8-K
AZZ INC (AZZ)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
April 22, 2022
Date of Report (Date of earliest event reported)
AZZ Inc.
(Exact name of Registrant as specified in its charter)
| Texas | 1-12777 | 75-0948250 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission<br><br>File Number) | (I.R.S. Employer<br><br>Identification No.) |
One Museum Place, Suite 500
3100 West 7th Street
Fort Worth, Texas 76107
(Address of principal executive offices) (Zip Code)
(817) 810-0095
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| Common Stock | AZZ | New York Stock Exchange |
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On April 22, 2022, AZZ Inc. ("AZZ") issued a press release reporting AZZ’s fourth quarter financial results for the period ended February 28, 2022. A copy of this press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
The information in this Item 2.02 (including Exhibit 99.1) is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. Nor shall the information in this Current Report be incorporated by reference in any other filing with the U.S. Securities and Exchange Commission made by AZZ, whether made before or after the date hereof, unless specifically identified therein as being incorporated therein by reference in such filing.
Item 7.01 Regulation FD Disclosure.
On April 22, 2022, AZZ also posted an investor presentation to its website at https://www.azz.com/investor-relations. A copy of the investor presentation is attached hereto as Exhibit 99.2 and incorporated herein by reference.
The information in this Item 7.01 (including Exhibit 99.2) is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. Nor shall the information in this Current Report be incorporated by reference in any other filing with the U.S. Securities and Exchange Commission made by AZZ, whether made before or after the date hereof, unless specifically identified there as being incorporated therein by reference in such filing.
Item 9.01 Financial Statements and Exhibits.
The following exhibits are filed as part of this report.
| Exhibit | Description |
|---|---|
| 99.1 | Press release, reporting financial results for thefourthquarter of fiscal year 2022, endedFebruary 28, 2022. |
| 99.2 | Investor Presentation, datedApril 22, 2022. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| AZZ Inc. | |||
|---|---|---|---|
| Date: | April 22, 2022 | By: | /s/ Philip A. Schlom |
| Philip A. Schlom <br>Chief Financial Officer |
Document
AZZ Inc. Reports Fourth Quarter EPS of $0.87 and Full Year EPS of $3.35 for Fiscal Year 2022
April 22, 2022 - FORT WORTH, TX - AZZ Inc. (NYSE: AZZ), a global provider of metal coating solutions, welding solutions, specialty electrical equipment and highly engineered services today issued its audited consolidated financial statements contained in the Company's Fiscal Year 2022 Annual Report on Form 10-K for the year ended February 28, 2022.
Fiscal Year 2022 Overview and Recent Highlights:
•Achieved 35th consecutive year of profitability
•Reported diluted earnings per share of $3.35 and reported net income of $84.0 million
•Full Year adjusted earnings per share of $3.34 and adjusted net income of $83.8 million
•Sales of $902.7 million, increased by 7.6% compared to prior year
◦Metal Coatings segment full year results versus prior year:
▪Sales of $519.0 million, up 13.4%
▪Adjusted operating income of $127.3 million, up 19.3%
▪Adjusted operating margin of 24.5%, versus 23.3%, or 120 bps improvement
◦Infrastructure Solutions segment full year results versus prior year:
▪Sales of $383.7 million, up 0.7%
▪Adjusted operating income of $33.7 million, up 115.1%
▪Adjusted operating margin of 8.8% versus 4.1%, or 470 bps improvement
•Cash provided from operating activities of $86.0 million decreased 6.5% versus prior year
•Repurchased $30.8 million of common shares during the year
•Effective tax rate of 21.0%; 130 basis points improvement over the prior year
Management Discussion
Tom Ferguson, President and Chief Executive Officer of AZZ, commented, “I am quite pleased with how well our leadership team and dedicated employees overcame supply chain disruptions and labor shortages to take care of their customers, improve our safety record and position AZZ for a strong fiscal year 2023. Fiscal year 2022 was a year of accomplishments for AZZ as we issued our first ESG Report, made significant progress towards becoming predominantly a metal coatings company, completed our 35th consecutive year of profitability, and continued returning capital to our shareholders through dividends and share repurchases. Our Metal Coatings segment again delivered great operating results as they finished with a strong 4th quarter. For the full year they generated record sales of $519.0 million, and 24.5% operating margin, an improvement of 120 basis points over the prior year. The team expanded their spin plant capacity, improved safety, drove improved profitability in Surface Technologies and continued delivering unparalleled value to their customers. Metal Coatings is also positioning to remain the leader in galvanizing through ongoing technology investments in conjunction with Texas A&M University. Our Metal Coatings team continued to drive operational efficiencies utilizing our digital galvanizing system (DGS), while supporting a very active acquisition pipeline that resulted in the completion of two acquisitions (Steel Creek Galvanizing and DAAM Galvanizing) in the fourth quarter.”
