FORT WORTH, Texas, May 15, 2018 /PRNewswire/ -- AZZ Inc. (NYSE:
AZZ), a global provider of metal coating services, welding
solutions, specialty electrical equipment and highly engineered
services, today issued its consolidated financial statements
contained in the Company's Quarterly Report on Form 10-Q for the
third quarter of Fiscal Year 2018, and its audited consolidated
financial statements contained in the Company's Fiscal Year 2018
Annual Report on Form 10-K. The Company also announced
financial results for the three month periods ended November 30, 2017, and February 28, 2018, as well as the 12 month period
ended February 28, 2018.
Management Discussion
Tom Ferguson, president and chief
executive officer of AZZ, said, "Although Fiscal 2018 was our
31st consecutive year of profitability, we faced
challenges on several fronts. We encountered cyclical headwinds in
demand, commodity input pricing and a secular downturn in the
domestic nuclear business that had a direct impact on our top- and
bottom-line performance.
On the positive side, we grew the business and our end-markets
by making three strategic acquisitions: Powergrid Solutions, Inc.
("PSI"), a business which fits into our switchgear portfolio;
Enhanced Powder Coating Ltd. ("EPC"), a powdering coating business
that fits into our Metal Coatings segment; and Rogers Brothers
Company, a company specializing in spinner galvanizing for small
parts such as fasteners, washers and castings. We are extremely
pleased with these acquisitions and how they fit into our vision of
expanding our Metal Coatings segment and our Electrical Solutions
business for our Energy segment. We had a smooth transition
integrating these operations into our portfolio and they are
already accretive to earnings; which provides us confidence for
2019 and beyond. We also built a new powder coating facility
in Crowley, Texas as we look to
expand market opportunities for our Metal Coatings segment.
Additionally, we successfully acquired the assets of Lectrus out of
bankruptcy in March 2018, another
enclosure business for our Energy segment, which was accretive
immediately after the completion of our integration. Looking
ahead, we are off to a solid start in fiscal 2019 as we believe
that the cycles for refinery turnarounds have bottomed and are
showing much improvement. Galvanizing demand has turned with
volumes returning to more normal levels, and recent investments are
gaining traction."
"In Metal Coatings we delivered an industry leading operating
margin of 21.7% for the year despite the challenges," said Mr.
Ferguson. "The headwinds we encountered were higher zinc prices,
increased pricing pressure in a few key regions, lower volumes from
cyclical downturns in solar and petrochemical markets, with the
additional other income effect of writing off a $3.2 million legal settlement due to a bankruptcy
from a former competitor. We also took some impairment charges to
close two unprofitable galvanizing sites. We remain committed to
delivering on the investments made for organic growth, driving
operational efficiencies more aggressively, and maintaining an
active M&A program to support our strategic growth initiatives.
We believe we will gain measurable traction from these strategic
initiatives in fiscal 2019."
Mr. Ferguson continued, "Our Energy segment business faced
cyclical weakness in refinery turnaround activity which was
worsened by the effects of Hurricane Harvey, as well as reduced
power generation demand throughout the segment. We also
believe that the domestic nuclear power generation market is in
secular decline as evidenced by the Westinghouse bankruptcy and the
delays and cancellations of nuclear power plant construction
projects in the U.S., all of which drove shortfalls in revenue and
profits, and caused us to take impairments on $10.5 million in assets used in nuclear
services. The majority of our shortfall in top- and
bottom-line results for the segment can be attributed to these
cyclical and secular challenges, while a smaller portion can be
attributed to other write-offs in the segment and certain internal
inefficiencies primarily in our Electrical businesses."
Mr. Ferguson continued, "As we previously reported, we took
appropriate realignment actions during the year, including a change
in leadership of the Electrical platform, restructuring the sales
effort, and increasing emphasis on operational excellence and
customer satisfaction. We are seeing signs of improvement, and our
expectation is for more normalized margins in the business as we
move through 2019 and into 2020. The Specialty Welding business was
restructured during the year to better align its cost structure,
and we invested in the selling organization to help drive WSI's
unique value proposition and improve the outlook for fiscal
2019."
