FORT WORTH, Texas, Jan. 8, 2019 /PRNewswire/ -- 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,
2018.
Management Discussion
Tom Ferguson, president and chief
executive officer of AZZ Inc., commented, "We are pleased to have
achieved significant year-over-year growth for both top- and
bottom-lines in the third quarter of fiscal year 2019. Driven by
strength in our Energy segment, third quarter consolidated revenue
increased 15.1% to $239.5 million and
net income increased to $15.4 million
this year compared to a loss of $0.2
million in the third quarter last year. Market demand
has improved, particularly in our industrial sector as turnarounds
and outages returned to more normal levels. Overall, our
consolidated bookings were up 17.5% for the quarter, growing to
$211.3 million compared to
$179.8 million in the third quarter
last year. As part of our ongoing efforts, we continue to
build on the positive momentum in the Energy segment, with a solid
backlog and international opportunities, setting the stage for
solid performance heading into the end of our fiscal
year."
"Metal Coatings segment revenue increased 6.3% from the third
quarter of last year. Operating margins were 17.0%, compared
to 21.4% in the third quarter of fiscal 2018, driven by near-peak
zinc costs flowing through our kettles, higher labor costs
year-over-year, and our Alternate Coatings and Continuous
Galvanized Rebar businesses performing below expectations.
Our push on price increases was unable to offset these cost
issues," Mr. Ferguson stated. "As we noted last quarter, we
believe zinc costs should begin to recede by the fourth quarter of
the year, and we have taken the necessary steps to close two
underperforming galvanizing plants during the year. Although
zinc costs, sequentially, were down slightly from the second
quarter, we expect a steeper reduction in the fourth quarter.
Further, we are taking steps to improve labor productivity and are
confident our Digital Galvanizing System initiative will allow us
to realize greater operational efficiency and productivity as we
enter Fiscal Year 2020. AZZ remains the industry leader in
North America with 40 galvanizing
plants, and continues to pursue growth through organic and
inorganic channels."
Mr. Ferguson continued, "Our Energy segment's Welding Solutions
group had a strong third quarter, executing on several domestic and
overseas projects. Our industrial and electrical served
markets improved somewhat compared to prior year, and we are
especially pleased with the demand for specialty welding both
domestically and internationally. We also benefitted from a
favorable comparison to the prior year third quarter that included
$8.3 million of impairment charges
from the retirement of certain equipment used in the nuclear
services market, and $2.9 million
resulting from an adverse court decision related to certain
outstanding accounts receivables. We continue to focus on
delivering organic growth and driving operational efficiencies
including additional metal coatings offerings to improve future
sales and maintaining an active M&A program to support our
strategic growth initiatives. We remain somewhat cautious due
to the uncertainty related to tariffs and the Chinese trade
situation, as well as the tighter market for labor in many of our
U.S. locations. Looking forward, we are comfortable narrowing
our fiscal 2019 guidance with earnings per share in the range of
$1.95 to $2.20 per diluted share, from $1.90 to $2.25 per diluted share, and annual
sales in the range of $940 million to
$960 million, from $930 million to $970
million."
Third Quarter Results
Revenues for the third quarter of fiscal year 2019 were
$239.5 million compared to
$208.2 million for the same quarter
last year, an increase of 15.1%. Net income for the third quarter
increased to $15.4 million, or
$0.59 per diluted share, compared to
a net loss of $(0.2) million, or
$(0.01) per diluted share, for the
third quarter of fiscal year 2018, which included charges described
above.
Gross margins for the third quarter of fiscal year 2019 were
20.8% compared to 14.9% in the third quarter of last year.
Operating margins were 9.5% compared to 0.7% the third quarter of
fiscal year 2018 as SG&A as a percentage of sales fell to 11.3%
of sales compared to 14.2% of sales in the prior year.
Additionally, the effective tax rate increased to 17.8% in the
current quarter compared to (91.6)% in the third quarter of the
prior year, with the change primarily attributable to the net loss
incurred and various tax benefits received during the prior year
period.
Incoming orders for the quarter were $211.3 million resulting in a book to revenue
ratio of 0.88. In the third quarter of fiscal year 2018
incoming orders were $179.8 million,
resulting in a book to revenue ratio of 0.86. Our backlog at the
end of the third quarter of fiscal year 2019 increased 8.7% to
$307.8 million compared to
$283.2 million for the third quarter
of last year. Approximately 54% of the current backlog is expected
to be delivered outside the U.S., compared to 28% in the third
quarter of fiscal year 2018.
Energy Segment
Revenues for the Energy segment for the third quarter of fiscal
year 2019 were $132.0 million as
compared to $107.0 million for the
same quarter last year, an increase of 23.4%. Gross profit rose
368.4% to $28.1 million compared to
$6.0 million for the same period last
year, with gross margins of 21.3% for the third quarter of fiscal
year 2019 compared to 5.6% in the prior year. Operating
income for the Energy segment increased to $11.5 million compared to a loss of $(12.1) million for the same period last year.
Operating margins for the third quarter of fiscal year 2019 rose to
8.7% as compared to (11.3)% in the prior year.
Metal Coatings Segment
Revenues for the Metal Coatings segment for the third quarter of
fiscal year 2019 were $107.5 million,
compared to the $101.1 million for
the same period of last year, an increase of 6.3%. Gross profit
fell 13.7% to $21.7 million from
$25.1 million in the same quarter
last year, driving gross margins of 20.2% compared to 24.8% in the
same quarter last year. Operating income was $18.3 million as compared to $21.7 million in the third quarter last year. As
a result, operating margins for the third quarter of fiscal year
2019 decreased to 17.0%, compared to 21.4% in the same period last
year.
