Azz Inc 10-Q for FY2022 Q1

Azz Inc (AZZ)

10-Q 2021-07-09 For: 2021-05-31

Added on April 04, 2026

About this 10-Q

Azz Inc filed this 10-Q on July 9, 2021, covering the quarter ended May 31, 2021 (FY2022 Q1).

Headline figures

Quarter ended May 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $229.83M; up 7.8% from $213.29M a year earlier
Net income: $22.34M; up 303.1% from net income of $5.54M a year earlier
Diluted EPS: $0.88; up 319.0% from $0.21 a year earlier

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Texas		75-0948250
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Museum Place, Suite 500
3100 West 7th Street
Fort Worth,	Texas	76107
(Address of principal executive offices)		(Zip Code)


		PAGE NO.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Shareholders’ Equity	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 5	Other Information	23
Item 6.	Exhibits	25

	SIGNATURES	26


	May 31, 2021		February 28, 2021
Assets
Current assets:
Cash and cash equivalents	$	12,403	$	14,837
Accounts receivable (net of allowance for credit losses of $5,362 as of May 31, 2021 and $5,713 as of February 28, 2021)	134,531		128,127
Inventories:
Raw material	92,283		86,913
Work-in-process	6,214		4,453
Finished goods	1,453		1,546
Contract assets	71,185		58,056
Prepaid expenses and other	11,211		5,876
Assets held for sale	5,628		3,684
Total current assets	334,908		303,492
Property, plant and equipment, net	207,689		205,909
Operating lease right-of-use assets	48,698		37,801
Goodwill	354,839		353,881
Intangibles and other assets, net	93,105		95,359
Total assets	$	1,039,239	$	996,442
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	48,831	$	41,034
Income tax payable	4,778		—
Accrued salaries and wages	16,614		22,606
Other accrued liabilities	36,278		27,136
Customer deposits	421		348
Contract liabilities	17,098		16,138
Lease liability, short-term	7,174		6,588


Total current liabilities	131,194		113,850
Debt due after one year, net	185,435		178,419
Lease liability, long-term	40,702		32,629
Deferred income taxes	38,467		39,283
Other long-term liabilities	6,030		8,969
Total liabilities	401,828		373,150
Commitments and contingencies
Shareholders’ equity:
Common stock, $1 par, shares authorized 100,000; 25,071 shares issued and outstanding at May 31, 2021 and 25,108 shares issued and outstanding at February 28, 2021	25,071		25,108
Capital in excess of par value	75,600		75,979
Retained earnings	559,173		547,289
Accumulated other comprehensive loss	(22,433)		(25,084)
Total shareholders’ equity	637,411		623,292
Total liabilities and shareholders' equity	$	1,039,239	$	996,442


	Three Months Ended May 31,
	2021		2020

Sales	$	229,826	$	213,293
Cost of sales	171,899		171,085
Gross margin	57,927		42,208

Selling, general and administrative	27,215		27,890

Operating income	30,712		14,318

Interest expense	1,697		2,634

Other (income) expense, net	(969)		1,456
Income before income taxes	29,984		10,228
Income tax expense	7,647		4,687
Net income	$	22,337	$	5,541
Earnings per common share
Basic earnings per share	$	0.89	$	0.21
Diluted earnings per share	$	0.88	$	0.21

Cash dividends declared per common share	$	0.17	$	0.17


	Three Months Ended May 31,
	2021		2020

Net income	$	22,337	$	5,541
Other comprehensive income (loss):
Foreign currency translation adjustments, net of income tax of $0	2,581		(1,039)
Interest rate swap, net of income tax of $0 and $7, respectively	—		(14)
Other comprehensive income (loss)	2,581		(1,053)
Comprehensive income	$	24,918	$	4,488


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended May 31, 2021
	Common Stock			Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total

	Shares	Amount
Balance at February 28,2021	25,108	$	25,108	$	75,979	$	547,289	$	(25,084)	$	623,292
Share-based compensation expense	—	—		1,811		—		—		1,811
Common stock issued under stock-based plans and related income tax expense	89	89		(2,190)		—		—		(2,101)


Repurchase and retirement of common stock	(126)	(126)		—		(6,138)		—		(6,264)
Cash dividends paid	—	—		—		(4,245)		—		(4,245)
Net income	—	—		—		22,337		—		22,337
Foreign currency translation	—	—		—		(70)		2,651		2,581

Balance at May 31, 2021	25,071	$	25,071	$	75,600	$	559,173	$	(22,433)	$	637,411


	Three Months Ended May 31, 2020
	Common Stock			Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total

	Shares	Amount
Balance at February 28, 2020	26,148	$	26,148	$	66,703	$	572,414	$	(30,899)	$	634,366
Share-based compensation	—	—		1,766		—		—		1,766
Common stock issued under stock-based plans and related income tax expense	47	47		(586)		—		—		(539)



Cash dividends paid	—	—		—		(4,425)		—		(4,425)
Net income	—	—		—		5,541		—		5,541
Foreign currency translation	—	—		—		—		(1,039)		(1,039)
Interest rate swap	—	—		—		—		(14)		(14)
Balance at May 31, 2020	26,195	$	26,195	$	67,883	$	573,530	$	(31,952)	$	635,656


