FORT WORTH, Texas, April
29, 2020 /PRNewswire/ -- AZZ Inc. (NYSE: AZZ), a global
provider of metal coating solutions, welding solutions, specialty
electrical equipment and highly engineered services, issued its
2020 audited consolidated financial statements contained in the
Company's Fiscal Year 2020 Annual Report on Form 10-K for the year
ended February 29, 2020.
Management Discussion
Tom Ferguson, president and chief
executive officer of AZZ, stated, "In Fiscal 2020 we achieved solid
double-digit year-over-year growth in both the topline as well as
cash provided by operating activities, while posting our
33rd consecutive year of profitability. We experienced
strong demand for galvanizing services, executed large refinery
turnaround projects, and completed international projects for the
Energy segment, resulting in overall revenue growth of 14.5% and a
5.8% decrease in reported net income as a result of three discrete
non-recurring items discussed below. Our consolidated
bookings for the year decreased 1.6% to $972.7 million while our backlog decreased 26.8%
to $243.8 million, primarily due to
the successful completion of large China orders booked in previous years.
We continued our long history of strong cash flows by generating
net cash provided by operating activities of 144.8 million, an
increase of 29.9% compared to prior year. Reported EPS of
$1.84 includes pre-tax adjusted items
of $18.6 million for the loss on
the disposal of the NLI business, $9.2
million from an impairment of certain assets in our WSI
nuclear business, and $1.9 million of
other tax adjustments related to NLI. Without these one-time items,
adjusted net income was $71.3
million, up 39.3% compared to prior year, and EPS was
$2.71, up 38.3% compared to
$1.96 for the prior year, on a
diluted basis."
"During the year, we delivered solid top and bottom line growth,
performed well in both our Metal Coatings and Energy segments, and
took steps in our previously stated strategic plan to focus on core
businesses as we successfully divested our Nuclear Logistics
("NLI") business, and completed four acquisitions during the year:
K2 Partners, Inc., NuZinc, LLC, Preferred Industries, Ltd., and
Tennessee Galvanizing, Inc. Operational improvement initiatives,
such as our investment in digital galvanizing systems ("DGS"), as
well as business integration within our enclosure systems' are
meeting expectations, and our Surface Technology businesses
continued to grow."
"In Metal Coatings we returned to an operating margin of 21.6%,
up from 19% for the previous year, driven primarily by higher
volumes of steel processed in our kettles, lower zinc prices, and
higher selling prices" said Mr. Ferguson. "Revenue gains in our
Metal Coatings segment were driven by a combination of organic
growth and acquisitions, demonstrating continued progress in
growing this segment. We remain committed to delivering on the
investments made in our Surface Technologies platform, which now
totals seven locations. We will continue to drive operational
efficiencies aggressively, and maintain an active M&A program
to support our strategic growth initiatives, however, our ability
to initiate new deals has recently slowed due to the COVID-19
pandemic. All of our Metal Coating operations in the United States are considered 'essential'
under Homeland Security's Cyber-Security and Infrastructure Agency
guidelines. Our Metal Coatings plants remain open and, while
many of our galvanizing plants are operating at pre-pandemic
levels, a few are experiencing modest declines in volume as we
enter the first quarter."
Mr. Ferguson continued, "Energy segment sales increased
primarily due to the completion of a large electrical project in
China and a large refinery
turnaround project in Canada. We executed upon our previously
stated strategic plan of focusing on core businesses through the
successful divestiture of NLI at the end of the year. We believe
this action, and impairing certain nuclear assets in WSI, was
appropriate given the secular decline in the domestic nuclear power
generation market. Our end markets for switchgear and e-houses were
strong during the year, and we will continue to execute on the
backlog we carry into fiscal year 2021. Our Energy products
and services are essential to operating and maintaining
infrastructure. Our customers count on our equipment and services
to meet the needs of critical infrastructure throughout
the United States and around the
globe. Manufacturing operations within our electrical platform are,
for the most part, uninterrupted. Our industrial field solutions
platform is currently executing domestic turnaround projects, but
at a significantly reduced level, due to limited refinery activity
and travel restrictions. We are also seeing a decline in
international refining turnarounds, as well as some customer
requests to delay work to both the second the third quarter of
FY2021 due to the COVID-19 pandemic."
Discontinues Fiscal Year 2021 Guidance
Mr. Ferguson added, "Due to uncertainty associated with the
recent COVID-19 pandemic on many of our end markets, we are
discontinuing our previously issued fiscal 2021 sales and earnings
per fully diluted share guidance range. 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, gives us the confidence that we can manage both debt
and liquidity satisfactorily throughout fiscal year 2021. We
are conserving cash by moderately reducing capital expenditures,
suspending share repurchases and taking selected staffing
reductions in businesses with low demand. Additionally, we have not
experienced any unusual slowdown in customer payments."
