Third Quarter Sales Growth Reflects
Continued Solid Demand
Robust Cash Flow Generation Has Reduced Net
Leverage by 0.9x
Raising FY2023 Adjusted EPS Guidance Range
to $4.05 - $4.25
FORT
WORTH, Texas, Jan. 9, 2023
/PRNewswire/ -- AZZ Inc. (NYSE: AZZ), the leading
independent provider of hot-dip galvanizing and coil coating
solutions, today announced financial results for the third quarter
ended November 30, 2022.
Third quarter notable highlights:
- Sales of $373.3 million from
continuing operations; Excludes one month of AIS sales totaling
$42.3 million, classified as
discontinued operations
- Strong third quarter sales performance across both segments
with Metal Coatings up 17.2% and Precoat Metals up 14.8% on a
comparable basis
- Consolidated Adjusted EPS of $0.88; Reported Diluted EPS of $(0.97) includes non-cash write down related to
previously announced AIS divestiture
- Adjusted EBITDA of $71.2 million
or 19.1% of sales for the quarter
- Net income from continuing operations of $18.4 million compared to $13.1 million in the prior year
- Raising Fiscal Year 2023 Adjusted EPS guidance to $4.05 - $4.25
- Reduced debt by $230.3
million
- Completed divestiture of AIS on September 30, 2022
"We were pleased with our second full quarter as a focused metal
coatings business. We delivered strong sales across the Metal
Coatings and Precoat Metals segments and completed the divestiture
of our majority stake in the Infrastructure Solutions segment
resulting in EPS growth from continuing operations of 11.3% in the
quarter," said Tom Ferguson,
President and Chief Executive Officer. "These results reflect
continued stable customer demand in both segments, the team's
ability to manage the increasing costs of materials and labor,
through pricing and operational improvement initiatives, and our
focus on providing outstanding value to our customers. As we
continue to progress through the seasonally slower second half of
the year, our outlook remains positive. We are well positioned to
create long-term value for our shareholders."
Third Quarter Fiscal Year 2023 Segment Review
Metal Coatings Segment
Strong sales of
$158.3 million, up 17.2% from the
third quarter of the prior year. Improved sales were driven by
value pricing initiatives, the impact of fully integrated prior
acquisitions, and an increase in volume for hot-dip galvanizing
driven by continued strength within the renewables, utility, OEM,
and non-residential construction markets.
EBITDA of $41.9 million was up
2.9% versus the third quarter of the prior year. EBITDA margin
declined 370 basis points, primarily due to increased zinc, labor,
acid, and energy costs in galvanizing, partially offset by
increased price, mix and sales volume.
Precoat Metals Segment
Strong sales of
$215.0 million, primarily driven by
value pricing initiatives and stable volumes from non-residential
construction markets and mix.
EBITDA of $34.4 million in line
with management's seasonal expectations as higher than normal
customer inventories, inflationary pressures and sales mix posed
productivity, efficiency, and cost headwinds. We have specific
plans in place to address production inefficiencies and are
encouraged by the results to date.
Balance Sheet, Liquidity and Capital Allocation
The Company generated year-to-date operating cash flow of
$68.6 million through strong earnings
and effective management of working capital. A total of
$230.3 million of operating cash and
proceeds from the sale of AIS were used to pay down debt in the
period. At the end of the third quarter, net leverage was 3.4x LTM
EBITDA, which improved approximately 0.9x in the six months since
closing the Precoat Metals acquisition. Consistent with the capital
allocation strategy, the Company returned cash to shareholders
through cash dividend payments. Capital expenditures were
$18.3 million during the quarter.
Mergers, Acquisitions and Divestitures
On September 30, 2022, the Company
completed the transaction whereby AZZ contributed its AZZ
Infrastructure Solutions segment to AIS Investment Holdings LLC
(the "AIS JV") and sold a 60% interest in the AIS JV to Fernweh
Group. The Company received proceeds from the sale of approximately
$108.0 million, as well as
$120.0 million that was funded by
committed debt financing taken on by the AIS JV, for total cash
received of $228 million.
Financial Outlook and Key Assumptions
Mr. Ferguson continued, "Due to the consistent operating
performance in our business segments, we are reaffirming our annual
sales guidance range of $1.27 billion
to $1.32 billion. In addition, we are
raising our guidance for adjusted earnings per diluted share for
fiscal year 2023 by $0.25 to
$4.05 – $4.25 from previously issued guidance of
$3.80 – $4.00. Our updated guidance reflects continued
strong performance within our segments during the third
quarter. Full year guidance reflects the previously
communicated seasonally lower fourth quarter, additional interest
expense, dividends on our Preferred Stock, and the impact of a
normalized forward-looking tax rate. Fourth quarter also
excludes any potential impact of equity in earnings on our
investment in the AIS JV."
