Slide 1: AZZ Inc. Corporate Presentation July 2016
AZZ Inc. NYSE: AZZ Corporate Presentation July 2016
Slide 2: Forward Looking Statements
2 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,
Slide 3: Corporate Overview and Vision
3 AZZ is a global provider of specialty electrical equipment and highly engineered services to the power generation, transmission, distribution and industrial markets as well as a leading provider of hot dip galvanizing services to the North American steel fabrication market Our Vision: We envision
Slide 4: Total Company: Sales by Segment
4 Total Company: Sales by Segment 45% 55% Actual FY2014 $752 million 44% 56% Actual FY2015 $817 million Energy Galvanizing 45% 55% Actual FY2016 $903 million
Slide 5: Total Company: Sales by Market Segment
5 49% 19% 32% FY2014 $752 million Total Company: Sales by Market Segment Transmission & Distribution Industrial - General Industry, Oil & Gas, Construction Power Generation 53% 16% 31% FY2015 $817 million 52% 21% 27% FY2016 $903 million
Slide 6: Served Markets
Served Markets Oil & Gas Renewable Transmission & Distribution Nuclear Refining / Petrochem Power Generation Combined Cycle Our products help power up the world from any generation source and our services ensure the safety of lives and equipment. Industrial & OEM 6
Slide 7: Customers & Partners
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Slide 8: Key Investment Considerations
8 Leading Market Positions Diversified Portfolio of Businesses Strong Long Term Growth Drivers Strong Historical Financial Performance New Leadership Instilling New Culture Key Investment Considerations
Slide 9: Leading Market Positions
9 Galvanizing Leading Market Positions Industrial Solutions Nuclear Solutions Electrical Solutions • Largest galvanizer in North America • World’s largest producer of weld metal overlay services • Largest third-party supplier of safety-related nuclear equipment • Global leader in cost efficient turn
Slide 10: Diversified Portfolio of Businesses
10 Industrial Solutions (WSI and SMS Operations) Specialty Welding and Overlays Critical Boiler, Drum and Vessel Components Boiler Construction and Overhauls Structural Repair and Upgrade Specialized Engineering Support Corrosion/Erosion Protection Nuclear Solutions (NLI & WSI Operat
Slide 11: Diversified Portfolio of Businesses
11 Electrical Solutions (Legacy Electrical & Industrial Products) High & Medium Voltage Bus Systems Switchgear Systems Enclosure Systems Tubular Products Hazardous and Specialty Lighting Systems Galvanizing Largest galvanizer in North America Corrosion protection services for steel
Slide 12: Strong Financial Performance
12 • FY 2016 – 29th consecutive year of profitability • 10 Year CAGR – Revenues 17.1%, Net Income 25.7% • Strong balance sheet and cash flows • Superior operating margins in legacy businesses • Solid Quarterly Cash dividend Strong Financial Performance
Slide 13: Key Long-Term Growth Drivers
13 • Aging U.S. energy and industrial infrastructure and required investment • Emerging North American energy independence • International demand for electricity and energy Key Long-Term Growth Drivers
Slide 14: A New Culture taking hold
14 New culture based on: • Operational excellence through 6-sigma practices and accountability • Accountability and change integrated throughout all layers of management • Early stages of adoption already reaping benefits • Returns-based metrics and margin growth • More financially driven organizati
Slide 15: Focus Areas for Fiscal Year 2017
15 Improving Energy segment operating margins through emphasis on international growth operational excellence leveraging fixed costs through top-line growth Growing our Galvanizing segment organically by acquisition seeking adjacent opportunities in metal finishing Continuing empha
