Strong Sales and Adjusted EBITDA
Reaffirming Fiscal 2024 Full Year
Guidance
FORT
WORTH, Texas, July 7, 2023 /PRNewswire/ -- AZZ Inc.
(NYSE: AZZ), the leading independent provider of hot-dip
galvanizing and coil coating solutions, today announced financial
results for the first quarter ended May 31, 2023.
First
Quarter Overview (results from
continuing operations(1),(2)):
- Sales of $390.9 million, up 88.7%
versus prior year, up 16.2% sequentially
-
- Metal Coatings sales of $168.8
million up 3.3% versus prior year and 13.0%
sequentially
- Precoat Metals sales of $222.1
million, up 18.7% sequentially
- Diluted EPS of $0.98, up 58.1%
versus prior year, up 553.3% sequentially; Adjusted EPS of
$1.14, up 3.6% versus prior year, up
280.0% sequentially
- Net Income of $28.5 million, up
85.8% versus prior year, up 284.0% sequentially; Adjusted net
income of $33.4 million, up 18.4%
versus prior year, up 337.4% sequentially
- Adjusted EBITDA $85.4 million or
21.8% of sales, up 62.6% versus prior year
- EBITDA margin for Metal Coatings 30.7% and Precoat Metals 19.4%
up sequentially by 370 and 560 bps respectively
- Paid down debt of $20.0 million,
resulting in net leverage of 3.5 times
(1) First quarter fiscal 2024 Precoat
Metals included results for the full quarter compared to only 2
weeks of results for the first quarter of fiscal 2023.
|
(2) Adjusted Net Income, Adjusted
EPS, and Adjusted EBITDA are non-GAAP financial measure as defined
and reconciled in the tables below.
|
Tom Ferguson, President and Chief
Executive Officer of AZZ, commented, "Our first quarter results
reflect the strength of our Metal Coatings business coupled with a
full quarter of Precoat Metals. On a sequential basis, sales grew
by 16%, and Adjusted EBITDA increased by 49%. Our teams
executed well, resulting in continued sales momentum in both
segments. Metal Coatings generated EBITDA margin of 30.7%,
above our targeted EBITDA range of 25-30%. I am encouraged by
the actions we have taken at Precoat Metals to address operational
inefficiencies, caused by excessively high customer inventories at
most plants, allowing us to deliver 560 bps of sequential
improvement in margins. Through a disciplined focus on
working capital, we paid down debt of $20.0
million in what is typically a high cash consuming
quarter. This positions us well to attain the $75-$100 million of
debt reduction we are targeting for this fiscal year."
"Our business is on track this year to deliver solid sales and
Adjusted EBITDA growth. While we are seeing softness in
certain end markets, we expect to benefit from continued secular
tailwinds supported by infrastructure and renewables spending,
reshoring of manufacturing, and continued migration to more
environmentally friendly pre-painted steel and aluminum.
Additionally, our new plant construction in Washington, Missouri is proceeding ahead of schedule and
tracking to budget. I want to thank our entire AZZ team for
their dedicated performance in the first quarter of fiscal year
2024," concluded Ferguson.
Fiscal Year 2024 First Quarter Segment Performance
AZZ Metal Coatings
Sales increased year-over-year by 3.3% to $168.8 million, with quarterly sequential growth
of 13.0%. Sequential sales increased on higher volume and continued
price realization. EBITDA of $51.9
million or 30.7% of sales was above our 25-30% targeted
EBITDA range.
AZZ Precoat Metals
Sales of $222.1 million increased
18.7% on a sequential basis. The sequential sales increase
was primarily driven by seasonally improved volume, value-pricing
initiatives, and a shift in sales mix for Precoat Metals.
EBITDA of $43.2 million or 19.4% of
sales represents a 560 basis point sequential improvement and was
within our 17-22% targeted EBITDA range. We implemented plans
to address production efficiencies and these plans are starting to
deliver results.
Balance Sheet, Liquidity and Capital Allocation
The Company generated year-to-date operating cash flow of
$46.9 million through solid earnings
and prudent management of working capital. At the end of the
first quarter, net leverage was 3.5x LTM EBITDA, which improved
approximately 0.7x in the twelve months following the acquisition
of Precoat Metals. During the first quarter, the Company paid
down debt of $20.0 million and
returned cash to shareholders through cash dividend payments
totaling $7.8 million. Capital
expenditures were $17.0 million
during the quarter, and fiscal year 2024 capital expenditures are
still expected to be approximately $80
million, which includes $30
million in cash outlays for AZZ's new coil coating plant in
Washington, Missouri.