Mr. Ferguson continued, “Infrastructure Solutions also had a solid year in spite of experiencing greater disruption from supply chain and labor constraints, as well as international travel restrictions that impacted some Industrial Solutions Platform projects. While bookings activity was quite good, cycle times have extended as supply chain and labor constraints persisted throughout the year. The Electrical Platform’s investment in new applications development resulted in a large battery energy storage system (BESS) project that positions them for a very strong FY2023. Based on the growth of renewable energy sources we believe this is the first of several significant BESS opportunities. We are optimistic for an improvement in the refining turnaround activity both domestically and internationally.”
Subsequent Event:
On March 7, 2022, the Company, and Sequa Corporation ("Sequa"), a portfolio company of global investment firm Carlyle, jointly announced an agreement whereby the Company will acquire Sequa's Precoat Metals business division ("Precoat Metals"). Precoat Metals is headquartered in St. Louis, Missouri and is North America's largest independent provider of metal coil coating solutions. The transaction, which is subject to certain closing conditions, has cleared Hart-Scott Rodino and is expected to close in May, 2022.
Fiscal Year 2023 Guidance
Mr. Ferguson added, “Due to our recent announcement related to the acquisition of Precoat Metals, we will not issue fiscal year 2023 guidance at this time. However, based upon the evaluation of information currently available to management, excluding the impact of the pending Precoat acquisition, we anticipate Metal Coatings will exceed $150 million in sales and exceed 30% EBITDA for the first quarter of fiscal year 2023. We anticipate Infrastructure Solutions for the first quarter of fiscal 2023 will exceed their results in the first quarter of fiscal 2022. This reflects our best estimates given current market conditions, existing execution on our current backlog, and does not include the impact of acquisitions or divestitures, related expenditures, nor any federal regulatory changes that may emerge.”
“As we enter fiscal 2023,” concluded Mr. Ferguson, “our focus will be growing our Metal Coatings segment, completing the acquisition of Precoat Metals, and continuing to pursue strategic options for Infrastructure Solutions. AZZ has maintained excellent cash management processes and will use these to reduce our debt. We have access to the capital necessary to sustain our operations, provide opportunities for organic growth and allow AZZ to continue its dividend. I want to express my sincere gratitude to all our employees for their hard work and dedication throughout the year. We are excited about the opportunities ahead and look forward to welcoming Precoat to the AZZ family.”
Fourth Quarter Results
Sales for the fourth quarter of fiscal year 2022 were $224.7 million, compared to $195.6 million for the prior year, an increase of 14.8%. Net income for the quarter was $21.6 million, or $0.87 per share on a diluted basis, up $5.5 million from the prior year, same quarter. Incoming orders for the three-month period increased to $311.6 million, as compared to $203.6 million for the same quarter last year. The book-to-sales ratio increased significantly to 1.39, compared to 1.04 in last year’s comparable period. As anticipated, backlog at the end of the quarter was $304.5 million, an increase of 63.6% as compared to the same quarter in the prior year.
Metal Coatings Segment
For the fourth quarter of fiscal year 2022, Metal Coatings segment sales increased 20.9% to $128.3 million and operating income increased 18.3% to $31.4 million versus the comparable prior year quarter. Segment operating margin decreased to 24.5% of sales, or 60 basis points lower than the comparable prior year fourth quarter operating margin. The decline in operating margin was a result of higher labor and material costs, including zinc. During the latter part of the fourth quarter, AZZ successfully acquired and has begun integrating Steel Creek Galvanizing and DAAM Galvanizing in Canada into its network of hot-dip galvanizing facilities in North America.