Fourth Quarter and Fiscal Year Results
For the twelve-month period, the Company reported revenues of
$1.06 billion compared to
$927.1 million for the comparable
period last year, an increase of 14.5%. Reported operating
income increased 3.1% to $79.3
million compared to $77.0
million in last year's comparable twelve month period.
Operating income included a loss on sale of $18.6 million, as well as $9.2 in impairment charges and would have been
$107.1 million on an adjusted basis,
up 39.2% compared to prior year. Net income for the twelve
months decreased 5.8% to $48.2
million, or $1.84 per diluted
share on a reported basis, compared to $51.2
million, or $1.96 per diluted
share compared to the prior fiscal year. The reported net
income includes pre-tax adjusted items of $18.6 million on the loss on the disposal of
the NLI business, $9.2 million from
an impairment of certain assets in our WSI nuclear business, and
$1.9 of other tax adjustments related
to NLI. Without these one-time items, adjusted net income was
$71.3 million, up 39.1% compared to
prior year, and EPS would have been $2.71, up 38.3% compared to prior year.
Bookings for fiscal 2020 were $972.7
million, compared to $988.6
million for the prior year, a decrease of 1.6%.
Backlog at the end of the 2020 fiscal year was $243.8 million, a decrease of 26.8% compared to
backlog at the end of the prior year of $332.9 million. Incoming orders for the
year were $972.7 million while
revenues for the year totaled $1.06
billion, resulting in a book to bill ratio of 0.92.
Approximately 33% of the $243.8
million in backlog is expected to be delivered outside of
the U.S.
Revenues for the fourth quarter were $245.4 million compared to $202.5 million for the same quarter last year, an
increase of 21.1%. Reported operating income for the fourth quarter
decreased 154.3% to $(7.3) million
compared to $13.4 million in last
year's fourth quarter. Operating income included pre-tax
adjusted items of $18.6
million on the loss on the disposal of the NLI business, and
$9.2 million from an impairment of
certain assets in our WSI nuclear business. Without these
items, adjusted operating income for the quarter totaled
$20.5 million or a 53.3% increase
over the same quarter last year. Reported net income for the
fourth quarter was $(10.6) million,
or $(.41) per diluted share, compared
to net income of $8.8 million, or
$0.34 per diluted share, for last
year's fourth fiscal quarter. The fiscal 2020 fourth quarter
net income included pre-tax adjusted items of $18.6 million on the loss on the disposal of
the NLI business, $9.2 million from
an impairment of certain assets in our WSI nuclear business, and
$1.9 of other tax adjustments related
to NLI. The adjusted non-GAAP net income without these items
would have been $12.4 million or
$0.47 per share, as disclosed in the
accompanying tables to our press release of April 29, 2020.
Metal Coatings Segment
For full year fiscal 2020, Metal Coatings segment revenues
increased 13.3% to $499 million and
operating income increased 29.1% to $107.9
million compared to $440.3
million and $83.6 million
respectively, for the prior fiscal year. The increased
revenue was attributable to higher volumes of steel processed in
our kettles, higher selling prices and contribution from our
acquisitions. Operating margins for the 2020 fiscal year were
21.6% compared to 19.0% in the prior fiscal year. Operating
margins were impacted by our ability to maintain price levels with
lower zinc costs, while tightly managing productivity and operating
efficiencies in the face of higher labor costs.
Revenues for the Company's Metal Coatings segment for the fourth
quarter of fiscal 2020 were $122.8
million, compared to the $101.3
million in the same period last year, an increase of 21.3%.
Operating income was $22.6 million,
an increase of 25.5% over the prior year fourth quarter. Operating
margins for the fourth quarter grew by 60 basis points to 18.4%,
compared to 17.8% in the same period last year. This was due
to strong galvanizing margins, but somewhat offset by lower Surface
Technologies margins.
Energy Segment
For full year fiscal 2020, Energy segment revenues increased
15.6% to $562.8 million and the
operating income of $32.8 million was
a 4.8% improvement over the prior year. The increase in net sales
for fiscal 2020 was attributable to several factors including
increased turnaround activity in the U.S. and international
refinery market, completion of a large high voltage bus project in
China and increases in our
electrical switchgear and e-house business. Operating margins
for the 2020 fiscal year were down 60 basis points to 5.8% as
compared to 6.4% in the prior fiscal year. This decrease was
primarily attributable to the $9.2
million impairment of certain assets in our WSI nuclear
business, somewhat offset by improved refinery turnarounds
described above, pricing increases, and improved project margins.
Without this item, the segment operating income would have been
$42.0 million, up 34.1% compared to
prior year.
