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
January 10, 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 January 10, 2022, AZZ Inc. ("AZZ") issued a press release reporting AZZ’s third quarter financial results for the period ended November 30, 2021. 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 10, 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 the third quarter of fiscal year 2022, ended November 30, 2021. |
| 99.2 | Investor Presentation, dated January 10, 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: | January 10, 2022 | By: | /s/ Philip A. Schlom |
| Philip A. Schlom <br>Chief Financial Officer |
Document
AZZ Inc. Reports Results for Third Quarter of Fiscal Year 2022; Generates EPS of $0.85
January 10, 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 announced financial results for the third quarter of fiscal year 2022, ended November 30, 2021.
Third Quarter Overview:
•Strong year-over-year financial results
◦Diluted earnings per share of $0.85, up $0.09, or 11.8%
◦Sales of $231.7 million, up 2.3% versus last year
◦Net income of $21.1 million, up $1.4 million
◦EBITDA of $39.8 million, up 0.5%
•Metal Coatings segment versus same quarter, prior year:
◦Sales of $133.4 million, up 15.4%
◦Operating income of $32.7 million, up 14.1%
◦Operating margins of 24.5%
•Infrastructure Solutions segment versus same quarter, prior year:
◦Sales of $98.4 million, down 11.4%
◦Operating income of $9.2 million, up 5.4%
◦Operating margins of 9.3%
•Repurchased $7.6 million shares during the third quarter; year-to-date we have repurchased 564,279 shares of common stock, totaling $28.9 million fiscal year to date
Management Discussion
Tom Ferguson, President and Chief Executive Officer of AZZ, commented, “We continue to deliver solid results in fiscal 2022 with strong operating performance in the third quarter, driven by sales increasing 2.3%, operating income up 8.0% and net income up 7.0%, compared to the same quarter last year. The continued success of our businesses is due to our teams executing at a high level to drive growth and profitability across all business segments.”
“Our Metal Coatings segment delivered great operating results generating sales of $133.4 million, up 15.4%, and operating margin of 24.5%, down slightly versus prior year due to increasing labor and material costs. Improved sales were driven by strong demand for hot-dip galvanizing within the renewables, utility, OEM, and construction end markets. I am pleased with the team’s ability to continue to manage the increasing costs of materials and labor, through value pricing and operational improvement initiatives, while focusing on providing outstanding customer service. Additionally, and subsequent to our quarter-end, the team acquired Steel Creek Galvanizing in South Carolina.”
Mr. Ferguson continued, “During the third quarter, our Infrastructure Solutions segment generated sales of $98.4 million, up $11.5 million sequentially but down $12.6 million or 11.4% compared to the same period last year. Several business units were affected by material delivery delays, including customer supplied components, and labor shortages. Operating margin of 9.3%, improved 140 basis points compared to operating margin of 7.9% for the same period last year. I would like to thank our employees for their hard work in delivering these third quarter results and continuing to provide exceptional service to our customers.”
(1) See "Non-GAAP Disclosures" section included in the attached Financial Tables for a reconciliation of non-GAAP Adjusted Earnings Measures for the three and nine months ended November 30, 2020.
Third Quarter Results
For the third quarter of fiscal year 2022, the Company reported sales of $231.7 million compared to $226.6 million for the comparable period last year, an increase of 2.3%. Operating income increased to $30.1 million, or by $2.2 million, compared to net income of $27.9 million during last year’s comparable third quarter period. Net income for the third quarter increased $1.4 million to $21.1 million, or $0.85 per diluted share compared to net income of $19.7 million, or $0.76 per diluted share for the third quarter in the prior fiscal year. The provision for income taxes of $6.0 million reflects an effective tax rate of 22.0% for the three months ended November 30, 2021, as compared to $6.6 million, or 25.1%, for the prior year comparable period. Bookings for the three-month period increased to $248.0 million, compared to $194.4 million for the third quarter last year. The book-to-sales ratio improved to 1.07, compared to 0.86 in last year’s comparable period. Backlog at the end of the third quarter was $217.7 million, an increase of 24.9% as compared to backlog at the end of the third quarter in the prior year. The increase in backlog versus prior year is largely attributable to growing demand for our electrical products. Sequentially, backlog was up $16.2 million, or 8.1% from the prior year third quarter ended August 31, 2021.