Slide 16: Galvanizing
16 Galvanizing
Slide 17: Galvanizing Market Opportunity
17 Galvanizing Market Opportunity Includes Galvanized: • Steel Sheet • Tube Steel Global Galvanized Steel Market Post-Fabrication Galvanized Steel Electrical Utility Industrial Petrochemical Bridge & Highway OEM AZZ Served Markets Evaluating other metal finishing process technologies
Slide 18: Galvanizing Locations
18 Galvanizing Locations Acquired 6 locations in Texas, Louisiana, and Mississippi from Trinity Industries in June 2015 Locations: 43 facilities in 19 states and 3 Canadian Provinces New Location: AZZ Galvanizing - Reno, NV Opened January 2016 Acquired : Olson Industries in Atkinson, NE in February
Slide 19: Galvanizing Revenue by Market
19 Galvanizing Revenue by Market 35% 12% 35% 5% 13% FY 2014 $336 million Electrical Utility OEM's Industrial Bridge & Highway Petrochemical 30% 13%36% 7% 14% FY 2015 $358 million 30% 13%36% 7% 14% FY 2016 $402 million
Slide 20: Operating Margins: Galvanizing
20 Operating Margins: Galvanizing 26.1% 26.1% 26.1% 26.2% 24.7% 23.6% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
Slide 21: Energy Segment
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Slide 22: Energy: Revenue Mix
22 35% 17% 48% FY2016 $501 million 36% 19% 45% FY2015 $458 million Energy: Revenue Mix 36% 13% 51% FY2014 $416 million Transmission & DistributionIndustrialPower Generation
Slide 23: Operating Margins: Energy
23 16.7% 14.2% 13.7% 10.7% 8.4% 11.7% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 13.8% Op Margin w/o Purch Price Accounting Operating Margins: Energy 15.9% Op Margin w/o Purch Price Accounting 13.8% Op Margin w/o Purch Price Accounting 11.2% Op M
Slide 24: Energy Backlog
24 Energy Backlog ($ in Millions) Table includes acquired backlog from NLI during FY 2013 and Aquilex SRO (WSI) during the first quarter of FY 2014, and reflects ending backlog including NLI and WSI balances for all periods shown $(millions) FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Beginning Backlog
Slide 25: Consolidated Financials
Consolidated Financials
Slide 26: FY2016 P&L Recap
FY2016 P&L Recap Consolidated AZZ Actual Prior Year $(000) Except EPS FY2016 FY2015 Delta ($) Delta (%) Bookings 905,053 824,269 80,784 9.8% Backlog 334,456 332,595 1,861 0.6% Sales 903,192 816,687 86,505 10.6% Gross Profit 230,111 205,696 24,415 11.9% Gross Margin (%) 25.5% 25.2% SG&A 107,823 98,87
Slide 27: Consolidated Net Sales
27 Consolidated Net Sales ($ in Millions) $381 $469 $571 $752 $817 $903 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 2011 2012 2013 2014 2015 2016 2017 (est)*Fiscal Year $930 – $970 *Per previously announced FY 2017 guidance
Slide 28: Earnings Per Share (Fully Diluted)
28 Earnings Per Share (Fully Diluted) $1.39 $1.61 $2.37 $2.32 $2.52 $2.96 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 2011 2012 2013 2014 2015 2016 2017 (est)* Fiscal Year *Per previously announced FY 2017 guidance $3.15 – $3.45
Slide 29: Cash Flow
29 Cash Flow ($ in Millions) -$20.0 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Cash Pro. By Oper. Net Income Free Cash Flow
Slide 30: CAPEX / Depreciation & Amortization
30 CAPEX / Depreciation & Amortization ($ in Millions) $16.4 $19.8 $24.9 *$43.5 $29.4 $39.9 $22.2 $22.6 $29.4 $43.3 $46.1 $47.4 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 CAPEX D&A *Includes $12 million for the rebuild of the Joliet Galvanizing facility in Fiscal 20
Slide 31: Total Bank Debt / Long Term Debt to Equity
31 Total Bank Debt / Long Term Debt to Equity ($ in Millions) 0.32 0.00 0.53 0.44 0.88 0.78 0.63 1.08 0.80 0.68 0.00 0.20 0.40 0.60 0.80 1.00 1.20 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 $400.0 $450.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Fiscal Year Bank Debt Cash Debt to E
