Azz Inc. · NYSE:AZZ
Azz — Investor Presentation (May 2017)
48 slides from Azz's investor presentation, May 2017
Slide 1: AZZ Inc. Corporate Presentation
AZZ Inc. NYSE: AZZ Corporate Presentation May 2017
Slide 2: Forward Looking Statements
Forward Looking Statements 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
Slide 3: Corporate Overview and Vision
Corporate Overview and Vision 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 mar
Slide 4: Total Company: Sales by Segment
Total Company: Sales by Segment Energy Galvanizing 44% 45% 44% 56% 55% 56% FY2015 FY2016 FY2017 $817 million $903 million $859 million 4
Slide 5: Total Company: Sales by Market Segment
Total Company: Sales by Market Segment Industrial - General Industry, Oil & Gas, Construction Transmission & Distribution Power Generation 27% 21% 31% 53% 52% 60% 19% 16% 21% FY2015 FY2016 FY2017 $817 million $903 million $859 million 5
Slide 6: Served Markets
Served Markets Our products help power up the world from any generation source and our services ensure the safety of lives and equipment.
Slide 7: Customers & Partners
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Slide 8: Key Investment Considerations
Key Investment Considerations Leading Market Positions New Culture Diversified Driving Future Portfolio of Opportunities Businesses Strong Historical Strong Long Financial Term Growth Performance Drivers 8
Slide 9: Leading Market Positions
Leading Market Positions Galvanizing • Largest galvanizer in North America Industrial Solutions • World’s largest producer of weld metal overlay services Nuclear Solutions • Largest third-party supplier of safety-related nuclear equipment Electrical Solutions • Global leader in cost efficient turnke
Slide 10: Diversified Portfolio of Businesses
Diversified Portfolio of Businesses 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 Nu
Slide 11: Diversified Portfolio of Businesses
Diversified Portfolio of Businesses 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 Corros
Slide 12: Strong Financial Performance
Strong Financial Performance • FY 2017 – 30th consecutive year of profitability • 10 Year CAGR – Revenues 12.7%, Net Income 10.9% • Strong balance sheet and cash flows, new debt facility in place • Superior operating margins in legacy businesses • Solid Quarterly Cash dividend 12
Slide 13: Key Long-Term Growth Drivers
Key Long-Term Growth Drivers • Aging U.S. energy and industrial infrastructure and required investment • Emerging North American energy independence • International demand for electricity and energy 13
Slide 14: Driving Performance FY2015 – FY2017
Driving Performance FY2015 – FY2017 Focus of Fiscal 2015-2017: • Unlocking value at recently acquired businesses (WSI & NL) • Management changes – “right players on the field” • Emphasis on project management • Seeking higher margins through sales leverage, cost control, and selective bidding • Driv
Slide 15: Focus Areas for Fiscal Year 2018
Focus Areas for Fiscal Year 2018 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 met
Slide 16: Galvanizing
Galvanizing
Slide 17: Galvanizing Market Opportunity
Galvanizing Market Opportunity Electrical Utility OEM Global Galvanized Steel Market Petrochemical Bridge & Highway Includes Galvanized: • Steel Sheet Post-Fabrication AZZ Galvanized Steel Served Markets • Tube Steel Industrial Evaluating other metal finishing process technologies 17
Slide 18: Galvanizing Locations
Galvanizing Locations Locations: 41 facilities in 19 states and 3 Canadian Provinces New Location: AZZ Galvanizing - Reno, NV Opened January 2016 Acquired 6 locations in Texas, Louisiana, and Mississippi from Trinity Acquired : Industries in June 2015, Olson Industries in Atkinson, NE in February 20
Slide 19: Galvanizing Revenue by Market
Galvanizing Revenue by Market 14% 14% 5% 7% 30% 30% 7% 7% 39% 36% 36% 13% 36% 13% 13% FY 2015 FY 2016 FY 2017 $358 million $402 million $376 million Electrical Utility OEM's Industrial Bridge & Highway Petrochemical 19
Slide 20: Operating Margins: Galvanizing
Operating Margins: Galvanizing 30.0% 26.1% 26.1% 26.2% 24.7% 25.0% 23.6% 21.0%* 20.0% 15.0% 10.0% 5.0% 0.0% *Includes $7.3 million of realignment charges in FY2017, or 1.94% of FY2017 sales of $376 million 20
Slide 21: Energy
GENERATION Energy Power Lines
Slide 22: Energy: Revenue Mix
