Azz Inc 8-K, filed Jul 9, 2020
Azz Inc (AZZ)
8-K
2020-07-09
For: 2020-07-09
View Original
Added on
April 04, 2026
About this 8-K
Azz Inc filed this 8-K on July 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 July 9, 2020, AZZ Inc. ("AZZ") issued a press release reporting AZZ’s first quarter financial results for the period ended May 31, 2020. 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 July 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.
| Exhibit | Description | ||||
| 99.1 | |||||
| 99.2 | |||||
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: July 9, 2020 | By: /s/ Philip A. Schlom | ||||
| Philip A. Schlom Chief Accounting Officer and Interim Chief Financial Officer | |||||
AZZ Inc. Reports Financial Results for the First Quarter of Fiscal Year 2021; Generates EPS of $0.21 in the Midst of COVID-19 Disruptions
July 9, 2020 - 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 first quarter of fiscal year 2021, ended May 31, 2020.
First Quarter Overview:
•Effectively managed liquidity; $342 million of additional available credit
•Cash and cash equivalents at the end of the period were $26.4 million versus $13.6 million
•Revenue of $213.3 million, down 26.2% versus last year’s period.
•Metal Coatings Segment versus same quarter, prior year:
•Revenue of $119.0 million, down 2.6%
•Operating Income of $25.1 million, down 14.7%
•Margins were 21.1%, versus 24.1%
•Energy Segment versus same quarter, prior year:
•Revenue of $94.3 million, down 43.5%
•Operating Income of $(1.0) million versus $12.6 million
•Margins were (1.1%) versus 7.5%
•Net Income of $5.5 million or $0.21 per share versus $21.3, or $0.81 per share.
•Declared quarterly cash dividend in the amount of $0.17 per common share.
Management Discussion
Tom Ferguson, President and Chief Executive Officer of AZZ, commented, “The worldwide COVID-19 pandemic disrupted our first quarter operations, but our Metal Coatings Segment still delivered solid results. Revenue for the quarter declined 26.2% compared to last year’s comparable quarter. In light of the global business shutdown brought on by the virus, our Energy Segment was particularly impacted with a 43% revenue decrease to $94.3 million, versus last year’s first quarter. Our Industrial Solutions Platform experienced postponement of most of its scheduled work for the first quarter as refiners deferred turnarounds amid the global pandemic. Although it is still early, we are optimistic for an improved second half of the year as we are seeing more quoting activity for turnarounds.”
“Our Metal Coatings Segment delivered solid operating results in this difficult environment with sales of $119 million, down slightly at 2.6%, and operating margin of 21.1% versus 24.1% in last year’s first quarter. Designated an essential business, we were able to keep all our galvanizing plants open and operating during this pandemic. While the galvanizing business experienced rather minimal disruption as infrastructure projects proceeded, our Surface Technologies plants were negatively impacted by several customers slowing or stopping operations for a large portion of the quarter. It is important to note, our DGS (digital galvanizing systems), which is deployed at all our galvanizing plants, continues to play an important part in the safety of our employees and customers by reducing the need for direct onsite contact, yet allowing for a seamless workflow.”
“Given the extraordinary circumstances, the safety and well-being of our employees and supporting our customers remain top priorities. I have the utmost confidence in our team to navigate through this crisis
and to emerge as a stronger company thanks to their commitment. I want to thank all our employees for their hard work and dedication in continuing to deliver outstanding service to our customers through this unprecedented time. Our focus for the balance of this year is structuring our operations and footprint to be safe, efficient and effective. This effort will include increased emphasis on divesting non-core businesses, and investing more heavily in ensuring our core businesses have the technology and resources to excel in the post-COVID era.”
First Quarter Results
For the first quarter of fiscal year 2021, the Company reported revenues of $213.3 million compared to $289.1 million for the comparable period last year, a decrease of 26.2%. Reported operating income decreased to $14.3 million, or 53.8% compared to $31.0 million in last year’s comparable three month period. Net income for the three months decreased to $5.5 million, or $0.21 per diluted share on a reported basis, compared to $21.3 million, or $0.81 per diluted share compared to the same quarter in the prior fiscal year. The provision for income taxes of $4.7 million reflects an effective tax rate of 45.8% for the three months ended May 31, 2020 as compared to $5.7 million, or 21.1% for the prior year comparable period. The increase is attributable to uncertain tax positions related to research and development tax credits and losses in foreign jurisdictions for which the Company does not anticipate being able to recognize the benefit. Bookings for the three-month period declined to $174.9 million, compared to $256.3 million for the same quarter last year. Backlog at the end of the quarter was $205.4 million, a decrease of 31.6% as compared to backlog at the end of the same quarter in the prior year. Approximately 20% of the current backlog is expected to be delivered outside the U.S., compared to 44% in the first quarter of fiscal 2020.
