UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
July 7, 2014
AZZ incorporated
(Exact name of Registrant as specified in its charter)
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TEXAS (State or Other Jurisdiction of Incorporation or Organization) | 1-12777 Commission File No. | 75-0948250 (I.R.S. Employer Identification Number) |
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| One Museum Place, Suite 500 3100 West 7th Street Fort Worth, TX 76107 (Address of principal executive offices, including zip code) | |
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Registrant’s Telephone Number, including Area Code: | (817) 810-0095 |
None
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
SECTION 7-REGULATION FD
ITEM 7.01 REGULATION FD DISCLOSURE.
Attached hereto as Exhibit 99.1 are materials to be used by representatives of AZZ incorporated, a Texas corporation (the “Company”), in future presentations to the financial community.
Pursuant to General Instruction B.2 of Form 8-K, the information in Item 7.01 of this Form 8-K, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in any such filing.
The information contained herein is summary information that is intended to be considered in the context of our SEC filings and other public announcements that we may make, by press release or otherwise, from time to time.
The Company undertakes no duty or obligation to publicly update or revise the information contained in this report, although the Company may do so from time to time as management of the Company believes is warranted. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure.
In connection with such future presentations to the financial community, reconciliations between EBITDA (as defined below) and net income and between Free Cash Flow (as define below) to cash provided by operating activities are provided as follows. As used by the Company, these terms may differ from similarly captioned measures used by other companies.
“EBITDA”, a non-GAAP financial measure, is defined as net income before interest, taxes, depreciation and amortization. The Company presents EBITDA because it considers such information an important supplemental measure of its performance and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies with comparable market capitalization, many of which present EBITDA when reporting their results. The Company also uses EBITDA for the following purposes: (1) the Company’s credit agreement uses EBITDA to measure compliance with covenants, such as fixed charge coverage and debt incurrence; (2) EBITDA is also used by potential lenders to evaluate potential transactions with the Company; and (3) EBITDA is also used by the Company to evaluate and price potential acquisition candidates.
EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Some of these limitations are: (a) EBITDA does not reflect changes in, or cash requirements for, the Company’s working capital needs, (b) EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments on the Company’s debts; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA does not reflect any cash requirements for such capital expenditures. Because of these limitations, EBITDA should not be considered as a principal indicator of the Company’s performance. The Company compensates for these limitations by relying primarily on the Company’s GAAP results and using EBITDA only on a supplemental basis.
Free Cash Flow (“FCF”), also a non-GAAP financial measure, is defined as cash provided by operating activities less cash disbursed for capital expenditures excluding acquisitions. The Company presents FCF because it considers such information an important supplemental measure of performance and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies with comparable market capitalization to the Company, many of which present FCF when reporting their results.
FCF has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. These limitations include that FCF excludes significant cash flows, such as principal payments on debt. Because of these limitations, FCF should not be considered as a principal indicator of the Company’s performance. The Company compensates for these limitations by relying primarily on the Company’s GAAP results and using FCF only on a supplemental basis.
(Financial tables are included in the attached Exhibit 99.1 in the section titled “Reg G Tables”.)
SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
ITEM 9.01 EXHIBITS
The following exhibits are filed as part of this report.
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Exhibit 99.1 | AZZ incorporated Presentation |
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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 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 presentation on Form 8-K 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 and its affiliates, including demand by the electrical power generation markets, electrical transmission and distribution markets, the nuclear power generation 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 political stability and economic conditions of the various markets that AZZ and its affiliates serve, both foreign and domestic, customer request delays of shipments, acquisition opportunities, currency exchange rates, adequacy of financing, and availability of experienced management 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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | AZZ incorporated
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Date: July 7, 2014 | By: | /s/ Paul W. Fehlman | |
| | Paul W. Fehlman Senior Vice President Finance Chief Financial Officer | |
EXHIBIT INDEX
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Exhibit 99.1 | AZZ incorporated Presentation |
AZZ incorporated NYSE: AZZ Corporate Presentation July 2014
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,” “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 presentation may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand and responses 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 political stability and economic conditions of the various markets that AZZ serves, both foreign and domestic, customer requested delays of shipments, acquisition opportunities, currency exchange rates, adequacy of financing, and availability of experienced management 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. Forward Looking Statements
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: To be the innovative solutions leader in protecting metal and electrical systems used to build the world's infrastructure Corporate Overview and Vision
4 Expanding Energy segment operating margins through emphasis on international growth a revitalized sales organization operational excellence leveraging fixed costs through top-line growth leveraging our strong NLI sales presence in the Nuclear platform Growing our Galvanizing Services segment organically by acquisition seeking adjacent opportunities in metal finishing Continuing emphasis on cash flow and efficient capital deployment Focus for Fiscal 2015 AZZ has significant growth opportunities that will provide a platform for sustainable earnings growth
5 Total Company: Sales by Segment 59% 41% Actual FY2013 $571 million 45% 55% Actual FY2014 $751 million 41% 59% Projected FY2015 $850 - $900 million Energy Galvanizing Services
6 49% 19% 32% Actual FY2014 $751 million Total Company: Sales by Market Segment 47% 21% 32% Actual FY2013 $571 million Transmission & Distribution Industrial Power Generation
7 Energy Segment
8 52% 48% 36% 13% 51% Actual FY2014 $416 million 77% 23% Energy: Revenue Mix 25% 29% 46% Actual FY2013 $234 million 31% 37% 32% Actual FY2012 $189 million 94% 6% Transmission & Distribution Industrial Power Generation Service Product B y M ar ke t B y Ty p e
9 Power Generation Our products power up the world from any generation source. Our services ensure the safety of lives and equipment. Bus Systems Nuclear Solutions Boiler Services Collector Substations for Renewables Power Distribution Centers
10 Transmission & Distribution Metal Clad Outdoor Switchgear Gas Insulated Bus Duct Portable Substations Power Distribution Centers Relay Panels Utility IPP EPC Co-ops OEM Our T&D products ensure that power is transmitted safely and reliably from generation source to end users.