Metal Coatings Segment – Year to date Summary (1)
For the nine months ended November 30, 2021, Metal Coatings segment sales increased 11.1% to $390.7 million and operating income increased 38.3% to $95.9 million compared to $351.6 million and $69.4 million, respectively, for the third period in the prior fiscal year. On an adjusted basis, operating income increased 19.3% to $80.4 million compared to the prior year-to-date period.
Year-to-date operating margins through the third quarter were 24.5%, a 480 basis points improvement compared to operating margins of 19.7% generated for the third quarter of the prior fiscal year. On an adjusted basis, current year operating margins improved 160 basis points from the adjusted prior year operating margin of 22.9%.
Infrastructure Solutions Segment – Year to date Summary (1)
For the nine months ended November 30, 2021, Infrastructure Solutions segment sales decreased 1.5% to $287.3 million as compared to $291.6 million for the same period in the prior fiscal year. The decrease in net sales for the Infrastructure segment was primarily attributable to supply chain disruptions within our electrical platform and COVID-related disruptions on customer locations within our welding solutions platform. Year-to-date operating income totaled $25.8 million, an increase of $22.5 million, or 668.1% compared to operating income of $3.4 million in the prior year. On an adjusted basis, operating income for the segment increased 105.2% to $12.6 million compared to the prior year-to-date period.
Year-to-date operating margins were 9.0%, an increase of 780 basis points over the prior year. On an adjusted basis, current year operating margins improved 470 basis points from the adjusted prior year operating margin of 4.3%.
Subsequent Event
On January 3, 2022, AZZ announced it acquired all the assets of Steel Creek Galvanizing Company, LLC (“Steel Creek”) on December 31, 2021. Steel Creek is a privately held hot-dip galvanizing company based in South Carolina and will be reported within the Metal Coatings segment. Terms of the transaction were not disclosed. AZZ expects the acquisition will be accretive to earnings within the first year of operation.
Fiscal Year 2022 Guidance
Mr. Ferguson added, “Due to the consistent operating performance in our business segments, we are reaffirming our sales guidance and anticipate annual sales to be in the range of $865 million to $925 million and are narrowing
(1) See "Non-GAAP Disclosures" section included in the attached Financial Tables for a reconciliation of non-GAAP Adjusted Earnings Measures for the three and nine months ended November 30, 2020.
earnings per share to be in the range of $3.00 to $3.20 per diluted share for fiscal year 2022, which excludes the impact of any future divestitures or acquisitions”.
“As we have previously stated, for the balance of fiscal 2022, we remain highly focused on growing our Metal Coatings segment, completing and integrating the recently announced hot-dip galvanizing acquisitions, and will continue to focus our Infrastructure Solutions team on supply chain improvements and increasing its craft pool. The underlining fundamentals of our business remain strong and provides us a good foundation to aggressively pursue growth opportunities that fit our strategic plan. As part of our corporate commitment to Trust, Respect, Accountability, Integrity, Teamwork and Sustainability (“TRAITS”), we continue to carefully manage our workforce to ensure a safe and healthy operating environment, while leveraging our operational capacity to match our customers’ solid demand for our products and services.”
“We continue to actively pursue initiatives to drive growth and enhance shareholder value. Previously, we have disclosed a desire for AZZ to become a predominately metal coatings company and over the past two quarters have meaningfully advanced our work on specific strategic options designed to achieve this commitment” concluded Mr. Ferguson.