Infrastructure Solutions Segment
For the fourth quarter of fiscal year 2022, Infrastructure Solutions segment sales increased 7.7% to $96.4 million, as compared to $89.5 million in the same quarter of the prior year. Infrastructure Solutions' reported operating income of $9.7 million was 210.8% higher than the comparable prior year quarter. Operating margin increased to 10.1% compared to prior year quarter operating margin of 3.5%. On an adjusted basis, taking into consideration the treatment of assets previously held for sale, operating income of $7.9 million was 155.1% higher than the comparable prior quarter-to-date period. Adjusted operating margin, as percent of sales, was 8.2% compared to 3.5%, as adjusted, in the prior year.
The following chart provides an overview of operating income for both our Metal Coatings and Infrastructure Solutions segments, as adjusted for the impairment charges recorded during the quarter:
| Three Months ended February 28, | Year Ended February 28, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Metal Coatings Segment | ||||||||||||
| Sales | $ | 128,298 | $ | 106,149 | $ | 519,000 | $ | 457,791 | ||||
| Segment operating income: | ||||||||||||
| Metal Coatings, as reported | 31,446 | 26,591 | 127,335 | 95,946 | ||||||||
| Impact of restructuring and impairment | — | (247) | — | 10,796 | ||||||||
| Metal Coatings, as adjusted | $ | 31,446 | $ | 26,344 | $ | 127,335 | $ | 106,742 | ||||
| Adjusted operating income as a % of sales | 24.5 | % | 24.8 | % | 24.5 | % | 23.3 | % | ||||
| Infrastructure Solutions Segment | ||||||||||||
| Sales | $ | 96,356 | $ | 89,480 | $ | 383,664 | $ | 381,126 | ||||
| Segment operating income: | ||||||||||||
| Infrastructure Solutions, as reported | 9,706 | 3,123 | 35,543 | 6,487 | ||||||||
| Impact of restructuring and impairment | (1,797) | (23) | (1,797) | 9,203 | ||||||||
| Infrastructure Solutions, as adjusted | $ | 7,909 | $ | 3,100 | $ | 33,746 | $ | 15,690 | ||||
| Adjusted operating income as a % of sales | 8.2 | % | 3.5 | % | 8.8 | % | 4.1 | % |
Conference Call Details
AZZ Inc. will conduct a conference call to discuss financial results for the fourth quarter and fiscal year 2022 today, Friday, April 22, 2022, 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), confirmation #8903619, through April 29, 2022, or by visiting http://www.azz.com/investor-relations for the next 90 days.
There will be a slide presentation accompanying today’s 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 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 Infrastructure Solutions 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 metal coatings markets, power generation markets, electrical transmission and distribution markets and the industrial 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 28, 2022 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 and Investor Relations
AZZ Inc.
(817) 810-0095
www.azz.com
Investor Contact:
Joe Dorame, Managing Partner
Lytham Partners
(602) 889-9700
www.lythampartners.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 February 28, | Year Ended February 28, | |||||||
| 2022 | 2021 | 2022 | 2021 | |||||
| Sales | $ | 224,654 | $ | 195,629 | $ | 902,664 | $ | 838,917 |
| Cost of sales | 169,437 | 149,859 | 677,441 | 650,170 | ||||
| Gross margin | 55,217 | 45,770 | 225,223 | 188,747 | ||||
| Selling, general and administrative | 31,006 | 27,268 | 113,680 | 107,134 | ||||