Fiscal Year 2019 Guidance
Mr. Ferguson concluded, "We are gaining confidence in our
outlook for fiscal 2019 as we see improving market activity in
refinery turnarounds and are seeing more robust galvanizing
markets. Additionally, we should benefit from improved operational
performance with our realigned sales team and expect accretion from
our recent acquisitions. We are initiating our fiscal 2019 earnings
per fully diluted share guidance range at $1.75 to $2.25, a
substantial increase over our Non-GAAP adjusted earnings for fiscal
2018 of $1.35. We are also
initiating our fiscal 2019 annual sales guidance range from
$900 million to $960 million. We believe we have taken the
necessary actions to improve operating performance and with the
improved market dynamics, we are optimistic for a much improved
fiscal 2019."
Fourth Quarter and Fiscal Year Results
For the twelve-month period, the Company reported revenues of
$810.4 million compared to
$863.5 million for the comparable
period last year, a decrease of 6.2%. Net income for the
twelve months was $45.2 million, or
$1.73 per diluted share, compared to
$61.3 million, or $2.35 per diluted share compared to the prior
fiscal year. Although the Company posted $1.73 earnings per diluted share for fiscal 2018,
when adjusted for one-time non-recurring items, including the
favorable impact of the Tax Cuts and Jobs Act of 2017, the adjusted
earnings per share for fiscal 2018 were $1.35 per share (as shown in the attached
reconciliation table).
Bookings for fiscal 2018 were $746.5
million, compared to $858.9
million for the prior year, a decrease of 13.1%.
Backlog at the end of the 2018 fiscal year was $265.4 million, a decrease of 16.5% compared to
backlog at the end of the prior year of $317.9 million. Incoming orders for the
year were $746.5 million while
revenues for the year totaled $810.4
million, resulting in a book to bill ratio of 0.92.
Approximately 41% of the $265.4
million in backlog is expected to be delivered outside of
the U.S.
Revenues for the fourth quarter were $200.7 million compared to $184.3 million for the same quarter last year, an
increase of 8.9%. Net income for the fourth quarter was
$23.5 million, or $0.90 per diluted share, compared to net income
of $12.3 million, or $0.47 per diluted share, for last year's fourth
fiscal quarter. The increase was primarily from one-time
non-recurring items.
Energy Segment
For full year fiscal 2018, Energy segment revenues decreased
13.7% to $421.0 million and the
operating loss of $1.8 million was a
$54.3 million decline from the prior
year. The decrease in net sales for fiscal 2018 was caused by
several factors including reduced turnarounds in the U.S. refinery
market, continued softness in the petrochemical market, negative
impacts from the hurricane Harvey, cancellations and delays in the
release of several large projects in the U.S. and overseas. In
addition, net sales were negatively impacted by the weak nuclear
market coupled with the Westinghouse Electric Company bankruptcy
filed on March 29, 2017.
Operating margins for the 2018 fiscal year were negative 0.4% as
compared to 10.8% in the prior fiscal year. This decrease was
attributable to the reduction in refinery turnarounds described
above, which typically carry a higher margin, contract
cancellations, lower margins on weakness in the Electrical market
in the U.S. and the effects from the Westinghouse bankruptcy.
In addition, for fiscal 2018, the Company recognized impairment
charge of $10.5 million and a
provision for doubtful accounts of $2.9
million resulting from an adverse court decision related to
certain outstanding accounts receivables.
Revenues for the Energy segment for the fourth quarter of fiscal
2018 were $103.5 million as compared
to $102.6 million for the same
quarter last year, increasing by 0.9%. Operating income for the
segment fell to $1.3 million compared
to $10.7 million in the same period
last year. Operating margins for the fourth quarter were 1.2% as
compared to 10.5% in the prior year period.
Metal Coatings Segment
For full year fiscal 2018, Metal Coatings segment revenues
increased 3.7% to $389.4 million and
operating income increased 6.7% to $84.3
million compared to $375.5
million and $79.0 million
respectively, for the prior fiscal year. The increased
revenue was attributable to incremental net sales from our
acquisitions during the year and increased prices. These increases
were partially offset by decreased volumes in steel processed as a
result of softness in the solar, petrochemical, and the oil and gas
markets. Operating margins for the 2018 fiscal year were
21.7% compared to 21.0% in the prior fiscal year.