As we have previously stated, we remain highly focused on
executing upon our growth strategy reinforced by our #1 market
position in both segments. The underlying fundamentals of our
business remain strong and secular growth drivers are in place in
key end-markets as we near the end of our seasonally slower period.
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.
Conference Call Details
AZZ Inc. will conduct a live conference call with Tom Ferguson, Chief Executive Officer, and
Philip Schlom, Chief Financial
Officer to discuss financial results for the third quarter of
fiscal year 2023 tomorrow, Tuesday, January
10, 2023 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: 9454594,
through January 17, 2023, 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 the leading independent provider of hot-dip
galvanizing and coil coating solutions to a broad range of
end-markets. Collectively, our business segments provide
sustainable, unmatched metal coating solutions that enhance the
longevity and appearance of buildings, products and infrastructure
that are essential to everyday life.
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," "could," "should,"
"expects," "plans," "will," "might," "would," "projects,"
"currently," "intends," "outlook," "forecasts," "targets,"
"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. Forward-looking
statements speak only as of the date they are made and are subject
to risks that could cause them to differ materially from actual
results. 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 construction markets, 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 continuing impact of the COVID-19 pandemic, including
governmental issued mandates regarding the same in the
jurisdictions in which we operate, sell to or from whom we
purchase. We could also experience additional increases in labor
costs, components and raw materials, including zinc and natural
gas, which are used in our 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, including a
prolonged economic downturn or macroeconomic conditions such as
inflation 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 Part I, Item 1A. Risk Factors, 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.
Company Contact:
David
Nark, Senior Vice President of Marketing, Communications and
Investor Relations
AZZ Inc.
(817) 810-0095
www.azz.com
Investor Contact:
Sandy
Martin / Phillip Kupper
Three Part Advisors
(214) 616-2207
www.threepa.com
AZZ
Inc.
|
Condensed
Consolidated Statements of Income
|
(dollars and shares in
thousands, except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
November 30,
|
|
Nine Months Ended
November 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Sales
|
|
$
373,301
|
|
$
135,083
|
|
$
987,145
|
|
$
395,732
|
Cost of
sales
|
|
300,219
|
|
97,510
|
|
752,455
|
|
285,572
|
Gross
margin
|
|
73,082
|
|
37,573
|
|
234,690
|
|
110,160
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
27,689
|
|
16,283
|
|
97,247
|
|
47,483
|
Operating income from
continuing operations
|
|
45,393
|
|
21,290
|
|
137,443
|
|
62,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
26,123
|
|
1,627
|
|
61,739
|
|
5,017
|
Equity in (earnings)
loss of unconsolidated
subsidiaries
|
|
(1,006)
|
|
—
|
|
(1,006)
|
|
—
|
Other (income) expense,
net
|
|
(610)
|
|
(91)
|
|
(582)
|
|
(106)
|
Income from continuing
operations before
income taxes
|
|
20,886
|
|
19,754
|
|
77,292
|
|
57,766
|
Income tax
expense
|
|
2,447
|
|
6,647
|
|
18,380
|
|
18,778
|
Net income from
continuing operations
|
|
18,439
|
|
13,107
|
|
58,912
|
|
38,988
|
Income from
discontinued operations, net of tax
|
|
1,069
|
|
7,978
|
|
17,126
|
|
23,412
|
Loss on disposal of
discontinued operations, net
of tax
|
|
(40,050)
|
|
—
|
|
(130,073)
|
|
—
|
Net income (loss) from
discontinued
operations
|
|
(38,981)
|
|
7,978
|
|
(112,947)
|
|
23,412
|
Net income
(loss)
|
|
(20,542)
|
|
21,085
|
|
(54,035)
|
|
62,400
|
Accrued dividends on
preferred stock
|
|
(3,600)
|
|
—
|
|
(4,640)
|
|
—
|
Net income (loss)
available to common
shareholders
|
|
$
(24,142)
|
|
$
21,085
|
|
$
(58,675)
|
|
$
62,400
|
|
|
|
|
|
|
|
|
|
Earnings per common
share from continuing
operations
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
$
0.60
|
|
$
0.53
|
|
$
2.19
|
|
$
1.57
|
Diluted earnings per
share
|
|
$
0.59
|
|
$
0.53
|
|
$
2.17
|
|
$
1.55
|
Earnings per common
share from discontinued
operations
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share
|
|
$
(1.57)
|
|
$
0.32
|
|
$
(4.55)
|
|
$
0.94
|
Diluted earnings
(loss) per share
|
|
$
(1.56)
|
|
$
0.32
|
|
$
(4.52)
|
|
$
0.93
|
Earnings per common
share
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share
|
|
$
(0.97)
|
|
$
0.85
|
|
$
(2.37)
|
|
$
2.51
|
Diluted earnings
(loss) per share
|
|
$
(0.97)
|
|
$
0.85
|
|
$
(2.35)
|
|
$
2.48
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
24,995
|
|
24,945
|
|
24,984
|
|
25,132
|
AZZ
Inc.