| Restructuring and impairment charges | (1,797) | (270) | (1,797) | 19,999 | ||||
| Operating income (loss) | 26,008 | 18,772 | 113,340 | 61,614 | ||||
| Interest expense | 1,314 | 2,272 | 6,395 | 9,648 | ||||
| Other (income) expense, net | (762) | 144 | 600 | 969 | ||||
| Income before income taxes | 25,456 | 16,356 | 106,345 | 50,997 | ||||
| Income tax expense (benefit) | 3,834 | 196 | 22,323 | 11,383 | ||||
| Net income | $ | 21,622 | $ | 16,160 | $ | 84,022 | $ | 39,614 |
| Earnings per common share | ||||||||
| Basic | $ | 0.88 | $ | 0.64 | $ | 3.38 | $ | 1.53 |
| Diluted | $ | 0.87 | $ | 0.63 | $ | 3.35 | $ | 1.52 |
| Diluted weighted average shares outstanding | 24,918 | 26,045 | 25,077 | 26,045 | ||||
| AZZ Inc. | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Segment Reporting | ||||||||
| (dollars in thousands) | ||||||||
| (unaudited) | ||||||||
| Three Months ended February 28, | Year Ended February 28, | |||||||
| 2022 | 2021 | 2022 | 2021 | |||||
| (In thousands) | (In thousands) | |||||||
| Sales: | ||||||||
| Metal Coatings | $ | 128,298 | $ | 106,149 | $ | 519,000 | $ | 457,791 |
| Infrastructure Solutions | 96,356 | 89,480 | 383,664 | 381,126 | ||||
| Total sales | $ | 224,654 | 195,629 | $ | 902,664 | $ | 838,917 | |
| Operating income: | ||||||||
| Metal Coatings | $ | 31,446 | $ | 26,591 | $ | 127,335 | $ | 95,946 |
| Infrastructure Solutions | 9,706 | 3,123 | 35,543 | 6,487 | ||||
| Corporate | (15,144) | (10,942) | (49,538) | (40,819) | ||||
| Total operating income | $ | 26,008 | $ | 18,772 | $ | 113,340 | $ | 61,614 |
| AZZ Inc. | ||||||||
| --- | --- | --- | --- | --- | ||||
| Condensed Consolidated Balance Sheets | ||||||||
| (dollars in thousands) | ||||||||
| (unaudited) | ||||||||
| February 28, 2022 | February 28, 2021 | |||||||
| Assets: | ||||||||
| Current assets (including assets held for sale of $225) | $ | 386,533 | $ | 305,055 | ||||
| Property, Plant and Equipment, Net | 230,848 | 207,089 | ||||||
| Other assets, net | 515,647 | 487,083 | ||||||
| Total assets | $ | 1,133,028 | $ | 999,227 | ||||
| Liabilities and Shareholders’ Equity: | ||||||||
| Current liabilities | $ | 150,531 | $ | 116,633 | ||||
| Long-term debt due after one year, net | 226,484 | 178,419 | ||||||
| Other liabilities | 88,648 | 80,883 | ||||||
| Shareholders' equity | 667,365 | 623,292 | ||||||
| Total liabilities and shareholders' equity | $ | 1,133,028 | $ | 999,227 | ||||
| (1) Amounts for FY2021 include adjustments for a business that was reclassified from Assets held for sale <br> to assets held and used. | ||||||||
| AZZ Inc. | ||||||||
| --- | --- | --- | --- | --- | ||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (dollars in thousands) | ||||||||
| (unaudited) | ||||||||
| Year Ended | ||||||||
| February 28,<br>2022 | February 28,<br>2021 | |||||||
| Net cash provided by operating activities | $ | 86,010 | $ | 92,035 | ||||
| Net cash used in investing activities | (86,835) | (28,593) | ||||||
| Net cash provided by (used in) financing activities | 912 | (88,425) | ||||||
| Effect of exchange rates on cash | 158 | 3,133 | ||||||
| Net increase (decrease) in cash and cash equivalents | $ | 245 | $ | (21,850) | ||||
| Cash and cash equivalents at beginning of period | 14,837 | 36,687 | ||||||
| Cash and cash equivalents at end of period | $ | 15,082 | $ | 14,837 |
AZZ Inc.