Slide 32: EBITDA Margins
32 EBITDA Margins ($ in Millions) 10.4% 16.4% 16.7% 21.2% 23.7% 22.3% 21.4% 24.0% 20.7% 18.7% 18.5% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% $0.0 $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 $700.0 $800.0 $900.0 $1,000.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Fiscal Year Net Sales EBITDA
Slide 33: Q & A
Q & A
Slide 34: Appendix - Businesses
Appendix - Businesses
Slide 35: Galvanizing
North America’s largest provider of post-fabrication galvanization Galvanizing OEM Industrial Bridge & Highway Agriculture 43 facilities in 19 states and 3 Canadian Provinces 35
Slide 36: Welding Services (WSI)
Welding Services (WSI) Worldwide provider that develops and delivers design repairs, component upgrades and specialty maintenance services for all energy intensive industries Machine Weld Overlay Shop Services Component Replacement Remote Weld Operation 36
Slide 37: Southeastern Mechanical Services (SMS)
Boiler Construction Boiler Overhaul Component Replacement HSRG Maintenance Southeastern Mechanical Services (SMS) SMS provides qualified modifications, repairs and fabrication of boiler components and pressure parts to industries that rely on boilers and heat recovery units for steam and/or power ge
Slide 38: Nuclear Logistics Inc (NLI)
Nuclear Logistics Inc (NLI) A leading 3rd party supplier of critical and safety related equipment for the nuclear power industry Electrical Mechanical Instrumentation & Control Qualification & Dedication 38
Slide 39: Switchgear Systems
Switchgear Systems PowerAisle™ metal clad and arc-resistant switchgear and relay panels provide the safe and reliable operation of electricity Renewable /Wind Utility Portable Substation Mining 39
Slide 40: Bus Systems
Bus Systems Electrical bus for domestic and international utilities and industrial markets Non-Segregated Phase Bus Segregated Phase Bus Isolated Phase Bus Bus Services 600V- 38kV 15kV-69kV600V-38kV Installation/Emergency Repair 40
Slide 41: High Voltage Bus Systems (HVBS)
High Voltage Bus Systems (HVBS) AZZ SF6 gas insulated bus provides a long distance power transmission alternative to transmission lines, high voltage cables, or GIS bus designs Vertical Underground Overhead Interconnections 41
Slide 42: Enclosure Systems
Enclosure Systems Factory fabricated electrical enclosures safely and securely protect instrumentation and control devices across a wide variety of markets Electrical Industrial Oil & Gas Specialty Applications 42
Slide 43: Lighting Systems
Hazardous and Specialty lighting for severe and harsh environments Lighting Systems Industrial Marine Lighting Food Processing/Inspection Manufacturing 43
Slide 44: Tubular Products
Pup Joints and Full Length Tubing serving the Oil Country Tubular Goods Market Tubular Products Upset Pipe Thread Pipe Full Length Tubing Pup Joints 44
Slide 45: Reg G Tables
Reg G Tables
Slide 46: GAAP to Non-GAAP EBITDA Reconciliation
46 GAAP to Non-GAAP EBITDA Reconciliation ($000's) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Net Income 7,827 21,604 27,688 42,206 37,728 34,963 40,736 60,456 59,597 64,943 76,790 Depreciation 5,535 6,478 7,999 12,921 15,603 18,929 18,855 19,365 25,090 28,051 31,194 Amortization 184 181
Slide 47: GAAP to Non-GAAP Free Cash Flow Reconciliation
47 GAAP to Non-GAAP Free Cash Flow Reconciliation FY 2007 - FY 2016 Free Cash Flow ($000's) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Cash from Operations 6,928 38,926 60,196 82,588 42,085 64,065 92,738 107,275 118,157 143,589 Less Capital Spending 10,659 9,926 20,009 12,037 16,411 19,784 24
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