Energy: Revenue Mix 45% 48% 35% 37% 36% 41% 19% 17% 22% FY2015 FY2016 FY2017 $458 million $501 million $483 million Power Generation Industrial Transmission & Distribution 22
Slide 23: Operating Margins: Energy
Operating Margins: Energy 15.9% Op Margin w/o Purch Price Accounting 13.8% Op 16.0% 13.8% Op Margin w/o 14.2% Margin w/o Purch Price 13.0% Op 13.7% Margin w/o 14.0% Purch Price Accounting Accounting Purch Price 11.2% Op 11.7% Accounting Margin w/o 12.0% 10.7% Purch Price 10.8% Accounting 10.0% 8.4%
Slide 24: Energy Backlog
Energy Backlog ($ in Millions) $(millions) FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Beginning Backlog 108.4 138.6 221.7 325.0 332.6 334.5 Acquired Backlog 0.0 78.5 95.1 0.0 0.0 11.9 Ending Backlog 138.6 221.7 325.0 332.6 334.5 346.4 Table includes acquired backlog from NL during FY 2013 and A
Slide 25: Consolidated Financials
Consolidated Financials
Slide 26: FY2017 P&L Recap
FY2017 P&L Recap Consolidated AZZ Prior Year $(000) Except EPS FY2017 FY2016 Delta ($) Delta (%) Bookings 858,934 905,053 (46,119) (5.1)% Backlog 346,363 334,456 11,907 3.6% Sales 858,930 903,192 (44,262) (4.9)% Gross Profit 204,784 230,111 (25,327) (11.0)% Gross Margin (%) 23.8% 25.5% SG&A 106,424
Slide 27: Consolidated Net Sales
Consolidated Net Sales ($ in Millions) $1,000 $900 $800 $903 $859 $817 $700 $752 $600 $500 $571 $400 $469 $300 $200 $100 $0 2012 2013 2014 2015 2016 2017 Fiscal Year 27
Slide 28: Earnings Per Share
Earnings Per Share (Fully Diluted) $3.50 $3.00 $2.50 $2.96 $2.52 $2.00 $2.32 $2.33 $2.37 $1.50 $1.61 $1.00 $0.50 $0.00 2012 2013 2014 2015 2016 2017 Fiscal Year 28
Slide 29: Cash Flow
Cash Flow ($ in Millions) $160.0 $140.0 $120.0 $100.0 $80.0 $60.0 $40.0 $20.0 $0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 -$20.0 Cash Pro. By Oper. Net Income Free Cash Flow 29
Slide 30: CAPEX, Depreciation & Amortization
CAPEX, Depreciation & Amortization ($ in Millions) $60.0 $50.4 $50.0 $46.1 $47.4 *$43.5 $43.3 $41.4 $39.9 $40.0 $29.4 $29.4 $30.0 $24.9 $22.2 $22.6 $19.8 $20.0 $16.4 $10.0 $0.0 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 CAPEX D&A *Includes $12 million for the rebuild of the Joliet Galvanizing
Slide 31: Total Bank Debt / Long Term Debt to Equity
Total Bank Debt / Long Term Debt to Equity ($ in Millions) Capitalization as of February 28, 2017 5 Year, $300M Senior Credit Facility $ 111.7 6.24% Senior Notes Due Mar 2018 $ 28.6 $450.0 5.42% Senior Notes Due 2021 $ 125.0 1.20 Total Bank Debt $ 272.3 $400.0 Shareholder Equity $ 529.6 1.08 Debt to
Slide 32: EBITDA Margins
EBITDA Margins ($ in Millions) $1,000.0 30.0% $900.0 23.7% 24.0% 25.0% $800.0 22.3% 21.2% 21.4% 20.7% $700.0 18.7% 18.5% 20.0% $600.0 16.4% 16.7% 17.4% $500.0 15.0% $400.0 10.0% $300.0 $200.0 5.0% $100.0 $0.0 0.0% 2007 2008 2009 2010 2011 2012 Year2013 Fiscal 2014 2015 2016 2017 Net Sales EBITDA EBI
Slide 33: Q&A
Q&A
Slide 34: Appendix - Businesses
Appendix - Businesses
Slide 35: Galvanizing
Galvanizing North America’s largest provider of post-fabrication galvanization OEM Industrial Bridge & Highway Agriculture 41 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)
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 generation Boiler Construction Boiler Overhaul Component Replacement HSRG Mai
Slide 38: Nuclear Logistics LLC (NL)
Nuclear Logistics LLC (NL) 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 600V-38kV 15kV-69kV 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
Lighting Systems Hazardous and Specialty lighting for severe and harsh environments Industrial Marine Lighting Food Processing/Inspection Manufacturing 43
Slide 44: Tubular Products
Tubular Products Pup Joints and Full Length Tubing serving the Oil Country Tubular Goods Market 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
GAAP to Non-GAAP EBITDA Reconciliation 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Net Income 21,604 27,688 42,206 37,728 34,963 40,736 60,456 59,597 64,943 76,790 60,921 Depreciation 6,478 7,999 12,921 15,603 18,929 18,855 19,365 25,090 28,051 31,194 33,430 Amortization 181 200 1,607 1,8
Slide 47: GAAP to Non-GAAP Free Cash Flow Reconciliation
GAAP to Non-GAAP Free Cash Flow Reconciliation 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Cash from Operations 38,926 60,196 82,588 42,085 64,065 92,738 107,275 118,157 143,589 111,176 Less Capital Spending 9,926 20,009 12,037 16,411 19,784 24,923 43,472 29,377 39,861 41,434 Free Cash Flow 29
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