Metal Coatings Segment
For the first quarter of fiscal year 2021, Metal Coatings Segment revenues decreased 2.6% to $119.0 million and operating income decreased 14.7% to $25.1 million compared to $122.2 million and $29.4 million respectively, for the same period in the prior fiscal year. The lower revenue for the quarter was attributable to lower volumes of steel processed in our kettles. Operating margins for the quarter were 21.1% compared to 24.1% in the first quarter of fiscal year 2020. Operating margins were most significantly impacted by plant closures in our Surface Technologies division as a result of reduced customer demand due to the COVID pandemic, and inefficiencies driven by our safety and security measures taken to protect our employees.
Energy Segment
For the first quarter of fiscal year 2021, Energy Segment revenues decreased 43.5% to $94.3 million as compared to $167.0 million in the same quarter of the prior year. Our operating loss for the first quarter of fiscal year 2021 of $(1.0) million compared to our operating income $12.6 million in the prior year’s quarter. The decrease in net sales and operating income for the three-month period was primarily attributable to several COVID-related factors, including significant reductions in turnaround activity in both the U.S. and international markets, project delays in the large high voltage bus project in China, and a marked slow-down of planned orders for our electrical products as customers temporarily shuttered facilities.
Fiscal Year 2021 Guidance
Mr. Ferguson added, “Due to the continued uncertainty associated with the COVID-19 pandemic on many of our end markets, we cannot provide an update to our previously suspended fiscal 2021 sales and earnings guidance range at this time. As previously stated, we continue to operate as an ‘essential business’ in supporting critical infrastructure needs during these unprecedented times. Our low debt level and ample borrowing capacity, combined with our consistent ability to generate cash, provides confidence that we will be able to successfully manage both debt and liquidity satisfactorily throughout fiscal year 2021. We continue to be prudent with our cash by focusing capital expenditures on core growth initiatives and safety-related spending, paying a dividend, reducing debt, and repurchasing shares to minimize dilution due to employee stock compensation plans. We are also carefully managing our workforce to ensure a safe and healthy operating environment, while flexing our capacity to better match our demand. Additionally, we did not experience any unusual slowdown in customer payments as we navigated our first quarter in the midst of the pandemic. We will continue to drive operational efficiencies aggressively, and maintain active M&A activities in support of our strategic growth initiatives. However, some M&A efforts have been impacted by our inability to meet with prospective parties due to the COVID-19 pandemic.
We hope to be able to re-establish our financial guidance as we get to the back half of this fiscal year. In the interim we will work to provide as much context to our outlook as possible. The risks we are focused on managing are: fully integrating the Galvanizing and Surface Technologies platforms to drive market share growth and operating efficiencies; building backlog in our core Electrical Businesses; ensuring our ability to deploy resources effectively during, what appears to be, a strengthening fall turnaround season; and managing our cash well to ensure we enter FY2022 in a great position.”
Conference Call Details
AZZ Inc. will conduct a conference call to discuss financial results for the first quarter of fiscal year 2021 today, Thursday July 9, 2020, 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 for three days at (877) 344-7529 or (412) 317-0088 (international), confirmation # 10145425, or for 30 days at http://www.azz.com/investor-relations.
