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AZZ Inc. Reports Operating Results (10-Q)

January 07, 2011 | About:
10qk

10qk

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AZZ Inc. (AZZ) filed Quarterly Report for the period ended 2010-11-30.

Azz Inc. has a market cap of $488.8 million; its shares were traded at around $39.18 with a P/E ratio of 14.5 and P/S ratio of 1.4. The dividend yield of Azz Inc. stocks is 2.6%. 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, Mario Gabelli of GAMCO Investors.

Highlight of Business Operations:

Revenues in the Galvanizing Services Segment increased $24.0 million, or 63%, for the three-month period ended November 30, 2010, as compared to the same period in fiscal 2010 and increased $43.4 million, or 37%, for the nine-month period ended November 30, 2010, as compared to the same periods in fiscal 2010. The volume of steel processed increased 58% and 36% for the three and nine months periods ended November 30, 2010, respectively, as compared to the same periods in the prior year. The average selling price for the three and nine month periods ended November 30, 2010, increased 2% and decreased 1% respectively, as compared to the same periods in the prior year. The revenues from the acquisition of NGA accounted for 76% and 77% of the increase in revenues for the three and nine month periods ended November 30, 2010, respectively. Revenues from the NGA acquisition were $­­­18.3 million and $33.3 million for the three and nine month periods ended November 30, 2010. Historically, revenues for this segment have closely followed the condition of the industrial sector of the general economy.

In the Galvanizing Services Segment, operating income increased 46% and 18% for the three and nine-month periods ended November 30, 2010, to $15.4 million and $42.1 million, respectively, as compared to $10.5 million and $35.6 million, respectively, for the same periods in fiscal 2010. Operating profit from NGA was $4.5 million and $8.0 million for the three and nine month periods ended November 30, 2010. Operating margins were 25% and 26%, respectively, for the three and nine-month periods ended November 30, 2010, as compared to 28% and 30%, respectively, for the comparable periods in fiscal 2010. Lower operating margins were the result of higher zinc costs for the current periods.

General corporate expenses, (see Note 4 to consolidated financial statements) not specifically identifiable to a segment, for the three-month period ended November 30, 2010, were $4.6 million compared to $4.0 million for the same period in fiscal 2010. For the nine-month period ended November 30, 2010, general corporate expenses were $16.6 million as compared to $14.5 million for the comparable period last year. The majority of the increase in general and corporate expenses was due to the $1.8 million of expensed acquisition cost during the nine month period ended November 30, 2010. As a percentage of sales, general corporate expenses were 4% and 6%, respectively, for the three and nine-month periods ended November 30, 2010, as compared to 5% for the same periods in fiscal 2010.

Net interest expense for the three and nine-month periods ended November 30, 2010 increased 3% and 2%, respectively, as compared to the same periods in fiscal 2010 to $1.8 million for the three months and $5.2 million for the nine months ended November 30, 2010. Increased interest expense for the compared periods was the result of an increase in short term borrowing against our revolving line of credit required to fund the acquisition of NGA. We repaid the amounts borrowed to fund this acquisition, which totaled $12.0 million, at the end of November 2010. We had outstanding long term debt of $100 million as of November 30, 2010 and November 30, 2009. Our long-term debt to equity ratio was .40 to 1 as of November 30, 2010, as compared to .45 to 1 at the same date in fiscal 2010.

Our operating activities generated cash flows of approximately $25.5 million for the nine-month period ended November 30, 2010, and $65.5 million during the same period in the prior fiscal year. Increased working capital requirement, primarily in our Galvanizing Services Segment, for the nine month period ended November 30, 2010, accounted for the decrease in cash flow from operations as compared to the same period in the prior year. Cash flow from operations for the nine months ended November 30, 2010 included net income in the amount of $25.7 million, depreciation and amortization in the amount of $16.2 million, and other adjustments to reconcile net income to net cash in the amount of a $2.5 million. Included in other adjustments were provisions for bad debt, deferred income taxes, gain or loss on the sale of assets and non-cash adjustments. Positive cash flow was recognized due to increased accounts payable in the amount of $2.7 million. These positive cash flow items were offset by increased accounts receivable, inventories, prepaids and revenue in excess of billings of $5.2 million, $7.8 million, $.6 million and $4.4 million, respectively and a decrease in accrued liability of $3.4 million. The significant decrease in accrued liabilities was due to the payment of the fiscal 2010 profit sharing payment to our employees in the amount of $6.1 million. Accounts receivable average days outstanding were 48 days and 53 days, respectively, as of November 30, 2010 and February 28, 2010.

Cash used in investing activities during the nine months ended November 30, 2010, was approximately $11.0 million related to capital improvements. The purchase of NGA was completed during the second quarter of fiscal 2011 for a purchase price of $132 million, net of cash acquired of $28 million, resulted in a net cash outlay of $104 million.

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