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”), the Company has provided adjusted operating income, adjusted earnings 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 a greater transparency comparison of operating results across a broad spectrum of companies, which provides a more complete understanding of the Company’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 provides a reconciliation for the three and twelve months ended February 28, 2022 and 2021 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):
| Three Months ended February 28, 2022 | Twelve Months ended February 28, 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| Operating income | $ | 26,008 | $ | 113,340 | ||||
| Restructuring and impairment charges | (1,797) | (1,797) | ||||||
| Acquisition related expenditures | 1,554 | 1,554 | ||||||
| Adjusted operating income | $ | 25,765 | $ | 113,097 | ||||
| Three Months ended February 28, 2022 | Year Ended February 28, 2022 | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Amount | Per<br><br>Diluted Share(1) | Amount | Per<br><br>Diluted Share(1) | |||||
| Net income and diluted earnings per share | $ | 21,622 | $ | 0.87 | $ | 84,022 | $ | 3.35 |
| Adjustments (net of tax): | ||||||||
| Restructuring and impairment charges: | ||||||||
| Metal Coatings | — | — | — | — | ||||
| Infrastructure Solutions(2) | (1,797) | (0.07) | (1,797) | (0.07) | ||||
| Acquisition related expenditures(3) | 1,554 | 0.06 | 1,554 | 0.06 | ||||
| Subtotal | (243) | (0.01) | (243) | (0.01) | ||||
| Tax provision (benefit) related to restructuring and impairment charges(4) | 56 | — | 56 | — | ||||
| Total adjustments | (187) | (0.01) | (187) | (0.01) | ||||
| Adjusted earnings and adjusted earnings per share | $ | 21,435 | $ | 0.86 | $ | 83,835 | $ | 3.34 |
| (1) Adjusted earnings per share amounts included in the table above may not sum due to rounding differences. | ||||||||
| (2) Represents the reversal of impairment charges recognized in FY2021 for a business that is no longer held for sale. | ||||||||
| (3) Acquisition related expenditures represents expenses related to the Precoat Acquisition. | ||||||||
| (4) The non-GAAP effective tax rates for both the three-and twelve-month periods for FY2022 was 22.9%. | ||||||||
| Three Months ended February 28, 2021 | Year Ended February 28, 2021 | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Amount | Per<br><br>Diluted Share(1) | Amount | Per<br><br>Diluted Share(1) | |||||
| Net income and diluted earnings per share | $ | 16,160 | $ | 0.63 | $ | 39,614 | $ | 1.52 |
| Adjustments (net of tax): | ||||||||
| Restructuring and impairment charges: | ||||||||
| Metal Coatings | (247) | (0.01) | 10,796 | 0.41 | ||||
| Infrastructure Solutions | (23) | — | 9,203 | 0.35 | ||||
| Subtotal | (270) | (0.01) | 19,999 | 0.77 | ||||
| Tax provision (benefit) related to restructuring and impairment charges(2) | 59 | — | (4,584) | (0.18) | ||||
| Total adjustments | (211) | (0.01) | 15,415 | 0.59 | ||||
| Adjusted earnings and adjusted earnings per share | $ | 15,949 | $ | 0.61 | $ | 55,029 | $ | 2.11 |
| (1) Adjusted earnings per share amounts included in the table above may not sum due to rounding differences. | ||||||||
| (2) The non-GAAP effective tax rates for the three-and twelve month periods was 22.0% and 22.9%, respectively. |
fy2022_fullxyearxandxq4x
AZZ Inc. Q4 and Full Year FY2022 Earnings Presentation April 22, 2022
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Safe Harbor Statement 2 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 presentation 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 28, 2022 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.
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Fiscal Year 2022 Segment Performance Update Full Year FY2022 Sales: $902.7 million Segment Updates Metal Coatings Segment $519.0 Infrastructure Solutions Segment $383.7 • Record Metal Coatings segment sales driven by higher volume and value pricing • Completed two acquisitions in the fourth quarter • Continued emphasis on Environmental, Health and Safety • Maintained focus on customer service, quality and cycle times while managing labor constraints • Infrastructure Solutions bookings of $502 million increased 53% over prior year • Backlog at end of year of $304 million; up 64% over prior year • Overall segment sales up slightly due to improved domestic turnaround activity for WSI, offset by lower electrical sales • Electrical sales have been affected by component delays, labor shortages • Finalized strategic portfolio review and pursuing completion of strategic options 3 +13.4% vs. FY2021 +0.7% vs. FY2021