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 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 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. 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 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 29, 2020 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, Vice President of Marketing and Communications
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
(in thousands, except per share data)
(unaudited)
| Three Months Ended May 31, | |||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||
| Net sales | $ | 213,293 | $ | 289,123 | |||||||||||||||||||||||||
| Costs of sales | 171,085 | 223,016 | |||||||||||||||||||||||||||
| Gross margin | 42,208 | 66,107 | |||||||||||||||||||||||||||
| Selling, general and administrative | 27,890 | 35,133 | |||||||||||||||||||||||||||
| Operating income | 14,318 | 30,974 | |||||||||||||||||||||||||||
| Interest expense | 2,634 | 3,584 | |||||||||||||||||||||||||||
| Other expense, net | 1,456 | 424 | |||||||||||||||||||||||||||
| Income before income taxes | 10,228 | 26,966 | |||||||||||||||||||||||||||
| Income tax expense | 4,687 | 5,682 | |||||||||||||||||||||||||||
| Net income | $ | 5,541 | $ | 21,284 | |||||||||||||||||||||||||
| Earnings per common share | |||||||||||||||||||||||||||||
| Basic | $ | 0.21 | $ | 0.81 | |||||||||||||||||||||||||
| Diluted | $ | 0.21 | $ | 0.81 | |||||||||||||||||||||||||
| Diluted average shares outstanding | 26,192 | 26,193 | |||||||||||||||||||||||||||
AZZ Inc.
Segment Reporting
(in thousands)
(unaudited)
| Three Months Ended May 31, | |||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||||||||
| Metal Coatings | $ | 118,991 | $ | 122,154 | |||||||||||||||||||||||||
| Energy | 94,302 | 166,969 | |||||||||||||||||||||||||||
| $ | 213,293 | $ | 289,123 | ||||||||||||||||||||||||||
| Segment operating income (loss): | |||||||||||||||||||||||||||||
| Metal Coatings | $ | 25,085 | $ | 29,392 | |||||||||||||||||||||||||
| Energy | (1,048) | 12,571 | |||||||||||||||||||||||||||
| Corporate | (9,719) | (10,989) | |||||||||||||||||||||||||||
| $ | 14,318 | $ | 30,974 | ||||||||||||||||||||||||||
AZZ Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
| May 31, 2020 | February 29, 2020 | ||||||||||
| Assets: | |||||||||||
| Current assets | $ | 335,029 | $ | 354,562 | |||||||
| Net property, plant and equipment | 214,965 | 213,104 | |||||||||
| Other assets, net | 500,779 | 506,165 | |||||||||
| Total assets | $ | 1,050,773 | $ | 1,073,831 | |||||||
| Liabilities and shareholders’ equity: | |||||||||||
| Current liabilities | $ | 239,617 | $ | 280,613 | |||||||
| Long term debt due after one year, net | 93,911 | 77,878 | |||||||||
| Other liabilities | 81,589 | 80,974 | |||||||||
| Shareholders’ equity | 635,656 | 634,366 | |||||||||
| Total liabilities and shareholders’ equity | $ | 1,050,773 | $ | 1,073,831 | |||||||
AZZ Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Three Months Ended May 31, | |||||||||||||||||
| 2020 | 2019 | ||||||||||||||||
| Net cash used in operating activities | $ | (11,184) | $ | (17,896) | |||||||||||||
| Net cash used in investing activities | (10,847) | (43,469) | |||||||||||||||
| Net cash provided by financing activities | 11,036 | 50,869 | |||||||||||||||
| Effect of exchange rate changes on cash | 722 | 77 | |||||||||||||||
| Net decrease in cash and cash equivalents | $ | (10,273) | $ | (10,419) | |||||||||||||
| Cash and cash equivalents at beginning of period | 36,687 | 24,005 | |||||||||||||||
| Cash and cash equivalents at end of period | $ | 26,414 | $ | 13,586 | |||||||||||||
--END--
AZZ Inc. Q1 FY2021 Earnings Release Presentation July 9, 2020
Q1 FY2021 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. 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 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 29, 2020 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. 2
