AZZ Inc.

Good morning and welcome to the AZZ Inc. Fourth Quarter and Fiscal Year 2021 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Joe Dorme, Managing Partner. Please go ahead.

Thank you. Good morning, and thank you all for joining us today to review the financial results for AZZ Inc. for the fourth quarter and fiscal year 2021, ended February 28, 2021. Joining the call today are Tom Ferguson, Chief Executive Officer, Philip Shlom, Chief Financial Officer, and David Nark, Senior Vice President, Marketing, Communication, and IR. After the conclusion of today's prepared remarks, we'll open the call for a question and answer session. Please note, there is a slide presentation for today's call, which can be found on AZZ's Investor Relations page under Latest Earnings Release Presentation at www.azz.com. Before we begin with prepared remarks, I'd like to remind everyone, certain statements made by the management team of AZZ during this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Except for the statements of historical fact, this conference call may contain forward-looking statements that involve risks and uncertainties, some of which are detailed from time to time in documents filed by AZZ with the Securities and Exchange Commission, including the annual report on Form 10-K, for the fiscal year ended February 28, 2021. Those risks and uncertainties include, but are not limited to, changes in customer demand and response to products and services offered by the company, including demand by the power generation markets, electrical transmission and distribution markets, the industrial markets, and the metal coating markets. Prices of raw material costs, 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, foreign and domestic, customer-requested delays of shipment, acquisition opportunities, currency exchange rates, adequate financing, and availability of experienced management and employees to implement the company's growth strategies. In addition, AZZ's customers and its operations could potentially be adversely impacted by the ongoing COVID-19 pandemic. The company can give no assurance that such forward-looking statements will prove to be correct. 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. With that out of the way, let me turn the call over to Tom Ferguson, Chief Executive Officer of AZZ. Tom? Thanks, Joe.

And welcome to our fourth quarter and full year fiscal 2021 earnings call. And thank you for joining us this morning. First, I need to express my great appreciation for the way our AZZ employees, their families, and our partners stepped up during the COVID pandemic and also during the winter storm that impacted a significant portion of our production just two weeks before the end of our fiscal year. Due to the concerted and in some cases extraordinary efforts of our employees, we were able to quickly respond and finish out a profitable fourth quarter. Overall, annual sales declined 21% versus the prior year record reaching $839 million, with metal coatings down 8% to $458 million and infrastructure solutions declining by 32% to $381 million. The lower volumes were driven primarily by the impact on our customers caused by the COVID pandemic, as well as the divestitures we made during the year. I will get into the details of this as we go along. We're pleased to have completed our 34th consecutive year of profitability. And while COVID negatively impacted our results, we were able to take several actions to better position AZZ for the future. We continued to generate strong cash flow during the year with 92 million of net cash provided by operating activities. We generated an adjusted net income of $55 million and adjusted EPS of $2.11 per diluted share. We were successful in completing the divestiture of our SMS and GalvaBar businesses during the year. We closed a couple of galvanizing plants due to both local market conditions and the proximity of our other plants that could efficiently absorb the majority of their business. We also closed the surface technology plant and idled some coating lines, two of which were recently brought back online. In line with our strategic commitment to value creation, we repurchased over 1.2 million shares for 48.2 $3 million and distributed $7.6 million in dividends. In metal coatings, we posted sales at $458 million while achieving operating margins of 23.3 percent on an adjusted basis, up nicely from the previous year. The margin improvement was primarily due to driving operating efficiencies and productivity in the face of rising labor and energy costs. The team completed the acquisition of Acme Galvanizing in Milwaukee near the end of the fiscal year. We remain committed to delivering on the investments made in our surface technology business, but it is important to note that customers for this business were more severely impacted by COVID than on the galvanizing side. Our infrastructure solution segment was severely impacted by the COVID pandemic, particularly in the early part of the year. Sales declined over 32% to $381 million. with adjusted operating income down 52%, generating adjusted margins of 4.1%. We divested the SMS business since it was deemed to be non-core to our long-term strategy. Restructuring and impairment charges for infrastructure solutions totaled $9.2 million for the year. For fiscal 2022, COVID continues to generate some uncertainty, but our folks are managing disruptions well and keeping our employees safe. so we are reaffirming our previously issued guidance. We anticipate sales to be in the range of $835 to $935 million and EPS of $2.45 to $2.95. Metal Coatings is continuing to focus on sales growth, including leveraging our spin galvanizing operations at several sites. They are also focused on operational execution and customer service as labor and operating expenses due to material cost inflation, are increasing. Our infrastructure solution segment is seeing a gradual return to more normalized business activity and entered Q1 with some momentum. Our industrial business is seeing good results from our expanded Poland facility, although globally the business continues to experience some intermittent project delays due to COVID outbreaks at certain customer sites. The electrical platform is focused on operational execution and growing its e-house and switchgear businesses. For fiscal year 2022, AZZ will continue to execute on strategic growth objectives that drive shareholder value. At our core, we're a metal coatings company and a manufacturer of products and provider of services that are critical to sustaining infrastructure. Our commitment to superior customer service is unwavering. Our ability to generate strong cash flow is based on initiatives that drive operational excellence, manage costs, ensure pricing discipline, and emphasis on receivables collection within our operating platforms. We are confident that our businesses remain vital to improving and sustaining infrastructure, so we are actively working to position our core businesses to provide sustainable profitability long into the future. And with that said, I'll turn it over to Philip.