11 Industrial and Commercial Mining Switchgear Power Distribution Centers Relay Panels Hazardous Duty Lighting Our products & services serve a broad range of industries, including refining, petrochemical, mining, pipeline, and more. Refining Services
12 Backlog FY 2012 FY 2013 FY 2014 FY 2014 FY 2014 FY 2014 FY 2015 Full Year Full Year Q1 Q2 Q3 Q4 Q1 Beginning Backlog 108.4 138.6 221.7 270.6 294.0 290.0 325.0 Acquired Backlog 88.1 51.0 Ending Backlog 138.6 221.7 270.6 294.0 290.0 325.0 309.0 $(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
13 Galvanizing Services
14 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
15 Galvanizing Services Locations Application: “After-fabrication” steel corrosion protection Locations: 36 facilities in 17 states and 3 Canadian Provinces 36th facility acquired 6/30/14
16 Galvanizing Services 39% 11% 30% 8% 12% Actual FY 2013 $337 million Electrical Utility OEM's Industrial Bridge & Highway Petrochemical 35% 12% 35% 5% 13% Actual FY 2014 $336 million
Consolidated Financials
18 Consolidated Net Sales ($ in Millions) $381 $469 $571 $752.0 2011 2012 2013 2014 2015(E) Fiscal Year Actual Projected $850-900 est.
19 Earnings Per Share (Fully Diluted) $1.39 $1.61 $2.37 $2.32 $2.40 to $2.80 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 2011 2012 2013 2014 2015(e) Fiscal Year Actual Projected
20 Operating Margins 16.7% 14.2% 14.7% 11.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% Energy Segment Actual Projected 11-13% 26.1% 26.1% 26.1% 27.4% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Galvanizing Services Actual Projected 26-28%
21 EBITDA Margins ($ in Millions) 11.0% 9.6% 10.4% 16.4% 16.7% 21.2% 23.7% 22.3% 21.4% 24.0% 20.7% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% -$5.0 $95.0 $195.0 $295.0 $395.0 $495.0 $595.0 $695.0 $795.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Fiscal Year Net Sales EBITDA EBITDA Margin
22 Cash Flow ($ in Millions) 5.00 15.00 35.00 55.00 75.00 95.00 115.00 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Fiscal Year Cash Pro. By Oper. Free Cash Flow Net Income *Free Cash Flow = (Cash Provided by Operations minus CAPEX ) and includes $12 million for the rebuild of the Joliet Galvanizing facility in Fiscal 2014 *
23 Total Bank Debt / Long Term Debt to Equity ($ in Millions) 0.98 0.60 0.37 0.32 0.16 0.32 0.00 0.53 0.44 0.88 0.81 0.63 1.08 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 $450.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Fiscal Year Bank Debt Cash Debt to Equity Ratio
24 Capital Expenditures / Depreciation & Amortization ($ in Millions) $16.4 $19.8 $24.9 $43.5 $22.2 $22.6 $29.4 $43.3 $0 $10 $20 $30 $40 $50 2011 2012 2013 2014 2015 est Capital Expenditures D&A Projected CE Projected D&A * $35.0 - $40.0 $45.0 - $50.0 *Includes $12 million for the rebuild of the Joliet Galvanizing facility in Fiscal 2014
25 • Strong Historical Performance • FY14 is the 27th consecutive year of profitability • 10 Yr CAGR – Revenues 18.6%, Net Income 30.2% • Significant Operating Margins • Key Growth Drivers • Aging U.S. energy and industrial infrastructure and required investment • Emerging North American energy independence • International demand for electrical power and energy • Niche products and value added services with strong market share position • Strong Management Team • Successful acquisition track record and opportunities for further expansion and growth • Strong balance sheet and cash flows • Cash Dividend AZZ Investment Summary
Reg G Tables
27 GAAP to Non-GAAP EBITDA Reconciliation FY 2004 - FY 2014 EBITDA ($000's) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Net Income 4,263 4,812 7,827 21,604 27,688 42,206 37,728 34,963 40,736 60,456 59,597 Depreciation 5,606 5,492 5,535 6,478 7,999 12,921 15,603 18,929 18,855 19,365 25,090 Amortization 125 160 184 181 200 1,607 1,823 3,237 3,740 9,999 18,214 Interest 2,407 1,637 1,689 1,495 1,495 6,170 6,838 7,731 13,939 13,043 18,407 Taxes 2,614 2,594 4,204 12,910 16,145 24,704 22,655 19,995 22,905 33,913 34,314 EBITDA 15,016 14,696 19,440 42,669 53,527 87,608 84,648 84,855 100,175 136,775 155,623
28 GAAP to Non-GAAP Free Cash Flow Reconciliation FY 2004 - FY 2014 Free Cash Flow ($000's) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Cash from Operations 14,963 6,471 12,794 6,928 38,926 60,196 82,588 42,085 64,065 92,738 107,275 Less Capital Spending 3,645 6,649 6,602 10,659 9,926 20,009 12,037 16,411 19,784 24,923 43,472 Free Cash Flow 11,318 (178) 6,192 (3,731) 29,000 40,188 70,551 25,674 44,281 67,815 63,804
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