Q1 FY2021 EARNINGS PRESENTATION COVID-19 Update Impact on Financial Suspended previously issued FY2021 guidance Results Energy platform has been negatively affected by turnaround deferrals and lower project bookings due to customer slow-downs Cash balance of $26.4 million as of Q1 FY 2021 Balance Sheet / Debt balance of $219.0 million at end of Q1 FY2021, EBITDA of $24.5 million at end of Q1 FY2021 Liquidity Available debt capacity of $342.3 million on revolving credit facility at end of Q1 FY2021 North America – All plants remain open and operating Continued travel limitations – Country borders just now re-opening Operational Impacts Monitoring and adhering to WHO, CDC, and state agency guidelines for cleaning and disinfecting, social distancing, health and safety, PPE Temporarily suspended revolving debt payments during Q1 FY2021 to accumulate cash on Balance Sheet Mitigation Adjusted personnel to align to volume reductions utilizing state work-share programs, furloughs and where necessary reductions Efforts in force Accessed Cares Act provision for deferrals of employer portion of FICA taxes to 2022 and 2023 Paid quarterly dividends in Q4 FY2020, and Q1 FY2021 Capital Allocation No share repurchases during Q1 FY2021 Decisions Continuing to support capital expenditures for safety and growth initiative projects Situational AZZ’s Leadership team continues to be direct contact with the White House, CDC, and other state and governmental agencies. Awareness 3
Q1 FY2021 EARNINGS PRESENTATION Q1 FY2021 Segment Revenue and Market Drivers Total Q1 FY2021 Revenue: $213.3 million Metal Coatings Energy Segment Segment $119.0 $94.3 -2.6% vs. Q1 FY2020 -43.5% vs. Q1 FY2020 Market Drivers • Galvanizing plants performed exceptionally well • Spring turnarounds deferred due to COVID-19 • Pandemic-related inefficiencies affected operations • Delayed utility and construction project launches • Surface Technologies experienced reduced • Refinery utilization remains low demand due to customers reducing production 4
Q1 FY2021 EARNINGS PRESENTATION Q1 FY2021 Summary - Consolidated In $millions, except per share amounts Revenue Net Income Diluted EPS -26.2% -74.0% -73.9% $289.1 $0.81 $213.3 $21.3 $0.21 $5.5 FY2020 FY2021 FY 2020 FY2021 FY 2020 FY2021 • Lack of spring refining turnarounds • Industrial operating leverage • Improved use of cash • Slowing electrical product demand • Low demand for Surface Technologies • Working Capital consistency • Lower Surface Technologies activity • Reduced corporate expenditures • Continued payment of dividends 5
Q1 FY2021 EARNINGS PRESENTATION Q1 FY2021 Segment Results – Metal Coatings In millions $ except percentages Revenue Operating Income Operating Margin Key Statistics -2.6% -14.7% -300 bps $122.2 $122.2 FY2020 Revenue $119.0 $29.4 24.1% $25.1 21.1% Organic $(7.6) Acquisitions $4.4 FY2021 Revenue $119.0 FY2020 FY2021 FY2020 FY2021 FY2020 FY2021 Segment Summary: • Galvanizing business remained open for business as “essential infrastructure” • Revenue decline driven by COVID-19 impact – Surface Technologies customers temporarily shuttered operations • Lower zinc costs in Galvanizing were offset by lower productivity levels at Surface Technologies • Operating Margins of 21.1%, compared to 24.1% for same quarter in the prior year result of inefficiencies due to COVID-19 6
Q1 FY2021 EARNINGS PRESENTATION Q1 FY2021 Segment Results – Energy In millions $ except percentages Revenue Operating Income Operating Margin Key Statistics -43.5% -108.3% -860 bps $167.0 FY 2020 Revenue $167.0 $12.6 7.5% FY2020 Book to Ship .82 to 1 $94.3 FY2021 Revenue $94.3 FY2021 Book to Ship .89 to 1 -$1.0 -1.1% FY2020 FY2021 FY2020 FY2021 FY2020 FY2021 Segment Summary: • Industrial Platform impacted by loss of spring turnarounds • Unable to reduce costs in line with significantly lower demand in Industrial • Electrical orders down due to lower demand for our products as customers delayed placing orders • China backlog shipped at a slower pace due to COVID-19 restrictions 7
Q1 FY2021 EARNINGS PRESENTATION Full Year Financial Guidance FY2021 Range Key Drivers: In millions , except for EPS Metal Coatings: COVID-19 impact on future quarters Revenue $970-$1,060 Lower zinc costs & Digital Galvanizing System Suspended FY21 Guidance Energy: $2.65-$3.15 Fall refining turnaround uncertainty Earnings Per Share Order uncertainty for Electrical equipment Refinery utilization remains low 8
