FORT WORTH, Texas, Jan. 9, 2020 /PRNewswire/ -- AZZ Inc. (NYSE:
AZZ), a global provider of metal coatings services, welding
solutions, specialty electrical equipment and highly engineered
services, today announced financial results for the three- and
nine-month periods ended November 30,
2019.
Management Discussion
Tom Ferguson, president and chief
executive officer of AZZ Inc., commented, "Third quarter fiscal
year 2020 financial results were driven by strength in both our
Energy and Metal Coatings segments with consolidated revenue
increasing 21.6% to $291.1 million
and net income increasing 43.1% to $22.0
million, as compared to the third quarter last year.
"Metal Coatings segment revenue increased 20.2% from the third
quarter of last year driven by organic volume growth and strategic
acquisitions. Operating margins were 21.1%, compared to 17.0% in
the third quarter of fiscal 2019, driven by lower zinc costs
flowing through our kettles, offset somewhat by the costs
associated with ramping up our Surface Technologies and Continuous
Galvanized Rebar businesses," stated Mr. Ferguson. "We are
confident that our Digital Galvanizing System ("DGS") initiative
will allow us to realize greater operational efficiency and
productivity. We anticipate the uptick in the costs associated with
growing the Surface Technologies and Continuous Galvanized Rebar
businesses to be temporary. AZZ remains the industry leader in
North America with 41 galvanizing
plants and continues to pursue growth through organic and inorganic
channels."
As we previously indicated our Energy Segment experienced a
particularly strong fall turnaround season in North America, driving 22.7% revenue growth
with 10.8% operating margins. The Welding Solutions group had a
strong third quarter, executing at a very high level during a very
active fall turnaround season. Our industrial served markets
improved compared to prior year, and we are especially pleased with
the demand for specialty welding, both domestically and
internationally.
Overall, consolidated bookings – in both the Energy and Metal
Coatings segments – were up 24.8% for the quarter, growing to
$263.7 million compared to
$211.3 million in the third quarter
last year. We are focused on delivering organic growth and driving
operational efficiencies in both segments to improve future sales.
We expect to complete fiscal 2020 on a strong note with that
momentum carrying into fiscal 2021."
Mr. Ferguson concluded, "We are reaffirming our previously
issued guidance for fiscal 2020 with earnings per share to be in
the range of $2.60 to $2.90 per diluted share, and revenues to be in
the range of $1.02 to $1.06 billion. Our fiscal year 2020 guidance
reflects our estimates given the current market conditions, current
backlog expectations, and does not include any significant
acquisitions or divestitures."
Third Quarter Results
Revenues for the third quarter of fiscal year 2020 were
$291.1 million compared to
$239.5 million for the same quarter
last year, an increase of 21.6%. Net income for the third quarter
increased 43.1% to $22.0 million, or
$0.84 per diluted share, compared to
$15.4 million, or $0.59 per diluted share for the third quarter of
fiscal year 2019.
Gross margins for the third quarter of fiscal year 2019 were
23.1% compared to 20.8% in the third quarter of last year.
Operating margins were 11.5% compared to 9.5% the third quarter of
fiscal year 2019 despite SG&A as a percentage of sales rising
slightly to 11.6% of sales compared to 11.3% of sales in the prior
year. Additionally, the effective tax rate increased to 28.6% in
the current quarter compared to 17.8% in the third quarter of the
prior year, with the change primarily attributable to 2019 tax
return to provision adjustments that were recorded during the
quarter.
Incoming orders for the quarter were $263.7 million resulting in a book to revenue
ratio of 0.91. In the third quarter of fiscal year 2019
incoming orders were $211.3 million,
resulting in a book to revenue ratio of 0.88. Our backlog at the
end of the third quarter of fiscal year 2020 fell 10.8% to
$274.5 million compared to
$307.8 million for the third quarter
of last year. Approximately 36% of the current backlog is expected
to be delivered outside the U.S., compared to 54% in the third
quarter of fiscal year 2019.
Metal Coatings Segment
Revenues for the Metal Coatings segment for the third quarter of
fiscal year 2020 were $129.2 million,
compared to the $107.5 million for
the same period last year, an increase of 20.2%. Gross profit grew
46.0% to $31.6 million from
$21.7 million in the same quarter
last year, driving gross margins of 24.5% compared to 20.2% in the
same quarter last year. Operating income increased 48.8% to
$27.3 million as compared to
$18.3 million in the third quarter
last year. As a result, operating margins for the third quarter of
fiscal year 2020 grew 410 basis points to 21.1%, compared to 17.0%
in the same period last year.
Energy Segment
Revenues for the Energy segment for the third quarter of fiscal
year 2019 were $161.9 million as
compared to $132.0 million for the
same quarter last year, an increase of 22.7%. Gross profit rose
27.1% to $35.7 million compared to
$28.1 million for the same period
last year, with gross margins of 22.0% for the third quarter of
fiscal year 2020 compared to 21.3% in the prior year.
Operating income for the Energy segment increased 51.1% to
$17.4 million compared to
$11.5 million for the same period
last year. Operating margins for the third quarter of fiscal year
2020 rose 210 basis points to 10.8% as compared to 8.7% in the
prior year.
Conference Call
AZZ Inc. will conduct a conference call to discuss financial
results for the third quarter of fiscal year 2020 at 11:00 A.M. ET
on Thursday, January 9, 2020.
