Azz Inc. · NYSE:AZZ
Azz — FY2018 Earnings Presentation
21 slides from Azz's earnings presentation, May 15, 2018
Slide 1: Fiscal Year 2018 Earnings Release Conference Call
Exhibit 99.2 Fiscal Year (FY) 2018 Earnings Release Conference Call May 15, 2018 1
Slide 2: Safe Harbor Statement
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 suc
Slide 3: Fiscal 2018 was challenging
Fiscal 2018 was challenging • Already lower than anticipated refinery turnaround activity was significantly worsened by Hurricane Harvey • Already soft Domestic Nuclear Market now in, what is likely to be, a secular downturn • Westinghouse bankruptcy impacted several Energy Segment BU’s • MNES withd
Slide 4: Fiscal 2018 Highlights
Fiscal 2018 Highlights • Executed on 3 acquisitions and more during year • PSI - switchgear • EPC – powder coating • Rogers Brothers - galvanizing • Added Lectrus Assets in March of FY2019 • Built greenfield powder-coating facility in Crowley, TX • Began production at Catoosa Galvabar plant • Took f
Slide 5: Fiscal 2018 Markets
Fiscal 2018 Markets • Electrical end market spending has shifted • Power generation investment decreased • Increased energy efficiency by consumers • Nuclear plant closures and project cancellations • Gas fired plant construction ‘bow-wave’ is completed • Transmission & distribution investment incre
Slide 6: Total Company Revenue by Market
Total Company Revenue by Market Industrial - General Industry, Oil & Gas, Construction Transmission & Distribution Power Generation FY 2019 Expectation 16% 21% Industrial 54% T&D 60% 19% 30% Power Gen FY2017 FY2018 $864 million $810 million 6
Slide 7: Metal Coatings Revenue by Market
Metal Coatings Revenue by Market FY 2019 Expectation 7% 5% 5% 5% Electrical Utility 39% 39% OEM’s 36% 39% Industrial Bridge & Highway 13% 12% Petrochemical FY 2017 FY 2018 $376 million $389 million Electrical & Telecommunication OEM's Industrial Bridge & Highway Petrochemical 7
Slide 8: Energy: Revenue by Market
Energy: Revenue by Market FY 2019 Expectation 16% Power Gen 37% 41% Industrial 30% 54% 22% T&D FY2017 FY2018 $488 million $421 million Power Generation Industrial Transmission & Distribution 8
Slide 9: Fiscal 2018 Results
Fiscal 2018 Results (Millions Except for EPS and percentages) FY 2018 FY 2017 % change Revenue $ 810.4 $ 863.5 -6.2% Gross Profit $ 160.3 $ 205.3 -21.9% Gross Margin 19.8% 23.8% Operating Profit $ 48.2 $ 98.9 -51.2% Operating Margin 6.0% 11.5% Net Income $ 45.2 $ 61.3 -26.3% Earnings Per Share 5.6%
Slide 10: Fiscal 2018 Adjustments to Earnings
Fiscal 2018 Adjustments to Earnings $ millions Earnings Per Share1 Impairment of long-lived assets 10.8 $0.42 Impairment of accounts receivable due to adverse court decision 2.9 $0.11 Impairment of note receivable from cancelled Chinese contract 1.3 $0.05 Impairment of note receivable with former co
Slide 11: FY 2018 Segment Results
FY 2018 Segment Results $(millions) Energy Metal Coatings Segment Segment FY 2018 Revenue $421.0 $389.4 Operating Income $(1.8) $84.3 Operating Margin -0.4% 21.7% FY 2017 Revenue $488.0 $375.5 Operating Income $52.6 $79.0 Operating Margin 10.8% 21.0% 11
Slide 12: FY 2018 Cash Flow Highlights
FY 2018 Cash Flow Highlights (Millions) FY 2018 FY 2017 Cash flows from operating activities $78.9 $111.2 Less: Capital Expenditures $29.6 $41.4 Free Cash Flow $49.3 $69.7 Net Income $45.2 $61.3 Free Cash Flow/Net Income 109.1% 113.9% Acquisition of subsidiaries, net of cash acquired $44.8 $22.7 Div
Slide 13: Cash Flow by Fiscal Year
Cash Flow by Fiscal Year ($ in Millions) $160.0 $140.0 $120.0 $100.0 $80.0 $60.0 $40.0 $20.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Cash Pro. By Oper. Net Income Free Cash Flow 13
Slide 14: CAPEX, Depreciation & Amortization
CAPEX, Depreciation & Amortization ($ in Millions) $60.0 $50.4 $50.5 $50.0 $46.1 $47.4 *$43.5$43.3 $41.4 $39.9 $40.0 $29.4 $29.4 $29.6 $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 FY2108 CAPEX D&A *Includes $12 million for the rebuild of the J
Slide 15: FY2019 Guidance
FY2019 Guidance FY 2019 Revenue $900 - $960 million Earnings per share $1.75 - $2.25 • Metal Coatings will have stronger Revenue due to inflation, a stronger selling effort, and improved traction on operational improvement initiatives • Metal Coatings Income will benefit from stronger emphasis on va
Slide 16: FY2019 Risks
FY2019 Risks • Refinery turnarounds for the Fall season do not materialize • Metal Coatings cannot offset zinc and direct labor cost increases with price, and operational execution efforts falter • AZZ’s ongoing recruiting and retention efforts fail to provide enough skilled and semi-skilled craft t
Slide 17: Q&A
Q&A 17
Slide 18: Reg G Tables
Reg G Tables 18
Slide 19: Non-GAAP Adjusted Earnings Reconciliation
Non-GAAP Adjusted Earnings Reconciliation In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"), AZZ has provided adjusted earnings and adjusted earnings per share, which are non-GAAP measures. Management believes that th
Slide 20: Non-GAAP Adjusted Earnings Reconciliation
Non-GAAP Adjusted Earnings Reconciliation Thousands except for EPS data Three Months Ended Twelve Months Ended February 28, 2018 February 28, 2018 Per Per Diluted Diluted Amount Share Amount Share GAAP net income and GAAP diluted earnings per share $ 23,487 $ 0.90 $ 45,169 $ 1.73 Adjustments to reco
Slide 21: GAAP to Non-GAAP Free Cash Flow Reconciliation
GAAP to Non-GAAP Free Cash Flow Reconciliation Fiscal Years 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Cash from Operations 38,926 60,196 82,588 42,085 64,065 92,738 107,275 118,157 143,589 111,176 78,909 Less Capital Spending 9,926 20,009 12,037 16,411 19,784 24,923 43,472 29,377 39,861