AZZ Inc. , a global provider of metal coating solutions, welding solutions, specialty electrical equipment and highly engineered services today issued its audited consolidated financial statements contained in the Company’s Fiscal Year 2021 Annual Report on Form 10-K for the year ended February 28, 2021.
Fiscal Year 2021 Overview and Recent Highlights:
Management Discussion
Tom Ferguson, President and Chief Executive Officer of AZZ, commented, “Throughout fiscal year 2021, the COVID-19 pandemic significantly impacted our operations and financial results. Despite the extraordinary circumstances, the safety and well-being of our employees and continued support of our customers remained top priorities. We were able to generate sales of $838.9 million and net income of $39.6 million, or $1.52 per diluted share, on a reported basis, and achieve our 34th consecutive year of profitability. Our consolidated bookings for the year decreased 19.3% to $785.3 million while our backlog decreased 23.7% to $186.1 million, primarily due to both the pandemic as well as the successful completion of multiple large multi-year international electrical projects for which revenue was recognized in fiscal year 2021. We continued our long history of strong cash flows by generating net cash provided by operating activities of $92.0 million, a decrease of 35.3% compared to prior year. Reported EPS of $1.52 includes pre-tax charges of $20.0 million for impairment and restructuring and the loss on the disposal of the Galvabar and SMS businesses during the year. Excluding these charges, adjusted net income was $55.0 million, and adjusted EPS was $2.11. During the year we returned capital to shareholders by repurchasing 1.2 million shares for $48.3 million dollars, and distributed $17.6 million in dividends.”
“Our Metal Coatings segment again delivered solid operating results with sales of $457.8 million, and adjusted operating margins of 23.3%, an improvement of 170 basis points over the prior year. Results were driven primarily by a combination of lower volume, which was offset by lower zinc costs. Our Metal Coatings team continued to drive operational efficiencies aggressively, while maintaining an active acquisition pipeline to support our strategic growth initiatives. While our ability to complete new deals was limited by the COVID-19 pandemic, we completed one acquisition (Acme Galvanizing) during the fiscal year.”
Mr. Ferguson continued, “Sales for the Infrastructure Solutions segment decreased $181.7 million, or 32.3%, to $381.1 million for fiscal year 2021, compared to $562.8 million for fiscal year 2020. The decrease in sales for fiscal 2021 was attributable to the weak refining turnaround activity, as well as lower sales for some of our electrical products, as a result of COVID-19. Within our Electrical Platform, sales results were mixed across our end-markets of Power Generation, Transmission and Distribution. The team is focused on aggressively pursuing projects and building our backlog as we progress through our first quarter of fiscal year 2022. Our Industrial Solutions platform executed domestic and international turnaround projects, but at a significantly reduced level, due to limited refinery activity and pandemic related travel restrictions. As we have stated previously, we remain cautiously optimistic for an improvement in the refining market, and are positioning our operations for a solid fiscal year 2022.
Reaffirms Fiscal Year 2022 Guidance
Mr. Ferguson added, “We are reaffirming our fiscal year 2022 sales and earnings per share guidance. We estimate sales to be in the range of $835 million to $935 million and earnings in the range of $2.45 to $2.95 per diluted share. Our fiscal year 2022 guidance is based upon the evaluation of information currently available to management and reflects our best estimates given current market conditions, current backlog expectations, and does not include any potential acquisitions or divestitures, nor any federal regulatory changes that may emerge. We continue to experience COVID-related travel restrictions within certain geographical areas served by our Infrastructure Solutions teams, particularly in some key international markets.”
“As we enter fiscal 2022,” concluded Mr. Ferguson, “our focus will be growing our Metal Coatings segment, and building the backlog for enclosures, switchgear and welding solutions in our Infrastructure Solutions segment. We have access to the capital necessary to sustain our operations, fund organic growth, aggressively seek opportunities that fit our strategic growth plan and return capital to shareholders. We continue to actively pursue initiatives to enhance shareholder value, drive growth, and accelerate our strategy to become predominately a metal coatings company, including the ongoing review of our portfolio and capital allocation. I want to express my sincere gratitude to all our employees for their hard work and dedication throughout the pandemic. We expect to emerge from this year a much stronger company, well-positioned to excel in the post-COVID era. We are excited about the opportunities ahead.”