Revenues for the Company's Metal Coatings segment for the fourth
quarter of fiscal 2018 were $97.2
million, compared to the $81.6
million in the same period last year, an increase of 19.1%.
Operating income was $18 million as
compared to $18.4 million in the
prior period, a decrease of 1.9%. Operating margins for the fourth
quarter were 18.5%, compared to 22.5% in the same period last
year.
Conference Call Details
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 #
10120333, 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 www.azz.com.
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, 2018 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 Statements of Income
|
(in thousands, except
per share data)
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
February
28,
2018
|
|
February
28,
2017
|
|
February
28,
2018
|
|
February
28,
2017
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
200,660
|
|
|
$
|
184,266
|
|
|
$
|
810,430
|
|
|
$
|
863,538
|
|
Costs of
sales
|
162,650
|
|
|
137,463
|
|
|
650,121
|
|
|
658,206
|
|
Gross margin
|
38,010
|
|
|
46,803
|
|
|
160,309
|
|
|
205,332
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
28,726
|
|
|
25,526
|
|
|
112,061
|
|
|
106,424
|
|
Operating income
|
9,284
|
|
|
21,277
|
|
|
48,248
|
|
|
98,908
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
3,593
|
|
|
3,573
|
|
|
13,860
|
|
|
14,732
|
|
Net loss on sale of
property, plant and equipment and insurance proceeds
|
190
|
|
|
50
|
|
|
765
|
|
|
76
|
|
Other (income)
expense, net
|
3,209
|
|
|
(248)
|
|
|
2,724
|
|
|
(1,197)
|
|
Income before income
taxes
|
2,292
|
|
|
17,902
|
|
|
30,899
|
|
|
85,297
|
|
Income tax (benefit)
expense
|
(21,195)
|
|
|
5,632
|
|
|
(14,270)
|
|
|
24,033
|
|
Net income
|
$
|
23,487
|
|
|
$
|
12,270
|
|
|
$
|
45,169
|
|
|
$
|
61,264
|
|
Earnings per common
share
|
|
|
|
|
|
|
|
Basic
|
$
|
0.91
|
|
|
$
|
0.47
|
|
|
$
|
1.74
|
|
|
$
|
2.36
|
|
Diluted
|
$
|
0.90
|
|
|
$
|
0.47
|
|
|
$
|
1.73
|
|
|
$
|
2.35
|
|
|
|
|
|
|
|
|
|
Diluted average
shares outstanding
|
25,998
|
|
|
26,110
|
|
|
26,036
|
|
|
26,097
|
|
AZZ
Inc.
|
Segment
Reporting
|
(in
thousands)
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
February
28,
2018
|
|
February
28,
2017
|
|
February
28,
2018
|
|
February
28,
2017
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
Energy
|
$
|
103,507
|
|
|
$
|
102,645
|
|
|
$
|
421,033
|
|
|
$
|
488,002
|
|
Metal
Coatings
|
97,153
|
|
|
81,621
|
|
|
389,397
|
|
|
375,536
|
|
|
$
|
200,660
|
|
|
$
|
184,266
|
|
|
$
|
810,430
|
|
|
$
|
863,538
|
|
|
|
|
|
|
|
|
|
Segment operating
income (loss):
|
|
|
|
|
|
|
|
Energy
|
$
|
1,263
|
|
|
$
|
10,745
|
|
|
$
|
(1,766)
|
|
|
$
|
52,577
|
|
Metal
Coatings
|
18,000
|
|
|
18,354
|
|
|
84,332
|
|
|
79,033
|
|
Corporate
|
(9,979)
|
|
|
(7,822)
|
|
|
(34,318)
|
|
|
(32,702)
|
|
|
$
|
9,284
|
|
|
$
|
21,277
|
|
|
$
|
48,248
|
|
|
$
|
98,908
|
|
AZZ
Inc.
