Azz Inc. has a market cap of $532.2 million; its shares were traded at around $42.84 with a P/E ratio of 15.3 and P/S ratio of 1.5. The dividend yield of Azz Inc. stocks is 2.3%. Azz Inc. had an annual average earning growth of 18.9% over the past 10 years.AZZ is in the portfolios of John Keeley of Keeley Fund Management, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC, Kenneth Fisher of Fisher Asset Management, LLC.
Highlight of Business Operations:In the Galvanizing Services Segment, operating income increased 24% and 6% for the three and six-month periods ended August 31, 2010, to $15.2 million and $26.7 million, respectively, as compared to $12.3 million and $25.1 million, respectively, for the same periods in fiscal 2010. The increase in operating income is from the acquisition of NGA. The acquisition of NGA generated $3.6 million of operating income for the second quarter of fiscal 2011. Operating margins were 26% and 27% for the three and six-month periods ended August 31, 2010, as compared to 31% for both comparable periods in fiscal 2010. Lower operating margins are the result of higher zinc costs for the compared periods.
General corporate expenses, (see Note 4 to consolidated financial statements) not specifically identifiable to a segment, for the three-month period ended August 31, 2010, were $5.5 million compared to $4.8 million for the same period in fiscal 2010. For the six-month period ended August 31, 2010, general corporate expenses were $12 million as compared to $10.5 million for the comparable period in the prior year. The increase in general and corporate expense was due to $1.8 million of expensed acquisition cost during the six month period ended August 31, 2010. As a percentage of sales, general corporate expenses were 6% and 7%, respectively, for the three and six-month periods ended August 31, 2010, as compared to 5% and 6%, respectively, for the same periods in fiscal 2010.
Net interest expense for the three and six-month periods ended August 31, 2010 was basically unchanged at $1.8 million for the three months and $3.5 million for the six months ended August 31, 2010. The Notes were issued on March 31, 2008 and therefore the prior year had one less month of interest expense relating to the Notes than the current year. We had outstanding long term debt of $112 million as of August 31, 2010 and $100 million as of August 31, 2009. We drew down $12 million under our revolving line of credit to complete the NGA acquisition.
Our operating activities generated cash flows of approximately $8 million for the six-month period ended August 31, 2010, and $36.9 million during the same period in the prior fiscal year. Cash flow from operations for the six months ended August 31, 2010 included net income in the amount of $16 million, depreciation and amortization in the amount of $10.3 million, and other adjustments to reconcile net income to net cash in the amount of a $1.2 million. Included in other adjustments were provisions for bad debt in the amount of $.02 million, deferred income taxes in the amount of ($1.4) million, gain or loss on the sale of assets in the amount of ($.06) million, and non-cash adjustments in the amount $2.6 million. Negative cash flow was recognized due to increased accounts receivable, inventories, prepaid expenses and revenue in excess of billings in the amount of $6.6 million, $4.7 million, $1.5 million and $0.6 million, respectively, and decreased accounts payable and accrued liabilities in the amounts of $0.9 million, and $5.1 million, respectively. Accounts receivable average days outstanding were 50 days for the period ended August 31, 2010, as compared to 53 days at February 28, 2010.
Cash used in investing activities during the six months ended August 31, 2010 was approximately $109.4 million, with $5.5 million related to capital improvements. The purchase of NGA was completed during the second quarter for a purchase price of $132 million, net of cash acquired of $28 million resulting in a net cash outlay of $104 million.
On April 29, 2010, we entered into the Fifth Amendment to the Second Amended and Restated Credit Agreement by and among AZZ, Bank of America, N.A. (“Bank of America”) and certain other lenders (including Bank of America) (the “Credit Agreement”), which replaced our Second Amended and Restated Revolving and Term Credit Agreement dated as of May 25, 2006. The Credit Agreement provides for an $80 million revolving line of credit with one lender, Bank of America, N.A., maturing on May 25, 2014. This is an unsecured revolving credit facility, which we used to refinance outstanding borrowings and is used to provide for working capital needs, capital improvements, future cash dividend payments, future acquisitions, and letter of credit needs. At August 31, 2010, we had $12 million outstanding under the revolving credit facility. Also, we had letters of credit outstanding in the amount of $12.6 million, which left approximately $55.4 million of additional credit available under the revolving credit facility.
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