|
Segment
Reporting
|
(dollars in
thousands)
|
(unaudited)
|
|
|
Three Months Ended
November 30,
|
|
Nine Months Ended
November 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
(In
thousands)
|
|
(In
thousands)
|
Sales:
|
|
|
|
|
|
|
|
|
Metal
Coatings
|
|
$
158,274
|
|
$
135,083
|
|
$
487,567
|
|
$
395,732
|
Precoat
Metals
|
|
215,027
|
|
—
|
|
499,578
|
|
—
|
Total sales
|
|
$
373,301
|
|
$
135,083
|
|
$
987,145
|
|
$
395,732
|
|
|
|
|
|
|
|
|
|
EBITDA(1):
|
|
|
|
|
|
|
|
|
Metal
Coatings
|
|
$
41,895
|
|
$
40,729
|
|
$
148,591
|
|
$
119,788
|
Precoat
Metals
|
|
34,434
|
|
—
|
|
93,846
|
|
—
|
Total segment
EBITDA
|
|
$
76,329
|
|
$
40,729
|
|
$
242,437
|
|
$
119,788
|
(1) See the
Non-GAAP disclosure section below for a reconciliation between the
various measures calculated in accordance with GAAP to the Adjusted
Earnings Measures
|
AZZ
Inc.
|
Condensed
Consolidated Balance Sheets
|
(dollars in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
November 30,
2022
|
|
February 28,
2022
|
Assets:
|
|
|
|
|
Current
assets
|
|
$
406,634
|
|
$
184,869
|
Property, plant and
equipment, net
|
|
491,367
|
|
193,358
|
Other assets,
net
|
|
1,301,473
|
|
246,924
|
Assets of discontinued
operations
|
|
—
|
|
507,876
|
Total assets
|
|
$
2,199,474
|
|
$
1,133,027
|
|
|
|
|
|
Liabilities and
Shareholders' Equity:
|
|
|
|
|
Current
liabilities
|
|
$
220,755
|
|
$
62,247
|
Long-term debt due
after one year, net
|
|
1,010,648
|
|
226,484
|
Other
liabilities
|
|
115,558
|
|
64,441
|
Liabilities of
discontinued operations
|
|
—
|
|
112,490
|
Shareholders'
Equity
|
|
852,513
|
|
667,365
|
Total liabilities and
shareholders' equity
|
|
$
2,199,474
|
|
$
1,133,027
|
AZZ
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(dollars in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
Nine Months Ended
November 30,
|
|
|
2022
|
|
2021
|
Net cash provided by
operating activities of continuing operations
|
|
$
68,622
|
|
$
45,938
|
Net cash used in
investing activities of continuing operations
|
|
(1,207,653)
|
|
(13,406)
|
Net cash provided by
(used in) financing activities of continuing operations
|
|
1,005,456
|
|
(29,167)
|
Cash provided by
discontinued operations
|
|
123,982
|
|
711
|
Effect of exchange rate
changes on cash
|
|
(2,199)
|
|
1,442
|
Net increase (decrease)
in cash and cash equivalents
|
|
(11,792)
|
|
5,518
|
Cash and cash
equivalents at beginning of period
|
|
15,082
|
|
14,837
|
Cash and cash
equivalents from continuing operations at end of period
|
|
$
3,290
|
|
$
940
|
AZZ Inc.
Non-GAAP
Disclosure
Adjusted Earnings Measures
(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 earnings, adjusted earnings per share, Earnings
before Interest, Taxes, Depreciation and Amortization ("EBITDA")
and Adjusted EBITDA (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, 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
November 30,
|
|
Nine Months Ended
November 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
Amount
|
|
Per
Diluted
Share(1)
|
|
Amount
|
|
Per
Diluted
Share(1)
|
|
Amount
|
|
Per
Diluted
Share(1)
|
|
Amount
|
|
Per
Diluted
Share(1)
|
Net income (loss)
available to
common shareholders and diluted
earnings per share
|
|
$
(24,142)
|
|
(0.97)
|
|
$ 21,085
|
|
0.85
|
|
$
(58,675)
|
|
(2.35)
|
|
$ 62,400
|
|
2.48
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition and
transaction related
expenditures(2)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
15,320
|
|
0.61
|
|
—
|
|
—
|
Loss on disposal of
discontinued
operations
|
|
45,010
|
|
1.80
|
|
—
|
|
—
|
|
159,910
|
|
6.40
|
|
—
|
|
—
|
Additional
depreciation and
amortization related to
acquisition(3)
|
|
7,986
|
|
0.32
|
|
—
|
|
—
|
|
18,634
|
|
0.75
|
|
—
|
|
—
|
Subtotal
|
|
52,996
|
|
2.12
|
|
—
|
|
—
|
|
193,864
|
|
7.76
|
|
—
|
|
—
|
Tax
impact(4)
|
|
(6,877)
|
|
(0.28)
|
|
—
|
|
—
|
|
(37,986)
|
|
(1.52)
|
|
—
|
|
—
|
Total
adjustments
|
|
46,119
|
|
1.85
|
|
—
|
|
—
|
|
155,878
|
|
6.24
|
|
—
|
|
—
|
Adjusted earnings and
adjusted
earnings per share
|
|
$ 21,977
|
|
$ 0.88
|
|
$ 21,085
|
|
$ 0.85
|
|
$ 97,203
|
|
$ 3.89
|
|
$ 62,400
|
|
$ 2.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 AZZ Infrastructure Solutions business into the
AIS JV.