|
Condensed
Consolidated Balance Sheets
|
(in
thousands)
|
|
|
February 28,
2018
|
|
February 28,
2017
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
Current
assets
|
$
|
329,154
|
|
|
$
|
297,052
|
|
Net property, plant
and equipment
|
216,855
|
|
|
228,610
|
|
Other assets,
net
|
482,200
|
|
|
452,692
|
|
Total
assets
|
$
|
1,028,209
|
|
|
$
|
978,354
|
|
|
|
|
|
Liabilities and
shareholders' equity:
|
|
|
|
Current
liabilities
|
$
|
131,739
|
|
|
$
|
136,770
|
|
Long term debt due
after one year, net
|
286,609
|
|
|
254,800
|
|
Other
liabilities
|
44,658
|
|
|
53,648
|
|
Shareholders'
equity
|
565,203
|
|
|
533,136
|
|
Total liabilities and
shareholders' equity
|
$
|
1,028,209
|
|
|
$
|
978,354
|
|
AZZ
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(in
thousands)
|
|
|
Twelve Months
Ended
|
|
February 28,
2018
|
|
February 28,
2017
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
$
|
78,909
|
|
|
$
|
111,176
|
|
Net cash used in
investing activities
|
(73,939)
|
|
|
(63,344)
|
|
Net cash provided by
(used in) financing activities
|
3,800
|
|
|
(76,619)
|
|
Effect of exchange
rate changes on cash
|
781
|
|
|
(102)
|
|
Net increase
(decrease) in cash and cash equivalents
|
$
|
9,551
|
|
|
$
|
(28,889)
|
|
Cash and cash
equivalents at beginning of period
|
11,302
|
|
|
40,191
|
|
Cash and cash
equivalents at end of period
|
$
|
20,853
|
|
|
$
|
11,302
|
|
AZZ incorporated
Non-GAAP
Disclosure
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"), AZZ has provided
adjusted earnings and adjusted earnings per share, 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 AZZ'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 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 table provides a reconciliation for the year ended
February 28, 2018 between net income
and diluted earnings per share calculated in accordance with GAAP
to adjusted earnings and adjusted earnings per share, respectively,
which are shown net of tax (in thousands, except per share
data):
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
February 28,
2018
|
|
February 28,
2018
|
|
Amount
|
|
Per
Diluted
Share
|
|
Amount
|
|
Per
Diluted
Share
|
|
|
|
|
|
|
|
|
GAAP net income and
GAAP diluted earnings per share
|
$
|
23,487
|
|
|
$
|
0.90
|
|
|
$
|
45,169
|
|
|
$
|
1.73
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile GAAP to non-GAAP financial measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of
long-lived assets
|
2,548
|
|
|
0.10
|
|
|
10,834
|
|
|
0.42
|
|
Impairment of
accounts receivable due to adverse court decision
|
—
|
|
|
—
|
|
|
2,881
|
|
|
0.11
|
|
Impairment of note
receivable from partial project cancellation
|
—
|
|
|
—
|
|
|
1,314
|
|
|
0.05
|
|
Impairment of note
receivable with a former competitor due to bankruptcy
|
3,163
|
|
|
0.12
|
|
|
3,163
|
|
|
0.12
|
|
Other disposal and
impairment charges
|
78
|
|
|
0.00
|
|
|
531
|
|
|
0.02
|
|
Income tax effect of
the non-GAAP adjustments above
|
(1,563)
|
|
|
(0.06)
|
|
|
(5,055)
|
|
|
(0.19)
|
|
Income tax benefit
related to 2017 U.S. tax reform
|
(23,700)
|
|
|
(0.91)
|
|
|
(23,700)
|
|
|
(0.91)
|
|
|
|
|
|
|
|
|
|
Total non-GAAP
adjustments
|
(19,474)
|
|
|
(0.75)
|
|
|
(10,032)
|
|
|
(0.38)
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
and diluted earnings per share
|
$
|
4,013
|
|
|
$
|
0.15
|
|
|
$
|
35,137
|
|
|
$
|
1.35
|
|
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SOURCE AZZ Inc.