Azz Inc 8-K, filed Jan 9, 2020
Azz Inc (AZZ)
8-K
2020-01-09
For: 2020-01-09
View Original
Added on
April 04, 2026
About this 8-K
Azz Inc filed this 8-K on January 9, 2020.
Items reported
- Item 2.02: Financial results
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
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
Date of Report (Date of earliest event reported)
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
(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 | ||
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 January 9, 2020, AZZ Inc. ("AZZ") issued a press release reporting AZZ’s third quarter financial results for the period ended November 30, 2019. 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 January 9, 2020, 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.
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: January 9, 2020 | By: /s/ Paul W. Fehlman |
Paul W. Fehlman Senior Vice President and Chief Financial Officer | |
AZZ Inc. Reports Financial Results for the
Third Quarter of Fiscal Year 2020
Third Quarter FY2020 EPS Up 42.4% to $0.84 versus $0.59 for Q3 FY2019
Third Quarter FY2020 Revenues Up 21.6% to $291.1 million versus $239.5 million for Q3 FY2019
Third Quarter FY2020 Operating Margin of 11.5% compared to 9.5% in Q3 FY2019
Company maintains full fiscal year 2020 guidance to Revenues of $1,020 million - $1,060 million and EPS of $2.60 - $2.90 per share
January 9, 2020 - FORT WORTH, TX - 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 | |
---Financial tables on the following page---
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 | |||
--END--
AZZ Inc. Third Quarter Fiscal Year 2020 Earnings Presentation January 9, 2020
Q3 FY2020 EARNINGS PRESENTATION 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 presentation 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 strategies. 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. 2
Q3 FY2020 EARNINGS PRESENTATION 3rd Quarter Segment Revenue and Market Drivers Total 3Q FY2020 Revenue: $291.1 million Metal Coatings Energy Segment Segment $129.2 $161.9 +20.2% vs. prior year +22.7% vs. prior year Market Drivers • Strong solar and petrochemical market activity • Strong North American turnaround season • Growing contribution from Surface Technologies • Shipped China HV Bus; Booked large domestic order • Maintaining price/value realization • Domestic nuclear market remains stable at a low level 3
Q3 FY2020 EARNINGS PRESENTATION 3rd Quarter Segment Results – Metal Coatings In millions $ except percentages Revenue Operating Income Operating Margin Key Statistics +20.2% +48.8% +410 bps $129.2 $107.5 FY2019 Revenue $107.5 $27.3 21.1% Organic $13.1 17.0% $18.3 Acquisitions $8.6 FY2020 Revenue $129.2 FY2019 FY2020 FY2019 FY2020 FY2019 FY2020 Segment Summary: • Record quarterly revenue driven by improved demand within solar and petrochemical markets. • Sales traction within our new business units – Surface Technologies and Galvabar • Lower zinc costs in Galvanizing offsetting higher wage expense • Improved labor productivity and operational efficiency driven by Digital Galvanizing System (DGS) • Operating Margins of 21.1%, compared to 17.0% for the same quarter last year • EBITDA of $34.9 million versus $25.5 million in same quarter last year 4
Q3 FY2020 EARNINGS PRESENTATION 3rd Quarter Segment Results – Energy In millions $ except percentages Revenue Operating Income Operating Margin Key Statistics +22.7% +51.1% +210 bps 10.8% $161.9 $17.4 FY19 Revenue $132.0 $132.0 8.7% FY19 Book to Ship 0.79 to 1 $11.5 FY20 Revenue $161.9 FY20 Book to Ship 0.83 to 1 FY2019 FY2020 FY2019 FY2020 FY2019 FY2020 Segment Summary: • Strong refinery turnaround business in 3Q FY2020 • Recognizing revenue and shipping Chinese orders; backlog down from prior year due to large China shipments • Improved Electrical operational execution and customer service • Operating Margin of 10.8% in Q3 FY2020, versus 8.7% same quarter last year • EBITDA of $22.5 million versus $15.9 million in same quarter last year 5
Q3 FY2020 EARNINGS PRESENTATION YTD Segment Results In $ millions except percentages Revenue Operating Income Operating Margin +11.0% +30.1% +340 bps $376.2 $85.3 $339.0 22.7% $65.6 19.3% Metal Coatings FY2019 FY2020 FY2019 FY2020 FY2019 FY2020 Revenue Operating Income Operating Margin +14.2% +32.9% +110 bps $440.3 $34.2 7.8% $385.5 6.7% $25.8 Energy FY2019 FY2020 FY2019 FY2020 FY2019 FY2020 6