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Sales Net Income Diluted EPS Fiscal Year 2022 Summary - Consolidated $838.9 $902.7 FY21 FY22 +7.6% • Higher sales volume primarily attributable to strong sales in Metal Coatings • Continued improvement in Metal Coatings productivity utilizing DGS and price realization • Full year tax rate of 21.0% • 58% increase compared to adjusted FY21 EPS of $2.11 (including $15.4 million in restructuring and impairment charges, net of tax) +112% reported; +52% adjusted +120% reported; +58% adjusted In $ millions, except per share amounts 4 $39.6 $84.0 $83.8 FY21 FY22 FY22(a) $1.52 $3.35 $3.34 FY21 FY22 FY22(a) (a)=adjusted
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Fiscal Year 2022 Segment Results – Metal Coatings • Higher sales a result of increased volume and value pricing • Improved operating efficiencies and productivity as DGS utilization continues to grow • Completed acquisitions of Steel Creek Galvanizing and DAAM Galvanizing late in fourth quarter In $ millions except percentages Sales $457.8 $519.0 FY21 FY22 +13.4% Operating Income +32.7% reported; 19.3% adjusted Key Statistics FY2021 Sales Organic Acquisitions FY2022 Sales $457.8 $519.0 $1.2 Segment Summary: 5 $95.9 $106.7 $127.3 1FY21 FY21(a) FY22 Operating Margin 21.0% 23.3% 24.5% 1FY21 FY21(a) FY22 +350 bps reported; +120 bps adjusted (a)=adjusted $60.0
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Fiscal Year 2022 Segment Results – Infrastructure Solutions • Bookings increased to $502 million as result of strong market demand; Booked a large 125 unit battery energy storage system (BESS) enclosure project • Electrical and Industrial Platform sales were relatively flat due to supply chain and labor constraints; Growing backlog and bookings • Current year operating results reflect the positive impact of prior year restructuring actions • Returned MVBUS assets previously held for sale to operating status (positive $1.8 million impact in the fourth quarter) In $ millions except percentages Key Statistics FY2021 Book to Ship 0.94 to 1 Segment Summary: FY2022 Book to Ship 1.13 to 1 FY 2021 Sales $381.1 FY2022 Sales $383.7 6 Sales $381.1 $383.7 FY21 FY22 +0.7% Operating Income +448% reported; +115.1% adjusted Operating Margin +760 bps reported; +470 bps adjusted (a)=adjusted $6.5 $15.7 $35.5 $33.7 FY21 FY21(a) FY22 FY22(a) 1.7% 4.1% 9.3% 8.8% FY21 FY21(a) FY22 FY22(a)
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Fiscal Year 2023 Q1 Outlook 7 • Due to our recently announced, and pending acquisition of Precoat Metals, AZZ will not issue FY2023 guidance at this time. • Volumes in the Metal Coatings segment continue to be strong. We anticipate sales will exceed $150 million and EBITDA should exceed 30% for the first quarter of fiscal year 2023. • Within our Metal Coatings business, we continue to see strong demand from several end markets including solar, transmission and utility, industrial and construction • The 2023 first quarter will include the full benefit of both the Steel Creek and DAAM acquisitions • AZZ’s Infrastructure Solutions segment continues to see improved bookings and backlog and should exceed the results from the 1st quarter of the prior year. • Uninterrupted manufacturing operations continue, despite seeing supply chain delays for some switchgear and e- house components. • Hazardous duty lighting and tubular products are seeing improved demand as result of higher oil prices • Our WSI business is seeing improved demand as refiners schedule more turnarounds that require our solutions
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Q4 FY2022 Consolidated Results In millions, except for EPS and percentages Q4 FY 22 Reported Q4 FY 21 Reported % Change Sales $224.7 $195.6 +14.8% Gross Profit $55.2 $45.8 +20.6% Gross Margin percent 24.6% 23.4% 120 bps Operating Profit $26.0 $18.8 38.5% Operating Margin 11.6% 9.6% 200 bps EBITDA $37.1 $29.1 27.8% Net Income (loss) $21.6 $16.2 33.8% Diluted EPS $0.87 $0.63 38.1% Diluted Shares Outstanding 24,918 26,045 -4.3% 8