Conference Call Details
AZZ Inc. will conduct a conference call to discuss financial results for the third quarter of fiscal year 2022 today, Monday, January 10, 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), replay access code: 2330111, through January 17, 2022, or by visiting http://www.azz.com/investor-relations for the next 90 days.
There will be a slide presentation accompanying today’s event. 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 galvanizing and a variety of metal coating solutions, welding solutions, specialty electrical equipment and highly engineered services to a broad range of markets, including but not limited to the power generation, transmission, distribution, refining and industrial markets. The Company’s Metal Coatings segment is a leading provider of metal finishing solutions for corrosion protection, including hot dip galvanizing, spin galvanizing, powder coating, anodizing and plating, to the North American steel fabrication industry. The Company’s Infrastructure Solutions segment 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 and waste management 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 power generation
(1) See "Non-GAAP Disclosures" section included in the attached Financial Tables for a reconciliation of non-GAAP Adjusted Earnings Measures for the three and nine months ended November 30, 2020.
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 continue to be adversely impacted by the ongoing COVID-19 pandemic, including governmental issued mandates regarding the same. 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 or disposition opportunities; currency exchange 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 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, 2021, 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:
Joe Dorame, Managing Partner
Lytham Partners
(602) 889-9700
www.lythampartners.com
---Financial tables on the following page---
(1) See "Non-GAAP Disclosures" section included in the attached Financial Tables for a reconciliation of non-GAAP Adjusted Earnings Measures for the three and nine months ended November 30, 2020.
| AZZ Inc. | ||||||||
|---|---|---|---|---|---|---|---|---|
| Condensed Consolidated Statements of Income | ||||||||
| (dollars and shares in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended November 30, | Nine Months Ended November 30, | |||||||
| 2021 | 2020 | 2021 | 2020 | |||||
| Sales | $ | 231,737 | $ | 226,623 | $ | 678,010 | $ | 643,287 |
| Cost of sales | 174,773 | 171,948 | 508,004 | 500,311 | ||||
| Gross margin | 56,964 | 54,675 | 170,006 | 142,976 | ||||
| Selling, general and administrative | 26,872 | 25,228 | 82,674 | 79,867 | ||||
| Restructuring and impairment charges | — | 1,576 | — | 20,269 | ||||
| Operating income | 30,092 | 27,871 | 87,332 | 42,840 | ||||
| Interest expense | 1,630 | 2,272 | 5,081 | 7,376 | ||||
| Other (income) expense, net | 1,413 | (724) | 1,362 | 823 | ||||
| Income before income taxes | 27,049 | 26,323 | 80,889 | 34,641 | ||||
| Income tax expense | 5,964 | 6,620 | 18,489 | 11,187 | ||||
| Net income | $ | 21,085 | $ | 19,703 | $ | 62,400 | $ | 23,454 |
| Earnings per common share | ||||||||
| Basic | $ | 0.85 | $ | 0.76 | $ | 2.51 | $ | 0.90 |
| Diluted | $ | 0.85 | $ | 0.76 | $ | 2.48 | $ | 0.90 |
| Diluted weighted average shares outstanding | 24,945 | 26,051 | 25,132 | 26,177 | ||||
| AZZ Inc. | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Segment Reporting | ||||||||