Q3 FY2020 EARNINGS PRESENTATION YTD FY 2020 Financial Guidance and Key Assumptions Key Assumptions: In millions , except for EPS Current Metal Coatings: Continued operational execution Revenue $1,020-$1,060 No significant winter weather disruptions Energy Earnings Per Share $2.60-$2.90 Electrical Platform operational execution No China trade disruptions 7
Q3 FY2020 EARNINGS PRESENTATION 3rd Quarter Summary - Consolidated In $millions, except per share amounts Revenue Net Income Diluted EPS +21.6% +43.1% +42.4% $291.1 $0.84 $22.0 $239.5 $0.59 $15.4 FY2019 FY2020 FY2019 FY2020 2019 2020 • Organic growth • Lower zinc costs • Improved margins • Contribution from acquisitions • Improved operational efficiencies • Strong cash generation • Price realization • Emphasis on expense control 8
Q3 FY2020 EARNINGS PRESENTATION Q3 FY2020 Consolidated Results In millions, except for EPS and percentages Q3 FY 20 Q3 FY 19 % Change Revenue $291.1 $239.5 21.6% Gross Profit $67.3 $49.8 35.3% Gross Margin 23.1% 20.8% Operating Profit $33.4 $22.8 46.8% Operating Margin 11.5% 9.5% EBITDA $46.8 $34.8 34.4% Net Income (loss) $22.0 $15.4 43.1% Diluted EPS $0.84 $0.59 42.4% Diluted Shares Outstanding 26.263 26.151 0.4% 9
Q3 FY2020 EARNINGS PRESENTATION YTD FY 2020 Consolidated Results In millions, except for EPS and percentages YTD FY 20 YTD FY 19 % Change Revenue $816.5 $724.5 12.7% Gross Profit $186.1 $155.4 19.8% Gross Margin 22.8% 21.4% Operating Profit $86.6 $63.6 36.2% Operating Margin 10.6% 8.8% EBITDA $123.4 $102.5 20.5% Net Income (loss) $58.9 $42.4 39.0% Diluted EPS $2.24 $1.62 38.3% Diluted Shares Outstanding 26.246 26.092 0.6% 10
Q3 FY2020 EARNINGS PRESENTATION YTD FY 2020 Cash Flow Highlights In millions, except for percentages YTD FY 20 YTD FY 19 Cash flows provided by operating activities $72.1 $58.1 Less: Capital Expenditures $(22.5) ($13.7) Free Cash Flow $49.6 $44.4 Net Income $58.9 $42.4 Free Cash Flow/Net Income 84.2% 104.7% Acquisition of Subsidiaries, net of cash acquired $60.6 $8.0 Dividends $13.4 $13.3 Share Repurchases $0.0 $0.0 11
Q3 FY2020 EARNINGS PRESENTATION Capital Allocation Focused on Growth In millions FY 2020 YTD Capital Deployment • New business and product lines $60.6 Capital • Systems and technology Expenditures • Strategic fit Growth • Accretive within the first year Acquisitions • North American market focus $22.5 Share • No share repurchases to date Repurchases $13.4 Dividends • YTD payout ratio 22.8% Shareholder Shareholder Return Capital Expenditures Acquisitions Share Repurchases Dividends 12
Q3 FY2020 EARNINGS PRESENTATION Strategic Direction • Continue to grow Metal Coatings organically and with a robust acquisition program, while targeting 21-23% Operating Margins • Focus on operating excellence and providing outstanding customer service • Assumes continued inorganic growth in Surface Technologies • Energy will focus on operational excellence and profitable growth in its core businesses while divesting, exiting the non-core • Specialty welding will grow through international expansion, offering the best customized welding technology, and reducing dependence on the nuclear market space • Electrical businesses will focus on improving profitability and focus more on domestic market growth 13
Q&A
Reg G Tables
Q3 FY2020 EARNINGS PRESENTATION Non-GAAP Disclosure of EBITDA • In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"), AZZ has provided 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, 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. 16
Q3 FY2020 EARNINGS PRESENTATION Non-GAAP Disclosure of Consolidated EBITDA In millions Consolidated Consolidated Consolidated Consolidated YTD FY 20 YTD FY 19 Q3 FY 20 Q3 FY 20 GAAP Net Income $58.9 $42.4 $22.0 $15.4 Adjustments to reconcile GAAP to non-GAAP Financial Measures Interest Expense $10.4 $11.5 $3.3 $3.7 Income Tax Expense $16.9 $10.5 $8.8 $3.3 Depreciation and Amortization $37.2 $38.1 $12.7 $12.4 Expense Total GAAP adjustments $64.5 $60.1 $24.8 $19.4 Non-GAAP EBITDA $123.4 $102.5 $46.8 $34.8 17
Q3 FY2020 EARNINGS PRESENTATION Non-GAAP Disclosure of Metal Coatings and Energy EBITDA In millions Metal Coating Metal Coating Energy Energy Q3 FY 20 Q3 FY 19 Q3 FY 20 Q3 FY 19 GAAP Operating Income $27.3 $18.3 $17.4 $11.5 Adjustments to reconcile GAAP to non-GAAP Financial Measures Other Income / Expense $0.1 $0.0 $0.5 $(0.3) Interest Expense $0.0 $0.0 $0.0 $0.0 Depreciation and Amortization $7.5 $7.2 $4.6 $4.7 Expense Total GAAP adjustments $7.6 $7.2 $5.1 $4.4 Non-GAAP EBITDA $34.9 $25.5 $22.5 $15.9 18