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Fiscal Year 2022 Consolidated Results In $ millions, except for EPS and percentages FY 2022 Reported FY 2022 Adjusted FY 2021 Reported FY 2021 Adjusted Sales $902.7 $902.7 $838.9 $838.9 Gross Profit $225.2 $225.2 $188.7 $188.7 Gross Margin 25.0% 25.0% 22.5% 22.5% Operating Profit $113.3 $113.1 $61.6 $81.6 Operating Margin 12.6% 12.5% 7.3% 9.7% EBITDA $157.4 $156.1 $105.2 $125.2 Net Income $84.0 $83.8 $39.6 $55.0 Diluted EPS $3.35 $3.34 $1.52 $2.11 Diluted Shares Outstanding 25,077 25,077 26,045 26,045 9
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Fiscal Year 2022 Cash Flow Highlights In $ millions, except for percentages FY 2022 FY 2021 Cash flows provided by operating activities $86.0 $92.0 Less: Capital Expenditures $(28.4) $(38.6) Free Cash Flow $57.6 $53.5 Net Income $84.0 $39.6 Free Cash Flow as percent of Net Income 68.6% 134.9% Acquisition of Subsidiaries, net of cash acquired $61.2 $4.4 Dividends $16.9 $17.6 Share Repurchases $30.8 $48.3 10
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Capital Allocation Focused on Growth $28.4 $61.2 $30.8 $16.9 Capital Expenditures Acquisitions Share Repurchases Dividends Capital Expenditures Acquisitions Share Repurchases Dividends In $ millions • Safety, Health and Environmental • Product/technology growth initiatives • Facility expansion & spin plant • Two acquisitions completed during the year (Steel Creek & DAAM) • Subsequent event – Precoat Metals Acquisition • Repurchased over 600 thousand shares • Continued to pay a dividend Gr ow th Sh ar eh ol de r R et ur n 11 Full Year FY2022 Capital Deployment
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION 12 Metal Coatings Segment • Cost of zinc in our kettles, which increased throughout FY2022, is expected to continue to rise • Emphasis on operating efficiency and productivity, supported by Digital Galvanizing System (“DGS”) investment Infrastructure Solutions Segment • Industrial platform (WSI) o Normalized Spring and Fall turnaround outlook • Electrical platform o T&D/Utility and Renewable market growth expected to continue, driving demand for electrical enclosures and switchgear o Continued robust data center market and further penetration within battery energy storage system market Corporate • Complete acquisition and integration of Precoat Metals • Continue to effectively manage cash flow and pay down debt • Complete strategic actions regarding Infrastructure Solutions Segment Key Indicators and Initiatives
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION • Meaningfully advanced our strategy of becoming predominately a coatings company o Entered into definitive agreement to acquire Precoat Metals from Sequa/Carlyle o Expected to be accretive during first full year of operations o Obtained Hart-Scott Rodino clearance on April 13, 2022 o Anticipated closing mid-May 2022 • Long term strategy to continue to grow the Metal Coatings segment organically and with a robust acquisition program o Grow industry leading operating margins above historical 21% to 23% range with a focus on operating excellence, and outstanding customer service o Continued inorganic growth • Infrastructure Solutions segment focused on executing on strong backlog and improving profitability Strategic Direction 13
Q&A
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Q4 Fiscal Year 2022 Segment Performance Update Total Q4 FY2022 Sales: $224.7 million Market Drivers Metal Coatings Segment $128.3 Infrastructure Solutions Segment $96.4 • Sales up 20.9% versus prior year’s quarter, on higher volumes of steel galvanized and higher pricing • Maintained price/value realization despite higher labor and material costs • Sales driven by higher volume from industrial business unit. • Demand for both switchgear and enclosures remains strong 15 +20.9% vs. prior year +7.7% vs. prior year