| (dollars in thousands) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended November 30, | Nine Months Ended November 30, | |||||||
| 2021 | 2020 | 2021 | 2020 | |||||
| Sales: | ||||||||
| Metal Coatings | $ | 133,373 | $ | 115,616 | $ | 390,701 | $ | 351,643 |
| Infrastructure Solutions | 98,364 | 111,007 | 287,309 | 291,644 | ||||
| Total sales | $ | 231,737 | $ | 226,623 | $ | 678,010 | $ | 643,287 |
| Operating income: | ||||||||
| Metal Coatings | $ | 32,724 | $ | 28,671 | $ | 95,888 | $ | 69,355 |
| Infrastructure Solutions | 9,189 | 8,722 | 25,838 | 3,364 | ||||
| Corporate | (11,821) | (9,522) | (34,394) | (29,879) | ||||
| Total operating income | $ | 30,092 | $ | 27,871 | $ | 87,332 | $ | 42,840 |
| AZZ Inc. | ||||||||
| --- | --- | --- | --- | |||||
| Condensed Consolidated Balance Sheets | ||||||||
| (dollars in thousands) | ||||||||
| (unaudited) | ||||||||
| February 28, 2021 | ||||||||
| Assets: | ||||||||
| Current Assets(1) | 349,535 | $ | 303,492 | |||||
| Property, Plant and Equipment, Net | 205,909 | |||||||
| Other assets, net | 487,041 | |||||||
| Total assets | 1,037,576 | $ | 996,442 | |||||
| Liabilities and Shareholders’ Equity: | ||||||||
| Current liabilities | 118,657 | $ | 113,850 | |||||
| Long-term debt due after one year, net | 178,419 | |||||||
| Other liabilities | 80,881 | |||||||
| Shareholders' equity | 623,292 | |||||||
| Total liabilities and shareholders' equity | 1,037,576 | $ | 996,442 | |||||
| (1) Includes assets held for sale of 4,409 and 3,684 as of November 30, 2021 and February 28, 2021, respectively. |
All values are in US Dollars.
| AZZ Inc. | ||||
|---|---|---|---|---|
| Condensed Consolidated Statements of Cash Flows | ||||
| (dollars in thousands) | ||||
| (unaudited) | ||||
| Nine Months Ended November 30, | ||||
| 2021 | 2020 | |||
| Net Cash Provided by Operating Activities | $ | 49,668 | $ | 59,394 |
| Net Cash Used in Investing Activities | (16,425) | (14,987) | ||
| Net Cash Used in Financing Activities | (29,167) | (64,229) | ||
| Effect of Exchange Rates on Cash | 1,442 | 2,330 | ||
| Net Increase (Decrease) in Cash and Cash Equivalents | 5,518 | (17,492) | ||
| Cash and Cash Equivalents at Beginning of Period | 14,837 | 36,687 | ||
| Cash and Cash Equivalents at End of Period | $ | 20,355 | $ | 19,195 |
AZZ Inc.
Non-GAAP Disclosure
Adjusted Operating Income, Adjusted Earnings and Adjusted Earnings Per Share
(dollars in thousands, except per share data)
(unaudited)
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.
In the second quarter of fiscal 2021, the Company developed and began the implementation of a plan to divest certain non-core businesses and later, divested several non-core businesses. During the six months ended August 31, 2021, the Company did not recognize any restructuring and impairment charges. The following tables provides a reconciliation for the three and nine months ended November 30, 2021 and 2020 between the various measures calculated in accordance with GAAP to the Adjusted Earnings Measures (dollars in thousands, except per share data):
| Three Months Ended November 30, | Nine Months Ended November 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Metal Coatings Segment | ||||||||||||
| Sales | $ | 133,373 | $ | 115,616 | $ | 390,701 | $ | 351,643 | ||||
| Segment operating income: | ||||||||||||
| Metal Coatings | $ | 32,724 | $ | 28,671 | $ | 95,888 | $ | 69,355 | ||||
| Impact of restructuring and impairment | — | (281) | — | 11,043 | ||||||||
| Metal Coatings, as adjusted | $ | 32,724 | $ | 28,390 | $ | 95,888 | $ | 80,398 | ||||