Revenues for the Energy segment for the fourth quarter of fiscal
2020 were $122.6 million as compared
to $101.3 million for the same
quarter last year, an increase of 21%. Operating income for the
segment decreased to $(1.4) million
compared to $5.6 million in the same
period last year, a decrease of 124.9%. Operating margins for the
fourth quarter declined 660 basis points to (1.1)% as compared to
5.5% in the prior year period, primarily attributable to the
$9.2 million impairment of certain
assets in our WSI nuclear business. Without this item, Energy
segment operating income would have been $7.8 million, up 39.5% compared to prior
year.
COVID-19 Business Continuity and Operations
Update
Mr. Ferguson concluded, "Employee health and safety remain our
top priority, as well as continuing to support our customers during
these difficult times. AZZ will continue to follow the
recommendations and guidelines provided by the CDC and World Health
Organization. Pursuant to this commitment, we have taken
proactive measures to protect our employees from COVID-19 while
still meeting the needs of critical infrastructure throughout
the United States and around the
world. The Company has implemented a business continuity plan
that encompasses all segments. All offices and plants
have implemented physical distancing through increasing employee
work station spacing, allowing flexible work arrangements,
staggering shifts, cutting non-essential travel, cancelling certain
events and significantly limiting outside visitors. We have
increased cleaning, disinfecting, and employee access to
sanitization tools."
"Due to the worldwide COVID-19 pandemic, our Metal Coatings
Segment has seen a modest drop in business in Q1 from some
Galvanizing fabrication customers, and Surface Technologies has
several large customers that have closed or reduced shifts into
May. Within our Energy Platform, we are continuing to process
backlog for switchgear, e-houses, and bus duct, while the
hazardous duty lighting and tubular products are seeing less demand
due to lower rig counts and less activity in the oil patch.
Our industrial field services platform is seeing a shift in most of
its work, originally scheduled for Q1 move to both Q2 and Q3 as
refiners defer turnarounds amid travel restrictions."
Today's Conference Call Details
AZZ Inc. will conduct a conference call to discuss financial
results for the fourth quarter and fiscal year 2020 today,
Wednesday, April 29, 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 #
10142840, 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.
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
|
AZZ
Inc.
|
Condensed
Consolidated Statements of Income
|
(in thousands, except
per share data)
|
(unaudited)
|
|
|
|
Three Months Ended
February 29/28,
|
|
Twelve Months Ended
February 29/28,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
245,365
|
|
|
$
|
202,548
|
|
|
$
|
1,061,817
|
|
|
$
|
927,087
|
|
Costs of
sales
|
194,261
|
|
|
159,291
|
|
|
824,589
|
|
|
728,466
|
|
Gross margin
|
51,104
|
|
|
43,257
|
|
|
237,228
|
|
|
198,621
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
39,738
|
|
|
29,871
|
|
|
139,253
|
|
|
121,665
|
|
Loss on disposal of
business
|
18,632
|
|
|
—
|
|
|
18,632
|
|
|
—
|
|
Operating income
(loss)
|
(7,266)
|
|
|
13,386
|
|
|
79,343
|
|
|
76,956
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
3,030
|
|
|
3,430
|
|
|
13,463
|
|
|
14,971
|
|
Other (income)
expense, net
|
623
|
|
|
(181)
|
|
|
990
|
|
|
(1,020)
|
|
Income (loss) before income
taxes
|
(10,919)
|
|
|
10,137
|
|
|
64,890
|
|
|
63,005
|
|
Income tax expense
(benefit)
|
(276)
|
|
|
1,286
|
|
|
16,656
|
|
|
11,797
|
|
Net income
(loss)
|
$
|
(10,643)
|
|
|
$
|
8,851
|
|
|
$
|
48,234
|
|
|
$
|
51,208
|
|
Earnings (loss) per
common share
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.41)
|
|
|
$
|
0.34
|
|
|
$
|
1.84
|
|
|
$
|
1.97
|
|
Diluted
|
$
|
(0.41)
|
|
|
$
|
0.34
|
|
|
$
|
1.84
|
|
|
$
|
1.96
|
|
|
|
|
|
|
|
|
|
Diluted average
shares outstanding
|
26,209
|
|
|
26,153
|
|
|
26,281
|
|
|
26,107
|
|
AZZ
Inc.