Conference Call
AZZ Inc. will conduct a conference call to discuss financial
results for the third quarter of fiscal year 2019 at 11:00 A.M. ET on Tuesday, January 8, 2019.
Interested parties can access the conference call by dialing (844)
855-9499 or (412) 317-5497 (International). The call will be
webcast via the Internet 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 #10127314, 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,
2018 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 (Loss)
|
(in thousands, except
per share data)
|
(unaudited)
|
|
|
Three Months Ended
November 30,
|
|
Nine Months Ended
November 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
239,516
|
|
|
$
|
208,158
|
|
|
$
|
724,539
|
|
|
$
|
609,770
|
|
Costs of
sales
|
189,761
|
|
|
177,041
|
|
|
569,175
|
|
|
487,471
|
|
Gross margin
|
49,755
|
|
|
31,117
|
|
|
155,364
|
|
|
122,299
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
26,986
|
|
|
29,563
|
|
|
91,794
|
|
|
83,335
|
|
Operating income
|
22,769
|
|
|
1,554
|
|
|
63,570
|
|
|
38,964
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
3,723
|
|
|
3,507
|
|
|
11,541
|
|
|
10,267
|
|
Other (income)
expense, net
|
309
|
|
|
15
|
|
|
(839)
|
|
|
90
|
|
Income (loss) before income
taxes
|
18,737
|
|
|
(1,968)
|
|
|
52,868
|
|
|
28,607
|
|
Income tax expense
(benefit)
|
3,342
|
|
|
(1,802)
|
|
|
10,511
|
|
|
6,925
|
|
Net income
(loss)
|
$
|
15,395
|
|
|
$
|
(166)
|
|
|
$
|
42,357
|
|
|
$
|
21,682
|
|
Earnings (loss) per
common share
|
|
|
|
|
|
|
|
Basic
|
$
|
0.59
|
|
|
$
|
(0.01)
|
|
|
$
|
1.63
|
|
|
$
|
0.83
|
|
Diluted
|
$
|
0.59
|
|
|
$
|
(0.01)
|
|
|
$
|
1.62
|
|
|
$
|
0.83
|
|
|
|
|
|
|
|
|
|
Diluted average
shares outstanding
|
26,151
|
|
|
25,965
|
|
|
26,092
|
|
|
26,049
|
|
AZZ
Inc.
|
Segment
Reporting
|
(in
thousands)
|
(unaudited)
|
|
|
Three Months Ended
November 30,
|
|
Nine Months Ended
November 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
Energy
|
$
|
132,025
|
|
|
$
|
107,021
|
|
|
$
|
385,526
|
|
|
$
|
317,526
|
|
Metal
Coatings
|
107,491
|
|
|
101,137
|
|
|
339,013
|
|
|
292,244
|
|
|
$
|
239,516
|
|
|
$
|
208,158
|
|
|
$
|
724,539
|
|
|
$
|
609,770
|
|
|
|
|
|
|
|
|
|
Segment operating
income (loss):
|
|
|
|
|
|
|
|
Energy
|
$
|
11,532
|
|
|
$
|
(12,103)
|
|
|
$
|
25,763
|
|
|
$
|
(3,029)
|
|
Metal
Coatings
|
18,321
|
|
|
21,681
|
|
|
65,581
|
|
|
66,332
|
|
Corporate
|
(7,084)
|
|
|
(8,024)
|
|
|
(27,774)
|
|
|
(24,339)
|
|
|
$
|
22,769
|
|
|
$
|
1,554
|
|
|
$
|
63,570
|
|
|
$
|
38,964
|
|
AZZ
Inc.
|
Condensed
Consolidated Balance Sheets
|
(in
thousands)
|
(unaudited)
|
|
|
November 30,
2018
|
|
February 28,
2018
|
|
|
|
|
Assets:
|
|
|
|
Current
assets
|
$
|
367,374
|
|
|
$
|
329,154
|
|
Net property, plant
and equipment
|
207,090
|
|
|
216,855
|
|
Other assets,
net
|
457,915
|
|
|
482,200
|
|
Total
assets
|
$
|
1,032,379
|
|
|
$
|
1,028,209
|
|
|
|
|
|
Liabilities and
shareholders' equity:
|
|
|
|
Current
liabilities
|
$
|
127,815
|
|
|
$
|
131,739
|
|
Long term debt due
after one year, net
|
272,712
|
|
|
286,609
|
|
Other
liabilities
|
35,974
|
|
|
44,658
|
|
Shareholders'
equity
|
595,878
|
|
|
565,203
|
|
Total liabilities and
shareholders' equity
|
$
|
1,032,379
|
|
|
$
|
1,028,209
|
|
AZZ
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(in
thousands)
|
(unaudited)
|
|
|
Nine Months Ended
November 30,
|
|
2018
|
|
2017
|
|
|
|
|
Net cash provided by
operating activities
|
$
|
60,395
|
|
|
$
|
38,710
|
|
Net cash used in
investing activities
|
(21,329)
|
|
|
(54,174)
|
|
Net cash (used in)
provided by financing activities
|
(41,565)
|
|
|
14,211
|
|
Effect of exchange
rate changes on cash
|
(941)
|
|
|
602
|
|
Net decrease in cash
and cash equivalents
|
$
|
(3,440)
|
|
|
$
|
(651)
|
|
Cash and cash
equivalents at beginning of period
|
20,853
|
|
|
11,302
|
|
Cash and cash
equivalents at end of period
|
$
|
17,413
|
|
|
$
|
10,651
|
|
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SOURCE AZZ Inc.