| Operating income as a % of sales | 24.5 | % | 24.6 | % | 24.5 | % | 22.9 | % | ||||
| Infrastructure Solutions Segment | ||||||||||||
| Sales | $ | 98,364 | $ | 111,007 | $ | 287,309 | $ | 291,644 | ||||
| Segment operating income: | ||||||||||||
| Infrastructure Solutions | 9,189 | 8,722 | 25,838 | 3,364 | ||||||||
| Impact of restructuring and impairment | — | 1,857 | — | 9,226 | ||||||||
| Infrastructure Solutions, as adjusted | $ | 9,189 | $ | 10,579 | $ | 25,838 | $ | 12,590 | ||||
| Operating income as a % of sales | 9.3 | % | 9.5 | % | 9.0 | % | 4.3 | % | ||||
| Three Months Ended | Nine Months Ended | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| November 30, 2020 | November 30, 2020 | |||||||||||
| Amount | Per<br> Diluted Share | Amount | Per<br> Diluted Share | |||||||||
| Net income and diluted earnings per share | $ | 19,703 | $ | 0.76 | $ | 23,454 | $ | 0.90 | ||||
| Adjustments (net of tax): | ||||||||||||
| Restructuring and impairment charges: | ||||||||||||
| Metal Coatings | (281) | (0.01) | 11,043 | 0.42 | ||||||||
| Infrastructure Solutions | 1,857 | 0.07 | 9,226 | 0.35 | ||||||||
| Subtotal | 1,576 | 0.06 | 20,269 | 0.77 | ||||||||
| Tax benefit related to restructuring and impairment charges | (347) | (0.01) | (4,459) | (0.17) | ||||||||
| Total adjustments | 1,229 | 0.05 | 15,810 | 0.61 | ||||||||
| Adjusted earnings and adjusted earnings per share | $ | 20,932 | $ | 0.80 | $ | 39,264 | $ | 1.50 | ||||
| (1) Earnings per share amounts included in the table above may not sum due to rounding differences. |
q3fy2022_earningsdeckxfi
AZZ Inc. Q3 FY2022 Earnings Release Presentation January 10, 2022
Q3 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 continue to be adversely impacted by the ongoing COVID-19 pandemic, including governmental issued mandates regarding the same. 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; 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, 2021 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.
Q3 FY2022 EARNINGS PRESENTATION Q3 FY2022 Segment Performance Update Total Q3 FY2022 Sales: $231.7 million Segment Updates Metal Coatings Segment $133 Infrastructure Solutions Segment $98 • Metal Coatings sales up $17.8M on strong demand for galvanizing from renewables, utility, OEM, and construction end-markets • Completed one galvanizing acquisition in December • Overall segment sales down due to: Continued COVID disruptions in some international markets Supply chain disruptions affecting some electrical shipments • Infrastructure solutions backlog up $16.3M on increasing demand for electrical products • Domestic backlog growth more than offsets reduction in China backlog 3 15.4% vs. Q3 FY2021 (11.4)% vs. Q3 FY2021 All references are to 3rd quarter on year over year basis
Q3 FY2022 EARNINGS PRESENTATION Sales Net Income Diluted EPS Q3 FY2022 Summary - Consolidated $226.6 $231.7 FY2021 FY2022 +2.3% • Higher Metal Coatings segment sales • Continued price realization • Metal Coatings continued strength • Lower SG&A and improved operating income within Infrastructure Solutions • Stronger operating income • Lower interest expense from lower rates • Improved tax rate +7.0% In $ millions, except per share amounts 4 $19.7 $20.9 $21.1 FY2021(r) FY2021(a) FY2022 $0.76 $0.80 $0.85 FY2021 (r) FY2021(a) FY2022 Legend: (r) – Reported (a) – Adjusted +11.8%