|
Segment
Reporting
|
(in
thousands)
|
(unaudited)
|
|
|
|
Three Months Ended
February 29/28,
|
|
Twelve Months Ended
February 29/28,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net sales:
|
|
|
|
|
|
|
|
Metal
Coatings
|
$
|
122,796
|
|
|
$
|
101,251
|
|
|
$
|
498,989
|
|
|
$
|
440,264
|
|
Energy
|
122,569
|
|
|
101,297
|
|
|
562,828
|
|
|
486,823
|
|
|
$
|
245,365
|
|
|
$
|
202,548
|
|
|
$
|
1,061,817
|
|
|
$
|
927,087
|
|
|
|
|
|
|
|
|
|
Segment operating
income (loss):
|
|
|
|
|
|
|
|
Metal
Coatings
|
$
|
22,603
|
|
|
$
|
18,010
|
|
|
$
|
107,926
|
|
|
$
|
83,591
|
|
Energy
|
(1,386)
|
|
|
5,569
|
|
|
32,845
|
|
|
31,332
|
|
Corporate
|
(9,851)
|
|
|
(10,193)
|
|
|
(42,796)
|
|
|
(37,967)
|
|
Loss on disposal of
business
|
(18,632)
|
|
|
—
|
|
|
(18,632)
|
|
|
—
|
|
|
$
|
(7,266)
|
|
|
$
|
13,386
|
|
|
$
|
79,343
|
|
|
$
|
76,956
|
|
AZZ
Inc.
|
Condensed
Consolidated Balance Sheets
|
(in
thousands)
|
(unaudited)
|
|
|
|
February 29,
2020
|
|
February 28,
2019
|
|
|
|
|
Assets:
|
|
|
|
Current
assets
|
$
|
354,562
|
|
|
$
|
378,545
|
|
Net property, plant
and equipment
|
213,104
|
|
|
210,227
|
|
Other assets,
net
|
506,165
|
|
|
499,798
|
|
Total
assets
|
$
|
1,073,831
|
|
|
$
|
1,088,570
|
|
|
|
|
|
Liabilities and
shareholders' equity:
|
|
|
|
Current
liabilities
|
$
|
280,613
|
|
|
$
|
164,771
|
|
Long term debt due
after one year, net
|
77,878
|
|
|
240,745
|
|
Other
liabilities
|
80,974
|
|
|
79,326
|
|
Shareholders'
equity
|
634,366
|
|
|
603,728
|
|
Total liabilities and
shareholders' equity
|
$
|
1,073,831
|
|
|
$
|
1,088,570
|
|
AZZ
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(in
thousands)
|
(unaudited)
|
|
|
|
Twelve Months Ended
February 29/28,
|
|
2020
|
|
2019
|
|
|
|
|
Net cash provided by
operating activities
|
$
|
144,759
|
|
|
$
|
111,476
|
|
Net cash used in
investing activities
|
(71,748)
|
|
|
(32,073)
|
|
Net cash used in
financing activities
|
(59,739)
|
|
|
(74,812)
|
|
Effect of exchange
rate changes on cash
|
(590)
|
|
|
(1,439)
|
|
Net increase in cash
and cash equivalents
|
$
|
12,682
|
|
|
$
|
3,152
|
|
Cash and cash
equivalents at beginning of period
|
24,005
|
|
|
20,853
|
|
Cash and cash
equivalents at end of period
|
$
|
36,687
|
|
|
$
|
24,005
|
|
AZZ incorporated
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"), AZZ has provided
adjusted operating income, 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 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 provide a reconciliation for the year ended
February 29, 2020 between the various
measures calculated in accordance with GAAP to those calculated on
a non-GAAP basis, which are shown net of tax (in thousands, except
per share data):
|
Three
Months
Ended
|
|
Twelve
Months
Ended
|
|
February 29,
2020
|
|
February 29,
2020
|
|
|
|
|
GAAP operating income
(loss)
|
$
|
(7,266)
|
|
|
$
|
79,343
|
|
Loss on disposal of
business
|
18,632
|
|
|
18,632
|
|
Impairment
charges
|
9,157
|
|
|
9,157
|
|
Non-GAAP operating
income
|
$
|
20,523
|
|
|
$
|
107,132
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
February 29,
2020
|
|
February 29,
2020
|
|
Amount
|
|
Per
Diluted
Share
|
|
Amount
|
|
Per
Diluted
Share
|
|
|
|
|
|
|
|
|
GAAP net income
(loss) and GAAP diluted earnings (loss) per share
|
$
|
(10,643)
|
|
|
$
|
(0.41)
|
|
|
$
|
48,234
|
|
|
$
|
1.84
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile GAAP to non-GAAP financial measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on disposal of
business
|
18,632
|
|
|
0.71
|
|
|
18,632
|
|
|
0.71
|
|
Impairment
charges
|
9,157
|
|
|
0.35
|
|
|
9,157
|
|
|
0.34
|
|
Tax benefit related
to loss on disposal and impairment
|
(6,697)
|
|
|
(0.25)
|
|
|
(6,697)
|
|
|
(0.25)
|
|
Tax
adjustment
|
1,920
|
|
|
0.07
|
|
|
1,920
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
Total non-GAAP
adjustments
|
23,012
|
|
|
0.88
|
|
|
23,012
|
|
|
0.87
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
and diluted earnings per share
|
$
|
12,369
|
|
|
$
|
0.47
|
|
|
$
|
71,246
|
|
|
$
|
2.71
|
|
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SOURCE AZZ Inc.