Fourth Quarter Results
Sales for the fourth quarter of fiscal year 2021 were $195.6 million, compared to $245.4 million for the prior year, a decrease of 20.3%. Net income for the quarter was $16.2 million, or $0.63 per share on a diluted basis, up $26.8 million from the prior year, same quarter, which was impacted by charges related to the sale of our Nuclear Logistics business and impairment of Welding Solutions nuclear-related intangible assets. Incoming orders for the three-month period declined to $207.4 million, as compared to $214.7 million for the same quarter last year. The book-to-sales ratio increased slightly to 1.06, compared to 0.87 in last year’s comparable period. As anticipated, backlog at the end of the quarter was $186.1 million, a decrease of 23.7% as compared to the same quarter in the prior year, due to lower order volume in China, along with the effects on the business resulting from the pandemic.
Metal Coatings Segment
For the fourth quarter of fiscal year 2021, Metal Coatings segment sales decreased 13.6% to $106.1 million and operating income increased 17.6% to $26.6 million versus the comparable prior year quarter. Segment operating margin improved to 25.1% of sales, which was 670 basis points higher than the comparable prior year fourth quarter operating margin. Improvement in operating margin was a result of improved labor productivity and operational efficiency driven by our Digital Galvanizing System (“DGS”), as well as lower zinc costs.
Infrastructure Solutions Segment
For the fourth quarter of fiscal year 2021, Infrastructure Solutions segment sales decreased 27% to $89.5 million, as compared to $122.6 million in the same quarter of the prior year. Infrastructure Solutions reported operating income of $3.1 million was 321.5% higher than the comparable prior year quarter which was impacted by the loss on sale of Nuclear Logistics, Inc. Operating margin increased to 3.5% compared to prior year quarter operating margin of (1.1%). During the fourth quarter of fiscal 2020, the Company recorded an impairment charge of $9.2 million related to the Company’s exit from the nuclear certified portion of its Industrial Solutions business. The decrease in net sales and operating income was primarily attributable to COVID-related business disruption, particularly within our Welding Solutions business.
The following chart provides an overview of operating income for both our Metal Coatings and Infrastructure Solutions segments, as adjusted for the impairment charges recorded during the quarter:
AZZ Inc. |
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Segment Reporting |
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(dollars in thousands) |
||||||||||||||||
(unaudited) |
||||||||||||||||
Three Months Ended |
Year Ended |
|||||||||||||||
February 28, |
February 29, |
February 28, |
February 29, |
|||||||||||||
Metal Coatings Segment |
||||||||||||||||
Sales |
$ |
106,149 |
$ |
122,796 |
$ |
457,791 |
$ |
498,989 |
||||||||
Segment operating income: |
||||||||||||||||
Metal Coatings, as reported |
26,591 |
22,603 |
95,946 |
107,926 |
||||||||||||
Impact of restructuring and impairment |
(247) |
— |
10,796 |
— |
||||||||||||
Metal Coatings, as adjusted |
$ |
26,344 |
$ |
22,603 |
$ |
106,742 |
$ |
107,926 |
||||||||
Adjusted operating income as a % of sales |
24.8 |
% |
18.4 |
% |
23.3 |
% |
21.6 |
% |
||||||||
Infrastructure Solutions Segment |
||||||||||||||||
Sales |
$ |
89,480 |
$ |
122,569 |
$ |
381,126 |
$ |
562,828 |
||||||||
Segment operating income: |
||||||||||||||||
Infrastructure Solutions, as reported |
3,123 |
(1,386) |
6,487 |
32,845 |
||||||||||||
Impact of restructuring and impairment |
(23) |
9,157 |
9,203 |
9,157 |
||||||||||||
Infrastructure Solutions, as adjusted |
$ |
3,100 |
$ |
7,771 |
$ |
15,690 |
$ |
42,002 |
||||||||
Adjusted operating income as a % of sales |
3.5 |
% |
6.3 |
% |
4.1 |
% |
7.5 |
% |
Conference Call Details
AZZ Inc. will conduct a conference call to discuss financial results for the fourth quarter and fiscal year 2021 today, Friday, April 23, 2021, 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.
Company Contact:
David Nark, Senior Vice President of Marketing and Investor Relations
AZZ Inc.
(817) 810-0095
www.azz.com
Investor Contact:
Joe Dorame, Managing Partner
Lytham Partners
(602) 889-9700
www.lythampartners.com