|
(3) Due to
purchase price accounting related to the acquisition of Precoat
Metals, additional depreciation and amortization was adjusted
during
the third quarter. The year-to-date amount includes $3.2 million
related to the first quarter, $7.5 million related to the second
quarter and $8.0
million related to the third quarter.
|
(4) Tax
benefit consists of: 21% federal statutory rate and 3%
blended state tax rate for all adjustments except the loss on
disposal of
discontinued operations, and 11% and 18% for the loss on disposal
of discontinued operations for the three and nine months ended
November
30, 2022, respectively.
|
|
|
Three Months Ended
November 30,
|
|
Nine Months Ended
November 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net income
(loss)
|
|
$
(20,542)
|
|
$
21,085
|
|
$
(54,035)
|
|
$
62,400
|
Interest
Expense(1)
|
|
26,126
|
|
1,630
|
|
61,747
|
|
5,081
|
Income Tax (Benefit)
Expense(1)
|
|
(2,380)
|
|
5,964
|
|
(7,530)
|
|
18,489
|
Depreciation and
Amortization(1)
|
|
22,970
|
|
11,138
|
|
63,092
|
|
33,222
|
Total
Adjustments
|
|
46,716
|
|
18,732
|
|
117,309
|
|
56,792
|
Non-GAAP
EBITDA
|
|
26,174
|
|
39,817
|
|
63,274
|
|
119,192
|
Acquisition and
transaction-related expenditures
|
|
—
|
|
—
|
|
15,320
|
|
—
|
Loss on disposal of
discontinued operations
|
|
45,010
|
|
—
|
|
159,910
|
|
—
|
Adjusted
EBITDA
|
|
$
71,184
|
|
$
39,817
|
|
$
238,504
|
|
$
119,192
|
(1)
Interest expense, income taxes, depreciation and amortization above
include both continuing and discontinued operations, so will
not be comparable to the statements of operations included herein,
which separate continuing and discontinued operations.
|
|
|
Three Months Ended
November 30,
|
|
Nine Months Ended
November 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Metal
Coatings
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
32,972
|
|
$
33,191
|
|
$
121,832
|
|
$
97,169
|
Interest
Expense
|
|
9
|
|
4
|
|
21
|
|
9
|
Income Tax
Expense
|
|
689
|
|
—
|
|
1,953
|
|
—
|
Depreciation and
Amortization Expense
|
|
8,225
|
|
7,534
|
|
24,785
|
|
22,610
|
Total
adjustments
|
|
8,923
|
|
7,538
|
|
26,759
|
|
22,619
|
Non-GAAP
EBITDA
|
|
41,895
|
|
40,729
|
|
148,591
|
|
119,788
|
|
|
|
|
|
|
|
|
|
Precoat
Metals
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
21,235
|
|
$
—
|
|
$
64,221
|
|
$
—
|
Interest
Expense
|
|
(182)
|
|
—
|
|
(266)
|
|
—
|
Income Tax
Expense
|
|
—
|
|
—
|
|
—
|
|
—
|
Depreciation and
Amortization Expense
|
|
13,381
|
|
—
|
|
29,891
|
|
—
|
Total
adjustments
|
|
13,199
|
|
—
|
|
29,625
|
|
—
|
Non-GAAP
EBITDA
|
|
34,434
|
|
—
|
|
93,846
|
|
—
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
(35,768)
|
|
$
(20,084)
|
|
$
(127,141)
|
|
$
(58,181)
|
|
|
|
|
|
|
|
|
|
Net income from
continuing operations
|
|
$
18,439
|
|
$
13,107
|
|
$
58,912
|
|
$
38,988
|
View original
content:https://www.prnewswire.com/news-releases/azz-inc-announces-fiscal-year-2023-third-quarter-results-301717022.html
SOURCE AZZ, Inc.