	2021		2020
Balance at February 28/29,	$	16,138	$	18,418
Contract liabilities added during the period	12,375		4,796
Sales recognized during the period	(11,415)		(5,849)
Balance at May 31,	$	17,098	$	17,365


	May 31, 2021		February 28, 2021
Total assets:
Metal Coatings	$	490,326	$	480,778
Infrastructure Solutions	521,428		489,986
Corporate	27,485		25,678
Total	$	1,039,239	$	996,442


	May 31, 2021		February 28, 2021
Property, plant and equipment, net:
United States	$	180,004	$	180,718
Canada	14,953		15,007
Other countries	12,732		10,184
Total	$	207,689	$	205,909


Balance at February 28, 2021	$	4,079
Warranty costs incurred	(112)
Additions charged to income	170

Balance at May 31, 2021	$	4,137


	May 31, 2021		February 28, 2021
2017 Revolving Credit Facility	$	36,000	$	29,000



2020 Senior Notes	150,000		150,000
Total debt, gross	186,000		179,000
Unamortized debt issuance costs	(565)		(581)
Total debt, net	185,435		178,419
Less amount due within one year	—		—
Debt due after one year, net	$	185,435	$	178,419


Fiscal year:	Operating Leases		Finance Leases		Total
2022 (remaining 9 months)	$	6,896	$	53	$	6,949
2023	8,709		71		8,780
2024	7,818		71		7,889
2025	6,777		68		6,845
2026	5,330		14		5,344
Thereafter	21,962		—		21,962
Total lease payments	57,492		277		57,769
Less imputed interest	(9,872)		(21)		(9,893)
Total	$	47,620	$	256	$	47,876


	Three Months Ended May 31,
	2021		2020
Sales:
Industrial	$	153,983	$	130,109
Transmission and distribution	43,667		49,057
Power generation	32,176		34,127
Total sales	$	229,826	$	213,293


	Three Months Ended May 31,
	2021			2020
Operating cash flows from operating leases included in lease liabilities	$	2,299		$	2,119
Lease liabilities obtained from new ROU assets - operating	12,661			204
Weighted-average remaining lease term - operating leases (years)	8.4			7.6
Weighted-average discount rate - operating leases	4.6		%	5.0		%
Operating and financing cash flows from financing leases included in lease liabilities	18			—
Lease liabilities obtained from new ROU assets - financing	—			—
Weighted-average remaining lease term - financing leases (years)	4.3			—
Weighted-average discount rate - financing leases	4.3		%	—		%


	Period Ended			Period Ended
Backlog	2/28/2021	$	186,119	2/28/2020	$	243,799
Net bookings		229,805			174,865

Sales recognized		(229,826)			(213,293)
Backlog	5/31/2021	$	186,098	5/31/2020	$	205,371
Book to sales ratio		1.00			0.82


	Three Months Ended May 31,
	2021		2020
Net cash provided by (used in) operating activities	$	11,060	$	(11,184)
Net cash used in investing activities	(7,466)		(10,847)
Net cash (used in) provided by financing activities	(5,610)		11,036


	As of May 31, 2021
Assets
Accounts receivable	$	4,715
Inventories	2,600
Contract assets	2,204
Other current assets	186
Property, plant and equipment	1,348
Other assets	43
Goodwill	1,693

Liabilities
Accounts payable	856
Contract liabilities	1,926
Other accrued liabilities	877
Lease liability – long term	12
Total carrying value	9,118
Less: Impairment of carrying value of remaining assets held for sale to estimated sales price	(3,490)
Fair value of disposal group	$	5,628


Period	Total Number of Share Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publically Announced Plans or Programs	Approximate Dollar Value that May Yet Be Used Under the Plans or Programs
Beginning balance, February 29, 2021					$	84,002,349
March 1 through March 31	60,649	$	49.47	60,649	83,941,700
April 1 through April 30	56,043	49.82		56,043	83,885,657
May 1 through May 31	9,078	51.92		9,078	83,876,579






Total	125,770	$	49.80	125,770	$	83,876,579


3.1						Amended and Restated Certificate of Formation of AZZ Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the Registrant on July 14, 2015)

3.2						Amended and Restated Bylaws of AZZ Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed by the Registrant on January 23, 2017)

10.1*						AZZ Inc. 2018 Employee Stock Purchase Plan (incorporated by reference to Appendix A to the Registrant's Definitive Proxy Statement on Form DEFA filed on May 25, 2018.).

10.2						Note Purchase Agreement, dated as of January 20, 2011, by and among AZZ incorporated and the purchasers identified therein (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on January 21, 2011).

10.3						Credit Agreement by and between AZZ Inc. as borrower, CitiBank,CitiBank, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer, and the other Lender's party hereto. Filed Herewith.

10.4*						AZZ incorporated 2014 Long Term Incentive Plan (incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Form DEFA filed May 29, 2014).

10.5*						First Amendment to AZZ Inc. 2014 Long Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Registrant on January 21, 2016.
10.6						Note Purchase Agreement, dated as of October 9, 2020, by and among AZZ Inc. and the purchasers identified therein (incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q filed by the Registrant on October 13, 2020).
10.7*						Form of Change in Control Agreement by and between AZZ Inc. and certain Executive Officers thereof. Filed Herewith.
31.1						Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed Herewith.

31.2						Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed Herewith.

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed Herewith.

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed Herewith.

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