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AZZ incorporated Reports Financial Results for the First Quarter of Fiscal Year 2015

Companies mentioned in this article: AZZ incorporated

FORT WORTH, Texas, June 27, 2014 /PRNewswire/ -- AZZ incorporated (NYSE:AZZ), a global provider of electrical products and highly engineered services and a leading provider of galvanizing services in North America, today announced unaudited financial results for the three month period ended May 31, 2014. Revenues for the first quarter of fiscal year 2015 were $216.1 million compared to $183.2 million for the same quarter last year, an increase of 18.0 percent. Net income for the first quarter was $14.9 million, or $0.58 per diluted share, compared to net income of $14.5 million, or $0.57 per diluted share, for the same quarter last year.

Earnings during the quarter included a pretax gain of $2.4 million from an insurance settlement relating to losses incurred at our Joliet galvanizing facility. Adjusted earnings without this gain would have been $0.52 per share for the first quarter of fiscal 2015. During the prior year's first quarter AZZ recorded non-recurring items including income related to a favorable settlement of a lawsuit, expenses from acquisitions, and operating losses at our Joliet facility. Adjusted earnings per share for the first quarter of fiscal 2014 without these non-recurring items would have been $0.56 per share. Included with the attached financial tables is a reconciliation of these nonrecurring items.

AZZ's backlog at the end of the first quarter of fiscal 2015 was $309.0 million, compared to $270.6 million at the end of the first quarter of fiscal year 2014. Of the $309.0 million backlog, 27.0 percent will be delivered outside of the U.S. Incoming orders for the first quarter of fiscal 2015 were $200.2 million while revenue for the quarter totaled $216.1 million, resulting in a book to ship ratio of 93.0 percent.

Revenues for AZZ's Energy Segment for the first quarter of fiscal 2015 were $130.5 million as compared to $96.5 million for the same quarter last year, an increase of 35.3 percent. This increase is mainly attributable to the acquisition of WSI LLC (together with its subsidiaries, "WSI") on March 29, 2013 which contributed $72.9 million in revenues for the full quarter as compared to $41.5 million for two months in the same quarter last year. Operating income for the segment increased 5.9 percent to $13.8 million compared to $13.0 million for the same period last year. The increase in year-over-over operating income is also attributable to the acquisition of WSI which provided $6.9 million in operating income as compared to $3.3 million in the same period last year. Excluding the WSI acquisition, operating income decreased $2.7 million. Operating margins for the first quarter of fiscal 2015 were 10.6 percent as compared to 13.5 percent in the same period last year. Excluding the acquisition of WSI, first quarter fiscal year 2015 Energy Segment operating margins would have been 12.1 percent.

Revenues for AZZ's Galvanizing Service Segment for the first quarter of fiscal year 2015 were $85.6 million, compared to $86.7 million in the same period last year, a decrease of 1.3 percent. Operating income was $22.0 million as compared to $21.5 million in the same period last year, an increase of 2.3 percent. As mentioned earlier, segment operating income included a $2.4 million gain from the settlement of insurance related to the fire at our Joliet facility. These proceeds were recorded as an offset to cost of sales during the first quarter of fiscal 2015 as they were related to reimbursement for business interruption. During the first quarter of fiscal 2014, a loss was recorded in the amount of $0.8 million due to the fire at our Joliet facility. These gains and losses are included in the Galvanizing Services Segment operating income for segment reporting purposes. Without these non-recurring items, the Galvanizing Services Segment operating income would have been $19.6 million for the first quarter of fiscal 2015 and $22.3 million for the same period last year. Operating margins without these non-recurring items would have been 22.9% and 25.7%, respectively, for the three months ended May 31, 2014 and 2013. Margins were negatively impacted by decreases in the electric utility market, primarily solar, and higher overhead costs.

Tom Ferguson, president and chief executive officer of AZZ incorporated, said, "Financial results for the quarter were as anticipated with revenue hitting record levels at $216.1 million on the strength of a full quarterly contribution from WSI compared to just two months in last year's comparable quarter. Increased quoting activity and the current backlog in our Energy Segment gives us confidence that the latter half of the fiscal year continues to look promising. Within the Energy Segment our Industrial platform gained momentum, particularly in the petrochemical and refining market; and our Electrical platform faced mixed markets, but saw growth in enclosures and switchgear."

"Activity in the Galvanizing Services Segment is approaching more historical operating levels after experiencing severe winter conditions. We are also expanding the focus of our Galvanizing services segment to include other metal finishing technologies that we expect will create new opportunities and enhance our industry position as the leading corrosion protection solutions provider in North America."

Mr. Ferguson concluded, "I am appreciative of the efforts of all of our employees and their continued commitment to operational excellence and to the success of AZZ. I am encouraged that we have a solid portfolio of products and innovative technologies to successfully compete and attract larger market share. Going forward we will continue to leverage our sales teams across all of our Energy segment businesses in North America; aggressively expand our business internationally; streamline our platforms and grow our Galvanizing business, both organically and with targeted acquisitions. We see a large number of untapped opportunities that will permit us to continue to grow the Company in the coming years."

As previously noted, the Company's shipments are typically related to the completion of projects. Because of that, financial results, on a quarterly basis, are not of a linear nature and that variability can provide a distorted picture of the Company's performance on a quarter-over-quarter basis. However, based upon the evaluation of information currently available, management continues to anticipate fiscal year 2015 gross revenues to be in the range of $850 to $900 million and its earnings to be in the range of $2.40 and $2.80 per diluted share for the year.

Additionally, the Company announced that the Board of Directors, at its regularly scheduled quarterly meeting, declared a $0.14 per share cash dividend on the Company's common stock outstanding. The dividend will be paid at the close of business on July 25, 2014, to shareholders of record on July 11, 2014.

