FORT WORTH - 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 2021, ended November 30, 2020.
Third Quarter Overview and Recent Highlights
Earnings per share of $0.76 and net income of $19.7 million; which includes net charges of $1.6 million, or $0.06 cents per share, primarily related to the loss on the divestiture of Southern Mechanical Services.
Sales of $226.6 million, increased sequentially by 11.4% from the second quarter
Metal Coatings segment results versus same quarter, prior year: Sales of $115.6 million, down 10.5%, with galvanizing sales down 8.8%
Operating income of $28.7 million, up 5.2%
Operating margin of 24.8%, versus 21.1%, or 370 bps improvement
Infrastructure Solutions segment results versus same quarter, prior year
Sales of $111.0 million up 28.6% sequentially; down 31.5%
Operating income of $8.7 million, down 49.9%
Operating margin of 7.9% versus 10.8%
Acquisition of Acme Galvanizing to continue strategic emphasis on Metal Coatings
Repurchased over 652,000 shares during the quarter.
Board authorized a new $100 million share repurchase program.
Management Discussion
Tom Ferguson, President and Chief Executive Officer of AZZ, commented, 'During the third quarter, the COVID-19 pandemic continued to significantly impact our operations and financial results. Despite the challenging global macroeconomic environment, we achieved sequential operating performance improvement as our businesses steadily adapted to operating in the current environment. We were able to maintain solid profitability with sales of $226.6 million and net income of $19.7 million, or $0.76 per diluted share, and return capital to our shareholders by purchasing more than 652,000 AZZ common shares in the open market during the third quarter.
I am pleased that our Metal Coatings segment continues to deliver solid operating results with sales of $115.6 million, and operating margins of 24.8%, an improvement of 370 basis points over the same quarter the prior year. Within our Infrastructure Solutions segment, we experienced mixed results. End-market demand for medium voltage switchgear continues to exceed prior year results, while electrical enclosure orders were consistent with the third quarter of last year. However, the ongoing impact of pandemic-related travel restrictions, coupled with the effects of weak oil demand, has resulted in significantly lower refining turnaround projects as customers continued to delay or defer maintenance. We are cautiously optimistic for improvement in the refining market, and are positioning our welding solutions operations for a solid fiscal year 2022. We are already seeing signs of improvement including earlier and increased quoting activity for the 2021 spring turnaround season.
As we previously communicated during the quarter, due to shifting industry and customer dynamics, and the protracted impact from the COVID-19 pandemic, we are taking the necessary steps to strategically restructure our portfolio of businesses to become a focused metal coatings business. As part of this process, we previously announced several actions including the divestiture of SMS, for which we recorded a loss on the sale of subsidiary of $1.9 million, the recent acquisition of Acme Galvanizing as part of our strategy to continue to grow Metal Coatings, and a comprehensive Board-led review of our businesses with the assistance of leading independent financial, legal and tax advisors. Our review of the Infrastructure Solutions businesses and associated assets, and the exploration of additional capital allocation opportunities to maximize shareholder value, is ongoing and I am pleased with the progress the team has made during the quarter.
I am extremely proud of AZZ's resiliency and execution as we continue to navigate the pandemic and again I want to express my sincere gratitude to all our employees for their hard work and dedication during this unprecedented time. We expect to emerge from this year a much stronger company, well-positioned to excel in the post-COVID era.'
Third Quarter Results
Sales for the third quarter of fiscal year 2021 were $226.6 million, compared to $291.1 million for the comparable period last year, a decrease of 22.2%. Net income for the quarter was $19.7 million, or $0.76 per share on a diluted basis, down $2.3 million from the prior year, same quarter. Incoming orders for the three-month period declined to $194.4 million, as compared to $263.7 million for the same quarter last year. The book-to-sales ratio declined slightly to 0.86, compared to 0.91 in last year's comparable period. Backlog at the end of the quarter was $174.4 million, a decrease of 36.5% as compared to backlog at the end of the same quarter in the prior year, due to lower orders in China as the Company previously stated its plan to decrease sales efforts in this region, along with the effects on the business from the pandemic.
Metal Coatings Segment
For the third quarter of fiscal year 2021, Metal Coatings segment sales decreased 10.5% to $115.6 million and operating income increased $1.4 million, or 5.2% to $28.7 million versus the comparable prior year quarter. Operating margins improved to 24.8% of sales, which was 370 basis points higher than the comparable prior year quarterly operating margin. On a year-to-date basis, adjusted operating income of $80.4 million was $4.9 million, or 5.8% lower than the comparable prior year-to-date period.
Infrastructure Solutions Segment (formerly the Energy Segment)
For the third quarter of fiscal year 2021, Infrastructure Solutions segment sales decreased to $111.0 million, or 31.5% as compared to $161.9 million in the same quarter of the prior year. Infrastructure Solutions operating income of $8.7 million was 49.9% lower than the comparable prior year quarter. Operating margin decreased to 7.9% compared to prior year quarter operating margin of 10.8%. On a year-to-date basis, adjusted operating income of $12.6 million was $21.6 million, or 63.2%, lower than the comparable prior year-to-date period. Adjusted year-to-date operating margin was 4.3% compared to 7.8% in the prior year. The decrease in net sales and operating income was primarily attributable to several COVID-related factors, including travel restrictions within certain key geographical areas served by our Infrastructure Solutions teams, significant reductions in turnaround activity in both the U.S. and international markets, and a reduction of orders for some of our electrical products.
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 Infrastructure Solutions (formerly 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.
Contact:
David Nark
Tel: (817) 810-0095
Web: www.azz.com
AZZ INC. 