Q1 FY2021 EARNINGS PRESENTATION Q1 FY2021 Consolidated Results In millions, except for EPS and percentages Q1 FY 2021 Q1 FY 2020 % Change vs. Prior Year Revenue $213.3 $289.1 -26.2% Gross Profit $42.2 $66.1 -36.2% Gross Margin 19.8% 22.9% -310 bps Operating Profit $14.3 $31.0 -53.8% Operating Margin 6.7% 10.7 -400 bps EBITDA $24.5 $42.9 -42.8% Net Income $5.5 $21.3 -74.0% Diluted EPS $0.21 $0.81 -73.9% Diluted Shares Outstanding 26,195 26,152 0.2% 9
Q1 FY2021 EARNINGS PRESENTATION Q1FY 2021 Cash Flow Highlights In millions, except for percentages Q1 FY 2021 Q1 FY 2020 Cash flows used in operating activities $(11.2) $(17.9) Less: Capital Expenditures $(10.8) $ (4.7) Free Cash Flow $(22.0) $(22.6) Net Income $5.5 $21.3 Free Cash Flow/Net Income (400)% (106.1)% Acquisition of Subsidiaries, net of cash acquired $0.0 $39.0 Dividends $4.4 $4.4 Share Repurchases $0.0 $0.0 10
Q1 FY2021 EARNINGS PRESENTATION Capital Allocation Focused on Growth In millions Q1 2021 Capital Deployment • Safety, Health and Environmental Capital • Facility expansion Expenditures • Product growth initiatives $10.8 • No acquisitions in Q1 FY2021 Growth • Pandemic-related deal travel Acquisitions restricted, but improving • Active portfolio of opportunities • Temporarily suspended share Share repurchase program $4.4 Repurchases • Will restart share repurchases to minimize dilution • Approved second quarter FY2021 Dividends dividend $0.0 $0.0 Shareholder Return Shareholder Capital Expenditures Acquisitions Share Repurchases Dividends 11
Key Indicators 12
Q1 FY2021 EARNINGS PRESENTATION Key Indicators Metal Coatings Segment • Fabrication activity remains solid for Q2, but seeing some steel shortages • Zinc cost level remains low and cost of zinc in our kettles continues to drop • Surface Technology customers are anticipated to return to more normal production levels by the end of Q2 FY2021 Energy Segment • Industrial platform • Fall turnaround season is shaping up internationally • Seeing the normal, seasonally slow, summer • Electrical platform • Bookings expected to increase in second quarter and beyond • China shipments expected to continue Corporate • Continue to tightly monitor cash flow and customer credit 13
Q1 FY2021 EARNINGS PRESENTATION Strategic Direction • Long term strategy to continue to grow Metal Coatings organically and with 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 Galvanizing and Surface Technologies • Energy will continue to focus on operational excellence and profitable growth in its core businesses while divesting or exiting non-core operations • Specialty Welding will grow through continued international expansion, offering the best customized welding technology, and continuing to reduce dependence on nuclear markets • Electrical businesses will continue to focus on improving profitability through process alignment, and focus on domestic market growth 14
Q&A
Reg G Tables
Q1 FY2021 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. 17
Q1 FY2021 EARNINGS PRESENTATION Non-GAAP Disclosure of Consolidated EBITDA In millions Consolidated Consolidated Q1 FY 21 Q1 FY 20 GAAP Net Income $5.5 $21.3 Adjustments to reconcile GAAP to non- GAAP Financial Measures Interest Expense $2.6 $3.6 Income Tax Expense $4.7 $5.7 Depreciation and Amortization Expense $11.7 $12.3 Total GAAP adjustments $19.0 $21.6 Non-GAAP EBITDA $24.5 $42.9 18
Q1 FY2021 EARNINGS PRESENTATION Non-GAAP Disclosure of Metal Coatings and Energy EBITDA In millions Metal Coating Metal Coating Energy Energy Q1 FY 21 Q1 FY 20 Q1 FY 21 Q1 FY 20 GAAP Operating Income $25.1 $29.4 $(1.0) $12.6 Adjustments to reconcile GAAP to non- GAAP Financial Measures Other Income / Expense $(0.1) $0.0 $(1.3) $(0.4) Interest Expense $0.0 $0.0 $0.0 $0.0 Depreciation and Amortization Expense $7.8 $7.3 $3.3 $4.6 Total GAAP adjustments $7.7 $7.3 $2.0 $4.2 Non-GAAP EBITDA $32.8 $36.7 $1.0 $16.8 19