$
334,413
|
|
$
150,531
|
Long-term debt due
after one year, net
|
|
1,594,777
|
|
226,484
|
Other
liabilities
|
|
165,543
|
|
88,648
|
Shareholders'
equity
|
|
687,559
|
|
667,365
|
Total liabilities and
shareholders' equity
|
|
$
2,782,292
|
|
$
1,133,028
|
(1) Includes
assets held for sale of $235 as of both May 31, 2022 and February
28, 2022.
|
AZZ
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(dollars in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
May 31,
|
|
|
2022
|
|
2021
|
Net cash provided by
operating activities
|
|
$
23,314
|
|
$
11,060
|
Net cash used in
investing activities
|
|
(1,306,289)
|
|
(7,466)
|
Net cash provided by
(used in) financing activities
|
|
1,368,940
|
|
(5,610)
|
Effect of exchange rate
changes on cash
|
|
(49)
|
|
(418)
|
Net increase (decrease)
in cash and cash equivalents
|
|
85,916
|
|
(2,434)
|
Cash and cash
equivalents at beginning of period
|
|
15,082
|
|
14,837
|
Cash and cash
equivalents at end of period
|
|
$
100,998
|
|
$
12,403
|
AZZ Inc.
Non-GAAP
Disclosure
Adjusted Operating Income, Adjusted Earnings
and Adjusted Earnings Per Share
(dollars in thousands,
except per share data)
(unaudited)
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.
In the second quarter of fiscal 2021, the Company developed and
began the implementation of a plan to divest certain non-core
businesses and later, divested several non-core businesses.
During the three months ended May 31, 2022, the Company did
not recognize any restructuring and impairment charges. The
following tables provides a reconciliation for the three months
ended May 31, 2022 and 2021 between the various measures
calculated in accordance with GAAP to the Adjusted Earnings
Measures (dollars in thousands, except per share data):
|
|
Three Months
Ended
|
|
|
May 31,
2022
|
|
|
Amount
|
|
Per Diluted
Share
|
Net income and diluted
earnings per share
|
|
$
24,077
|
|
|
Impact of after-tax
interest expense for Convertible Notes
|
|
547
|
|
|
Net income for diluted
earnings per share
|
|
$
24,624
|
|
$
0.96
|
Adjustments:
|
|
|
|
|
Acquisition and
transaction related expenditures(2)
|
|
12,614
|
|
0.49
|
Increase in interest
expense due to Precoat Acquisition
|
|
5,776
|
|
0.22
|
Depreciation and
amortization - Precoat Metals
|
|
3,181
|
|
0.12
|
Precoat Metals segment
contribution
|
|
(6,666)
|
|
(0.26)
|
Subtotal
|
|
14,905
|
|
0.58
|
Tax
benefit(3)
|
|
(3,577)
|
|
(0.14)
|
Total
adjustments
|
|
11,328
|
|
0.44
|
Adjusted earnings and
adjusted earnings per share
|
|
$
35,952
|
|
$
1.40
|
|
|
|
|
|
(1) Earnings
per share amounts included in the table above may not sum due to
rounding differences.
|
(2) Includes
expenses related to the Precoat acquisition as well as the
divestiture of the Infrastructure Solutions business.
|
(3) Tax
benefit consists of 21% federal statutory rate and 3% blended state
tax rate.
|
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SOURCE AZZ Inc.