Financial Outlook - Reaffirming Fiscal Year 2024
Guidance
Management reaffirms fiscal year 2024 guidance:
- Sales of $1.40 billion to
$1.55 billion
- Adjusted EBITDA of $300-$325
million
- Adjusted earnings per diluted share of $3.85-$4.35(1)
Fiscal year 2024 guidance reflects higher interest expense,
dividends on our Series A Preferred Stock, and the impact of an
annualized effective tax rate of approximately 24%. This
reflects our best estimates given expected market conditions for
the full year, and does not include the impact of future
acquisitions or divestitures, related expenditures, or any federal
regulatory changes that may emerge.
(1) Fiscal
Year 2024 guidance excludes equity in earnings on the investment in
the AIS joint venture.
|
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 first quarter of
fiscal year 2024, Monday, July 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: 4865769,
through July 17, 2023, or by visiting
http://www.azz.com/investor-relations for the next 90
days.
There will be a slide presentation accompanying the first
quarter conference call. 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. 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; an increase in our debt leverage and/or
interest rates on our debt, of which a significant portion is tied
to variable interest 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, 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, 2023, 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
---Financial tables on the following
page---
AZZ
Inc.
|
Condensed
Consolidated Statements of Income
|
(dollars in thousands,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
May 31,
|
|
|
2023
|
|
2022
|
Sales
|
|
$
390,873
|
|
$
207,134
|
Cost of
sales
|
|
293,854
|
|
147,081
|
Gross margin
|
|
97,019
|
|
60,053
|
|
|
|
|
|
Selling, general and
administrative
|
|
31,523
|
|
32,144
|
Operating
income
|
|
65,496
|
|
27,909
|
|
|
|
|
|
Interest
expense
|
|
28,706
|
|
7,472
|
Equity in (earnings) of
unconsolidated subsidiaries
|
|
(1,420)
|
|
—
|
Other (income) expense,
net
|
|
38
|
|
(27)
|
Income from continuing
operations before income taxes
|
|
38,172
|
|
20,464
|
Income tax
expense
|
|
9,650
|
|
5,111
|
Net income from
continuing operations
|
|
28,522
|
|
15,353
|
Income from
discontinued operations, net of tax
|
|
—
|
|
8,724
|
Net income from
discontinued operations
|
|
—
|
|
8,724
|
Net income
|
|
28,522
|
|
24,077
|
Dividends on preferred
stock
|
|
(3,600)
|
|
—
|
Net income available to
common shareholders
|
|
$
24,922
|
|
$
24,077
|
Basic earnings per
share
|
|
|
|
|
Earnings per common
share from continuing operations
|
|
$
1.00
|
|
$
0.62
|
Earnings per common
share from discontinued operations
|
|
$
—
|
|
$
0.35
|
Earnings per common
share
|
|
$
1.00
|
|
$
0.97
|
Diluted earnings per
share
|
|
|
|
|
Earnings per common
share from continuing operations
|
|
$
0.98
|
|
$
0.62
|
Earnings per common
share from discontinued operations
|
|
$
—
|
|
$
0.34
|
Earnings per common
share
|
|
$
0.98
|
|
$
0.96
|
|
|
|
|
|
Weighted average shares
outstanding - Basic
|
|
24,940
|
|
24,709
|
Weighted average shares
outstanding - Diluted
|
|
29,150
|
|
25,675
|
AZZ
Inc.
|
Segment
Reporting
|
(dollars in
thousands)
|
(unaudited)
|
|
|
|
|
|
Three Months Ended
May 31,
|
|
2023
|
|
2022
|
|
(In
thousands)
|
Sales:
|
|
|
|
Metal
Coatings
|
$
168,794
|
|
$
163,443
|
Precoat
Metals
|
222,079
|
|
43,691
|
Total sales
|
$
390,873
|
|
$
207,134
|
|
|
|
|
EBITDA(1)
|
|
|
|
Metal
Coatings
|
$
51,862
|
|
$
53,669
|
Precoat
Metals
|
43,156
|
|
9,829
|
Infrastructure
Solutions(2)
|
1,398
|
|
—
|
Total Segment
EBITDA(3)
|
$
96,416
|
|
$
63,498
|
|
|
|
|
(1) See the
Non-GAAP disclosure section below for a reconciliation between the
various measures calculated
in accordance
with GAAP to the non-GAAP financial measures.