Q3 FY2022 EARNINGS PRESENTATION Q3 FY2022 Segment Results – Metal Coatings • Segment sales up 15.4% from prior year on higher volumes of steel galvanized and price inflation • End markets continuing to demonstrate strength include renewables, construction, utility, and OEM • Overall segment operating margins relatively flat, primarily due to higher operating costs (zinc, wire, acid, energy labor) offset by operating efficiencies, productivity and value pricing In $ millions except percentages Sales $115.6 $133.4 FY2021 FY2022 +15.4% Operating Income +14.1%Key Statistics FY2021 QTR Sales Organic Acquisitions FY2022 QTR Sales $115.6 $133.4 $2.4 $15.4 Segment Summary: 5 $28.7 $28.4 $32.7 1 FY2021( r ) FY2021(a) FY2022 Operating Margin 24.8% 24.6% 24.5% FY2021(r) FY2021 FY2022 -30 bps Legend: (r) – Reported (a) – Adjusted
Q3 FY2022 EARNINGS PRESENTATION Q3 FY2022 Segment Results – Infrastructure Solutions • Backlog improving on stronger U.S. domestic bookings as Switchgear and Enclosure bookings more than offsets China backlog reductions • Sales decline of $12.6 million primarily related to lower Industrial Platform sales as fewer large projects and some business deferred into 4th quarter • Operating income margin improving on lower sales as a result of actions taken in prior year to reduce overhead and divest lower margin operations In $ millions except percentages Key Statistics FY2021 Book to Ship .86 to 1 Segment Summary: FY2022 Book to Ship 1.07 to 1 FY 2021 Sales $111.0 FY2022 Sales $98.4 6 Sales $111.0 $98.4 FY2021 FY2022 -11.4% Operating Income +5.4% Operating Margin +140 bps $8.7 $10.6 $9.2 FY2021(r) FY2021(a) FY2022 7.9% 9.5% 9.3% FY2021(r) FY2021(a) FY2022 Legend: (r) – Reported (a) – Adjusted
Q3 FY2022 EARNINGS PRESENTATION FY2022 – Updated Full Year Financial Guidance Key Drivers: Metal Coatings: • Volume/mix and severity of winter weather conditions • Ability to realize price as production costs increase • Successfully integrate acquisitions to achieve expected benefits Infrastructure Solutions: • Ability to convert backlog into shipments • Domestic opportunities for electrical equipment remain robust • Continuing to manage labor and supply chain constraints Corporate: • Tax rate changes, and our ability to recognize planned tax savings in FY2022 • Continued low interest rate environment 7 Sales Earnings Per Share In millions, except for EPS Range $865 - $925 $3.00 - $3.20
Q3 FY2022 EARNINGS PRESENTATION Q3 FY2022 Consolidated Results In $ millions, except for EPS and percentages Q3 FY 2022 Q3 FY 2021 Reported (r) Q3 FY 2021 Adjusted (a) % Change, vs. Prior Year (a) Sales $231.7 $226.6 $226.6 2.3% Gross Profit $57.0 $54.7 $54.7 4.2% Gross Margin 24.6% 24.1% 24.1% 50 bps Operating Profit $30.1 $27.9 $29.8 2.2% Operating Margin 13.0% 12.3% 13.0% 70 bps EBITDA $39.8 $39.6 $41.2 (3.4%) Net Income $21.1 $19.7 $20.9 0.7% Diluted EPS $0.85 $0.76 $0.80 6.3% Diluted Shares Outstanding 24,945 26,051 26,051 (4.2%) 8 Legend: (r) – Reported (a) – Adjusted
Q3 FY2022 EARNINGS PRESENTATION FY 2022 Year-to-date Cash Flow Highlights In $ millions, except for percentages YTD FY 2022 YTD FY 2021 Cash flows used in operating activities $49.7 $59.4 Less: Capital Expenditures $(19.1) $(27.9) Free Cash Flow $30.6 $31.5 Net Income $62.4 $23.5 Free Cash Flow / Net Income 49.0% 134.0% Acquisition of Subsidiaries, net of cash acquired $0.0 $0.0 Dividends $12.7 $13.3 Share Repurchases $28.9 $31.0 9
Q3 FY2022 EARNINGS PRESENTATION Capital Allocation Focused on Growth $6.0 $0.0 $7.6 $4.2 Capital Expenditures Acquisitions Share Repurchases Dividends Capital Expenditures Acquisitions Share Repurchases Dividends Q3 2022 Capital Deployment In $ millions • Safety, Health and Environmental • Facility maintenance • Product/technology growth initiatives • $6.0M in quarter; $19.1M YTD • Full year estimate $32.0M • No acquisitions in the quarter • Subsequent events – Galvanizing Acquisitions in South Carolina and Canada • Repurchased $7.6 million in outstanding common stock in the quarter and $28.9 million year to date • Continue to consistently pay dividends Gr ow th Sh ar eh ol de r R et ur n 10