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Sales Net Income Diluted EPS Q4 Fiscal Year 2022 Summary - Consolidated $195.6 $224.7 FY21 FY22 +14.8% • Higher sales volume in Metal Coatings • Improved turnaround activity in WSI • Price/value realization in Metal Coatings • Improved operational efficiencies • FY22 Q4 adjustments include +$1.8 million (assets previously held for sale returned to held and used status) offset by $(1.6) million deal-related costs associated with the acquisition of Precoat Metals +33.8% Reported; +34.4% Adjusted +38.1% Reported / +41.0% Adjusted In $millions, except per share amounts 16 (a)=adjusted $16.2 $21.6 $21.4 FY21 FY22 FY22(a) $0.63 $0.87 $0.86 FY21 FY22 FY22(a)
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Q4 Fiscal Year 2022 Segment Results – Metal Coatings • Quarterly sales increase reflects higher sales volume and pricing for galvanizing • Operating Margins of 24.5%, compared to 25.1% for the same quarter last year a result of increased labor and material costs • Operating Income of $31.4 million compared to $26.6 million for the same quarter last year In millions $ except percentages Sales $106.1 $128.3 FY21 FY22 +20.9% Operating Income +18.3%Key Statistics FY2021 Sales Organic Acquisitions FY2022 Sales $106.1 $128.3 $1.2 $21.0 Segment Summary: 17 $26.6 $31.4 FY21 FY22 Operating Margin 25.1% 24.5% FY21 FY22 -60 bps
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Q4 Fiscal Year 2022 Segment Results – Infrastructure Solutions • Book to ship ratio increasing significantly from last year • Higher sales in our industrial solutions business, driven by improved turnarounds • Growing domestic backlog of orders of enclosures and switchgear; Booked large BESS order in renewables market • Operating Margins of 10.1%, compared to 3.5% for the fourth quarter of last year In millions $ except percentages Key Statistics FY21 Book to Ship 1.06 to 1 Segment Summary: FY22 Book to Ship 1.38 to 1 FY21 Sales $89.5 FY22 Revenue $96.4 18 Sales $89.5 $96.4 FY21 FY22 +7.7% Operating Income +155.1% Adjusted Operating Margin 470 bps Adjusted (a)=adjusted $3.1 $9.7 $7.9 FY21 FY22 FY22(a) 3.5% 10.1% 8.2% FY21 FY22 FY22(a)
Appendix and Additional Information
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"), AZZ has provided EBITDA and Adjusted EBITDA, 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 EBITDA and Adjusted EBITDA, 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. Non-GAAP Disclosure of EBITDA 20
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Q4 Fiscal 2022 - Non-GAAP Disclosure of Consolidated EBITDA 21 In millions Consolidated Q4 FY 22 Consolidated Q4 FY 21 GAAP Net Income $21.6 $16.2 Adjustments to reconcile GAAP to non- GAAP Financial Measures Interest Expense $1.3 $2.3 Income Tax (Benefit) / Expense $3.8 $0.2 Depreciation and Amortization Expense $11.4 $10.4 Total Adjustments $16.6 $12.9 Non-GAAP EBITDA $38.2 $29.1 Current Year vs. Prior Year As Reported to As Adjusted Q4 Consolidated FY2021 $(millions) except EPS As Reported (a) Adjustment As Adjusted Sales 195.6$ 195.6$ Gross Profit 45.8 45.8 Gross Margin 23.4% 23.4% SG&A 27.3 27.3 Impairment and Restructuring Cost 0.3 (0.3) (1) - Loss on Disposal (0.0) (0.0) Operating Profit 18.8 18.5 Operating Margin 9.6% 9.5% Other (exp) / income net (0.1) (0.1) Interest 2.3 2.3 Tax 0.2 0.2 Net Income 16.2$ 16.0$ Shares 25,648 25,648 Diluted EPS 0.63$ 0.62$ Depreciation and Amortization 10.4$ 10.4$ EBITDA 29.1$ 28.8$
Q4 AND FULL YEAR FY2022 EARNINGS PRESENTATION Full Year Fiscal 2022 - Non-GAAP Disclosure of Consolidated EBITDA 22 In millions Consolidated FY 22 Consolidated FY 21 GAAP Net Income $84.0 $39.6 Adjustments to reconcile GAAP to non- GAAP Financial Measures Interest Expense $6.4 $9.6 Income Tax Expense $22.3 $11.4 Depreciation and Amortization Expense $44.7 $44.6 Total Adjustments $73.4 $65.6 Non-GAAP EBITDA $157.4 $105.2 Current Year vs. Prior Year As Reported to As Adjusted Full Year Consolidated FY2021 $(millions) except EPS As Reported (a) Adjustment As Adjusted Sales 838.9$ 838.9$ Gross Profit 188.7 188.7 Gross Margin 22.5% 22.5% SG&A 107.1 107.1 Impairment and Restructuring Cost (16.9) 16.9 (1) 0.0 Loss on Sale (3.1) 3.1 (2) 0.0 Operating Profit 61.6 81.6 Operating Margin 7.3% 9.7% Other (exp) / income net (1.0) (1.0) Interest 9.6 9.6 Tax 11.4 (4.6) (3) 16.0 Net Income 39.6$ 55.0$ Shares 26.045 26.045 Diluted EPS 1.52$ 2.11$ Depreciation and Amortization 44.6$ 44.6$ EBITDA 105.2$ 125.2$