AZZ incorporated will conduct a conference call to discuss financial results for the first quarter of fiscal year 2015 at 11:00 A.M. ET on Friday, June 27, 2014. Interested parties can access the conference call by dialing (877) 317-6789 or (412) 317-6789 (international). The call will be web cast 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 #10048014 or for 30 days at http://www.azz.com/investor-relations.

AZZ incorporated is a global provider of specialty electrical equipment and highly engineered services to the power generation, transmission, distributions, and industrial markets as well as a leading provider of hot dip galvanizing services to the North American steel fabrication market.

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 hot dip galvanizing markets; prices and raw material cost, including zinc and natural gas which are used in the hot dip galvanizing process; changes in the 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, 2014 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 incorporated 817-810-0095

             Internet:  www.azz.com


             Lytham Partners 602-889-9700

             Joe Dorame or Robert Blum

             Internet: www.lythampartners.com

                                           AZZ incorporated

                              Condensed Consolidated Statement of Income

                               (in thousands except per share amounts)


                                         Three Months Ended

                                            May 31, 2014                 May 31, 2013

                                            (unaudited)                   (unaudited)
                                             ==========                   ==========


    Net
     sales                                               $216,126                     $183,175

    Cost
     of
     Sales                                                160,738                      132,460
                                                          -------                      -------

         Gross
          Margin                                           55,389                       50,715


     Selling,
     General
     and
     Administrative                                        27,541                       26,687
                                                           ------                       ------

          Operating
          Income                                           27,847                       24,028


     Interest
     Expense                                                4,209                        4,478

    Net
     (Gain)                        and
     Loss                          Equipment
     on
     Sale
     or
     Insurance
     Settlement
     of
     Property,
     Plant                                                   (27)                        (23)

    Other
     (Income)                                                (31)                     (3,828)
                                                              ---                       ------

         Income
         before
         Income
         Taxes                                            $23,696                      $23,402

     Income
     Tax
     Expense                                                8,771                        8,855
                                                            -----                        -----

        Net
         income                                           $14,925                      $14,547
                                                          =======                      =======

    Earnings Per Common Share

        Basic                                               $0.58                        $0.57

         Diluted                                            $0.58                        $0.57


     Diluted
     Average
     Shares
     Outstanding                                           25,739                       25,655

                                  Segment Reporting

                                   (in thousands)


                              Three Months Ended

                                 May 31, 2014          May 31, 2013

                                 (unaudited)           (unaudited)
                                  ==========            ==========


    Net Sales:

       Energy                                 $130,521               $96,466

       Galvanizing
        Services                                85,605                86,709
                                                ------                ------

                                              $216,126              $183,175


    Segment Operating Income:

       Energy                                  $13,812               $13,048

       Galvanizing
        Services                                21,990                25,699
                                                ------                ------

       Total Segment
        Operating Income                       $35,802               $38,747

                                  Condensed Consolidated Balance Sheet

                                             (in thousands)


                                             May 31, 2014              February 28, 2014

                                             (unaudited)                  (unaudited)
                                              ==========                   ==========


    Assets:

           Current
           Assets                                         $329,929                      $296,181

           Net
           Property,
           Plant
           and
           Equipment                                       197,416                       197,639

           Other
           Assets,
           Net                                             456,194                       459,433
                                                           -------                       -------

           Total
           Assets                                         $983,539                      $953,253
                                                          ========                      ========


    Liabilities and Shareholders'
     Equity:

           Current
           Liabilities                                    $158,005                      $144,016

           Long
           Term
           Debt
           Due
           After
           One
           Year                                            378,607                       384,768

           Long
           Term
           Liabilities
           Due
           After
           One
           Year                                              9,121                         9,121

           Other
           Liabilities                                      45,865                        39,435

           Shareholders'
           Equity                                          391,941                       375,913
                                                           -------                       -------

     Total
     Liabilities
     and
     Shareholders'
     Equity                                               $983,539                      $953,253
                                                          ========                      ========


               AZZ incorporated

             Non-GAAP Disclosure

        Adjusted Earning and Adjusted
              Earnings Per Share


    Adjusted Earnings and Adjusted
     Earnings Per Share


    In addition to reporting financial
     results in accordance with GAAP, AZZ
     has provided adjusted earnings and
     adjusted earnings per share, which
     are non-GAAP measures.  Management
     believes that the presentation of
     these measures provides investors
     with 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
     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.


    The following table provides a
     reconciliation for the three month
     period ended May 31, 2014 and 2013
     between net income and diluted
     earnings per share calculated in
     accordance with GAAP to adjusted
     earnings and adjusted per share,
     respectively, which are shown net of
     tax (dollars in thousands, except
     per share data):


                      Three Months Ended May 31,
                      --------------------------

                                            2014                        2013
                                            ----                        ----

                                                     (in thousands,
                                                      except EPS)
                                                    ---------------

                                                 Per Diluted    Share                  Per Diluted Share
                                                 --------------------                  -----------------

    Net Income and
     Diluted Earnings
     Per Share                           $14,925                  $0.58        $14,457                 $0.57


    Adjustments (Net
     of Tax)


    Joliet Facility
     Fire Operating
     Loss                                      -                     -           495                  0.02

    Joliet Facility
     Fire-Business
     Interruption
     Insurance
     Proceeds                            (1,505)                (0.06)             -                    -


    Law Suit
     Settlement                                -                     -       (2,611)               (0.10)


    Acquisition
     Related Expense                           -                     -         1,981                  0.07
                                             ---                   ---         -----                  ----


    Adjusted Earnings
     and Adjusted
     Earnings Per
     Share                               $13,420                  $0.52        $14,322                 $0.56
                                         =======                  =====        =======                 =====

SOURCE AZZ incorporated