Q3 FY2022 EARNINGS PRESENTATION 11 Metal Coatings Segment Fabrication activity remains solid for Q4 of fiscal year 2022; Potential for seasonal delays due to inclement weather Zinc cost in our kettles continues to increase Infrastructure Solutions Segment Industrial platform • Craft deployed to projects - opportunity of increased scope of work • Management optimistic regarding Spring turnaround season Electrical platform • Continued focus on sales excellence as well as continued operational improvements • Demand continues to improve Corporate Continue to effectively deploy capital Key Indicators
Q3 FY2022 EARNINGS PRESENTATION • The previously announced board-led strategic review of our portfolio and capital allocation is complete • We continue to actively pursue initiatives to drive growth and enhance shareholder value. Previously, we have disclosed a desire for AZZ to become a predominately metal coatings company and over the past two quarters have meaningfully advanced our work on specific strategic options that will achieve this commitment. • Infrastructure Solutions is focused on operational performance to its FY2022 Plan • Specialty Welding will grow through leveraging the international footprint and improved North American turnarounds, offering the best customized welding solutions • Electrical businesses will continue to focus on improving profitability through business process alignment, and on steady market growth • Long term strategy continues to focus on growing Metal Coatings organically and through a robust acquisition program, while targeting sustainable 21-23% Operating Margins • Focus on operating excellence and providing outstanding customer service • Assumes continued inorganic growth in our Metal Coatings businesses Strategic Direction 12
Q&A
Appendix and Additional Information
Q3 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, 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. Non-GAAP Disclosure of EBITDA 15
Q3 FY2022 EARNINGS PRESENTATION Non-GAAP Disclosure of Consolidated EBITDA 16 Legend: (r) – Reported (a) – Adjusted Current Year vs. Prior Year As Reported Fiscal 2021 (prior year) As Reported to As Adjusted In millions Consolidated Q3 FY 2022 Consolidated Q3 FY 2021 GAAP Net Income $21.1 $19.7 Adjustments to reconcile GAAP to non- GAAP Financial Measures Interest Expense $1.6 $2.3 Income Tax Expense $6.0 $6.6 Depreciation and Amortization Expense $11.1 $11.0 Total Adjustments $18.7 $19.9 Non-GAAP EBITDA $39.8 $39.6 $(millions) except share information As Reported Adjustment F/N As Adjusted Sales $ 226.6 $ 226.6 Gross Profit 54.7 54.7 Gross Margin 24.1% 24.1% SG&A 25.2 25.2 Restructuring Charges & Loss on Sale 1.6 1.6 (1) - Operating Profit 27.9 1.6 29.5 Operating Margin 12.3% 13.0% Other (income) / expense, net (0.7) (0.7) Interest 2.3 2.3 Tax 6.6 (0.3) (2) 6.9 Net Income 19.7 20.9 Diluted shares outstanding 26,051 26,051 Diluted EPS $ 0.76 $ 0.80 Depreciation and Amortization 11.0 11.0 EBITDA 39.6 41.2 Footnotes: (1) - Includes ($0.3)M of restructuring charges in the Metal Coatings Segment and $1.9M loss on sale in the Infrastructure Solutions Segment. (2) - $0.3M tax adjustment is the tax benefit of the $1.6M in disposals and impairments.