|
(2)
Infrastructure Solutions segment includes the Company's equity in
earnings from its investment in the AVAIL
joint venture, as
well as other expenses related to receivables that were retained by
the Company following the
sale of the AIS
business.
|
(3) Total
segment EBITDA excludes Corporate EBITDA.
|
AZZ
Inc.
|
Condensed
Consolidated Balance Sheets
|
(dollars in
thousands)
|
(unaudited)
|
|
|
As of
|
|
|
May 31,
2023
|
|
February 28,
2023
|
Assets:
|
|
|
|
|
Current
assets
|
|
$
408,489
|
|
$
417,416
|
Property, plant and
equipment, net
|
|
504,032
|
|
498,503
|
Other assets,
net
|
|
1,293,456
|
|
1,305,560
|
Total assets
|
|
$
2,205,977
|
|
$
2,221,479
|
|
|
|
|
|
Liabilities and
Shareholders' Equity:
|
|
|
|
|
Current
liabilities
|
|
$
180,107
|
|
$
187,240
|
Long-term debt,
net
|
|
1,040,841
|
|
1,058,120
|
Other
liabilities
|
|
113,656
|
|
122,659
|
Shareholders'
Equity
|
|
871,373
|
|
853,460
|
Total liabilities and
shareholders' equity
|
|
$
2,205,977
|
|
$
2,221,479
|
|
AZZ
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(dollars in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
May 31,
|
|
|
2023
|
|
2022
|
Net cash provided by
operating activities of continuing operations
|
|
$
46,893
|
|
$
21,675
|
Net cash used in
investing activities of continuing operations
|
|
(17,027)
|
|
(1,304,953)
|
Net cash provided by
(used in) financing activities of continuing operations
|
|
(29,545)
|
|
1,368,939
|
Cash used in
discontinued operations
|
|
—
|
|
304
|
Effect of exchange rate
changes on cash
|
|
737
|
|
(49)
|
Net increase in cash
and cash equivalents
|
|
1,058
|
|
85,916
|
Cash and cash
equivalents at beginning of period
|
|
2,820
|
|
15,082
|
Less: Cash and cash
equivalents from discontinued operations at end of year
|
|
—
|
|
(3,000)
|
Cash and cash
equivalents from continuing operations at end of period
|
|
$
3,878
|
|
$
97,998
|
AZZ
Inc.
|
Non-GAAP
Disclosure
|
Adjusted Net Income,
Adjusted Earnings Per Share and Adjusted EBITDA
|
|
In addition to
reporting financial results in accordance with Generally Accepted
Accounting Principles in the United States ("GAAP"), we provided
adjusted net income 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 greater transparency when comparing
operating results across a broad spectrum of companies, which
provides a more complete understanding of our financial
performance, competitive position and prospects for future capital
investment and debt reduction. Management also believes that
investors regularly rely on non-GAAP financial measures, such as
adjusted net income and adjusted earnings per share, to assess
operating performance and that such measures may highlight trends
in our business that may not otherwise be apparent when relying on
financial measures calculated in accordance with GAAP.
|
|
Management also
provides EBITDA and Adjusted EBITDA, which are non-GAAP measures.
Management defines EBITDA as earnings excluding depreciation,
amortization, interest and provision for income taxes.
Adjusted EBITDA is defined as earnings excluding depreciation,
amortization, interest, provision for income taxes and acquisition
and transaction related expenses. Management believes EBITDA and
Adjusted EBITDA are used by investors to analyze operating
performance and evaluate the Company's ability to incur and service
debt and its capacity for making capital expenditures in the
future. EBITDA and Adjusted EBITDA are also useful to investors to
help assess the Company's estimated enterprise value. In addition,
management believes that the adjustments shown below are useful to
investors in order to allow them to compare the Company's financial
results during the periods shown without the effect of each of
these adjustments.
|
|
Management provides
non-GAAP financial measures for informational purposes and to
enhance understanding of the Company's GAAP consolidated financial
statements. Readers should consider these measures in addition to,
but not instead of or superior to, the Company's financial
statements prepared in accordance with GAAP. These non-GAAP
financial measures may be determined or calculated differently by
other companies, limiting the usefulness of those measures for
comparative purposes.