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 #10137851, or for 30 days at
http://www.azz.com/investor-relations.
About AZZ Inc.
AZZ Inc. is a global provider of metal coatings 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 metal coatings 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, 2019 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
|
AZZ
Inc.
|
Condensed
Consolidated Statements of Income
|
(in thousands, except
per share data)
|
(unaudited)
|
|
|
Three Months Ended
November 30,
|
|
Nine Months Ended
November 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
291,139
|
|
|
$
|
239,516
|
|
|
$
|
816,452
|
|
|
$
|
724,539
|
|
Costs of
sales
|
223,808
|
|
|
189,761
|
|
|
630,328
|
|
|
569,175
|
|
Gross margin
|
67,331
|
|
|
49,755
|
|
|
186,124
|
|
|
155,364
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
33,903
|
|
|
26,986
|
|
|
99,515
|
|
|
91,794
|
|
Operating income
|
33,428
|
|
|
22,769
|
|
|
86,609
|
|
|
63,570
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
3,301
|
|
|
3,723
|
|
|
10,433
|
|
|
11,541
|
|
Other (income)
expense, net
|
(743)
|
|
|
309
|
|
|
367
|
|
|
(839)
|
|
Income before income
taxes
|
30,870
|
|
|
18,737
|
|
|
75,809
|
|
|
52,868
|
|
Income tax
expense
|
8,835
|
|
|
3,342
|
|
|
16,932
|
|
|
10,511
|
|
Net income
|
$
|
22,035
|
|
|
$
|
15,395
|
|
|
$
|
58,877
|
|
|
$
|
42,357
|
|
Earnings per common
share
|
|
|
|
|
|
|
|
Basic
|
$
|
0.84
|
|
|
$
|
0.59
|
|
|
$
|
2.25
|
|
|
$
|
1.63
|
|
Diluted
|
$
|
0.84
|
|
|
$
|
0.59
|
|
|
$
|
2.24
|
|
|
$
|
1.62
|
|
|
|
|
|
|
|
|
|
Diluted average
shares outstanding
|
26,263
|
|
|
26,151
|
|
|
26,246
|
|
|
26,092
|
|
AZZ
Inc.
|
Segment
Reporting
|
(in
thousands)
|
(unaudited)
|
|
|
Three Months Ended
November 30,
|
|
Nine Months Ended
November 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net sales:
|
|
|
|
|
|
|
|
Energy
|
$
|
161,943
|
|
|
$
|
132,025
|
|
|
$
|
440,259
|
|
|
$
|
385,526
|
|
Metal
Coatings
|
129,196
|
|
|
107,491
|
|
|
376,193
|
|
|
339,013
|
|
|
$
|
291,139
|
|
|
$
|
239,516
|
|
|
$
|
816,452
|
|
|
$
|
724,539
|
|
|
|
|
|
|
|
|
|
Segment operating
income (loss):
|
|
|
|
|
|
|
|
Energy
|
$
|
17,421
|
|
|
$
|
11,532
|
|
|
$
|
34,231
|
|
|
$
|
25,763
|
|
Metal
Coatings
|
27,258
|
|
|
18,321
|
|
|
85,323
|
|
|
65,581
|
|
Corporate
|
(11,251)
|
|
|
(7,084)
|
|
|
(32,945)
|
|
|
(27,774)
|
|
|
$
|
33,428
|
|
|
$
|
22,769
|
|
|
$
|
86,609
|
|
|
$
|
63,570
|
|
AZZ
Inc.
|
Condensed
Consolidated Balance Sheets
|
(in
thousands)
|
(unaudited)
|
|
|
November 30,
2019
|
|
February 28,
2019
|
|
|
|
|
Assets:
|
|
|
|
Current
assets
|
$
|
414,621
|
|
|
$
|
378,545
|
|
Net property, plant
and equipment
|
211,691
|
|
|
210,227
|
|
Other assets,
net
|
546,256
|
|
|
499,798
|
|
Total
assets
|
$
|
1,172,568
|
|
|
$
|
1,088,570
|
|
|
|
|
|
Liabilities and
shareholders' equity:
|
|
|
|
Current
liabilities
|
$
|
182,373
|
|
|
$
|
164,771
|
|
Long term debt due
after one year, net
|
254,845
|
|
|
240,745
|
|
Other
liabilities
|
82,107
|
|
|
79,326
|
|
Shareholders'
equity
|
653,243
|
|
|
603,728
|
|
Total liabilities and
shareholders' equity
|
$
|
1,172,568
|
|
|
$
|
1,088,570
|
|
AZZ
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(in
thousands)
|
(unaudited)
|
|
|
Nine Months Ended
November 30,
|
|
2019
|
|
2018
|
|
|
|
|
Net cash provided by
operating activities
|
$
|
72,054
|
|
|
$
|
58,104
|
|
Net cash used in
investing activities
|
(82,834)
|
|
|
(21,329)
|
|
Net cash provided by
(used in) financing activities
|
1,209
|
|
|
(39,274)
|
|
Effect of exchange
rate changes on cash
|
(145)
|
|
|
(941)
|
|
Net decrease in cash
and cash equivalents
|
$
|
(9,716)
|
|
|
$
|
(3,440)
|
|
Cash and cash
equivalents at beginning of period
|
24,005
|
|
|
20,853
|
|
Cash and cash
equivalents at end of period
|
$
|
14,289
|
|
|
$
|
17,413
|
|
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SOURCE AZZ Inc.