|
|
The following tables
provides a reconciliation for the three months ended May 31,
2023 and 2022 between the various measures calculated in accordance
with GAAP to the Adjusted Earnings Measures, which are shown net of
tax (dollars in thousands, except per share data):
|
|
Adjusted Net
Income and Adjusted Earnings Per Share from Continuing
Operations
|
|
|
Three Months Ended
May 31,
|
|
2023
|
|
2022
|
|
Amount
|
|
Per
Diluted
Share(1)
|
|
Amount
|
|
Per
Diluted
Share(1)
|
Net income from
continuing operations
|
$
28,522
|
|
|
|
$
15,353
|
|
|
Less: preferred stock
dividends
|
(3,600)
|
|
|
|
—
|
|
|
Net income from
continuing operations available to common shareholders
|
24,922
|
|
|
|
15,353
|
|
|
Impact of after-tax
interest expense for convertible notes
|
—
|
|
|
|
547
|
|
|
Impact of preferred
stock dividends
|
3,600
|
|
|
|
—
|
|
|
Net income and diluted
earnings per share from continuing operations
|
28,522
|
|
$
0.98
|
|
15,900
|
|
$
0.62
|
Adjustments:
|
|
|
|
|
|
|
|
Acquisition and
transaction-related expenditures(2)
|
—
|
|
—
|
|
12,614
|
|
0.49
|
Amortization of
intangible assets
|
6,355
|
|
0.22
|
|
3,541
|
|
0.14
|
Subtotal
|
6,355
|
|
0.22
|
|
16,155
|
|
0.63
|
Tax
impact(3)
|
(1,525)
|
|
(0.05)
|
|
(3,877)
|
|
(0.15)
|
Total
adjustments
|
4,830
|
|
0.17
|
|
12,278
|
|
0.48
|
Adjusted net income and
adjusted earnings per share from continuing
operations(4)
|
$
33,352
|
|
$
1.14
|
|
$
28,178
|
|
$
1.10
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - Diluted
|
|
|
29,150
|
|
|
|
25,675
|
|
|
|
|
|
|
|
|
(1) Earnings
per share amounts included in the table above may not sum due to
rounding differences.
|
(2) Includes
expenses related to the Precoat Metals acquisition and the
divestiture of 60% of the AVAIL joint venture.
|
(3)
The non-GAAP effective tax rates for each of the periods presented
is estimated at 24.0%.
|
(4) Adjusted
net income from continuing operations includes $1.4 million of
equity in earnings from the AVAIL joint venture for the three
months ended May 31, 2023.
|
Adjusted EBITDA
from Continuing Operations
|
|
|
Three Months Ended
May 31,
|
|
2023
|
|
2022
|
Net income from
continuing operations
|
$
28,522
|
|
$
15,353
|
Interest
expense
|
28,706
|
|
7,472
|
Income tax
expense
|
9,650
|
|
5,111
|
Depreciation and
amortization
|
18,523
|
|
11,973
|
Acquisition and
transaction-related expenditures
|
—
|
|
12,614
|
Adjusted EBITDA from
continuing operations
|
$
85,401
|
|
$
52,523
|
EBITDA from
Continuing Operations by Segment
|
|
|
Three Months Ended
May 31,
|
|
2023
|
|
2022
|
Metal
Coatings
|
|
|
|
Operating
income
|
$
45,470
|
|
$
45,270
|
Depreciation and
amortization expense
|
6,416
|
|
8,389
|
Other income
(expense)
|
(24)
|
|
10
|
EBITDA
|
$
51,862
|
|
$
53,669
|
|
|
|
|
Precoat
Metals
|
|
|
|
Operating
income
|
$
37,691
|
|
$
6,648
|
Depreciation and
amortization expense
|
5,465
|
|
3,181
|
EBITDA
|
$
43,156
|
|
$
9,829
|
|
|
|
|
Infrastructure
Solutions
|
|
|
|
Operating
loss
|
$
(22)
|
|
$
—
|
Equity in earnings of
unconsolidated subsidiaries
|
1,420
|
|
—
|
EBITDA
|
$
1,398
|
|
$
—
|
|
|
|
|
Corporate
|
|
|
|
Operating
loss
|
$
(17,643)
|
|
$
(24,009)
|
|
|
|
|
Consolidated operating
income
|
$
65,496
|
|
$
27,909
|
View original content to download
multimedia:https://www.prnewswire.com/news-releases/azz-inc-reports-fiscal-year-2024-first-quarter-results-301872301.html
SOURCE AZZ Inc.