AZZ INC.
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. In addition, certain factors could
affect the outcome of the matters described herein. This Quarterly Report may
contain forward-looking statements that involve risks and uncertainties
including, but not limited to, changes in customer demand for our products and
services, including demand by the power generation markets, electrical
transmission and distribution markets, the industrial markets and the metal
coatings markets. In addition, within each of the markets we serve, our
customers and our operations could potentially continue to be adversely impacted
by the ongoing coronavirus ("COVID-19") pandemic, including governmental issued
mandates regarding the same. We could also experience additional increases in
labor costs, components and raw materials, including zinc and natural gas, which
are used in our hot dip galvanizing process; supply-chain vendor delays;
customer requested delays of our products or services; delays in additional
acquisition or disposition opportunities; currency exchange rates; adequacy of
financing; availability of experienced management and employees to implement
AZZ's growth strategy; a downturn in market conditions in any industry relating
to the products we inventory or sell or the services that we provide; economic
volatility or changes in the political stability in the United States and other
foreign markets in which we operate; acts of war or terrorism inside the United
States or abroad; and other changes in economic and financial conditions. 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, 2021
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.
The following discussion should be read in conjunction with management's
discussion and analysis contained in our Annual Report on Form 10-K for the
fiscal year ended February 28, 2021 , and with the condensed consolidated
financial statements and notes thereto included in this Quarterly Report on Form
10-Q.
RESULTS OF OPERATIONS
Strategy
We have a developed strategy and periodically review our strategy against our
performance, market conditions and competitive threats. During the third quarter
of fiscal 2021, we publicly announced strategic and financial initiatives to
enhance shareholder value. These initiatives included a comprehensive, Board-led
review of our portfolio and capital allocation and the engagement of leading
independent financial, legal and tax advisors in support of this review. We have
completed much of the review and continue to aggressively pursue these
initiatives in fiscal 2022. We believe these actions will allow us to accelerate
the strategy to become a predominantly metal coatings focused company, which we
believe will more rapidly enhance shareholder value.
Coronavirus (COVID-19)
The continued uncertainty associated with COVID-19, and any of the ongoing
variants, did not have a material adverse effect on our results of operations
for the three months ended November 30, 2021 . While we continue to support our
customers, there remains uncertainties regarding the duration and, to what
extent, if any, that the COVID-19 pandemic, or newly identified variants, or
additional regulatory requirements, will ultimately have on the demand for our
products and services or with our supply chain or our employees.
18
--------------------------------------------------------------------------------
Table of Contents
The impact of COVID-19 to the Company's personnel and operations has been
limited. During the third quarter of fiscal 2022, the Company continued to see
improvement in sales and operating income in both of its operating segments.
However, labor market and supply chain challenges have increased during the
current quarter, resulting in increased operating expenses as the constrained
labor market and supply chain disruptions impacted the availability and cost of
labor and materials. In addition, new vaccine mandates were announced on
September 9, 2021 . Since the most current pronouncements indicate the mandates
must be implemented by January 10, 2022 , the extent of the regulatory impact is
unclear at this time and could potentially have an adverse impact on our future
operations. We cannot reasonably estimate the severity of this pandemic or the
government's mandates regarding the same, or the extent to which the disruption
may materially impact our consolidated balance sheets, statements of income or
statements of cash flows for fiscal year 2022 or beyond.
Overview
We have two distinct operating segments, the Metal Coatings segment and the
Infrastructure Solutions segment. Management believes that the most meaningful
analysis of our results of operations is to analyze our performance by segment.
We use sales and operating income by segment to evaluate the performance of our
segments. Segment operating income consists of sales less cost of sales and
selling, general and administrative expenses that are specifically identifiable
to a segment. For a reconciliation of segment operating income to consolidated
operating income, see Note 4 to our consolidated financial statements included
in this Quarterly Report on Form 10-Q.
During the nine months ended November 30, 2021 , we have continued to execute our
plan to divest certain non-core businesses, which was approved by the board of
directors in fiscal 2021. As of November 30, 2021 , one business in our
Infrastructure Solutions segment and one non-operating location in our Metal
Coatings segment remain classified as held for sale. The assets and liabilities
of these locations are expected to be disposed of within the next twelve months,
and are included in "Assets held for sale" in the accompanying consolidated
balance sheets.
Orders and Backlog
Our backlog relates entirely to our Infrastructure Solutions segment and
excludes transaction taxes for certain foreign subsidiaries. As of November 30,
2021 , backlog increased $31.6 million from February 28, 2021 , to $217.7 million .
Our backlog increased $43.3 million , or 24.8%, compared to $174.4 million for
the same period in the prior fiscal year. The increase in backlog is primarily
due to an increase in backlog in the Electrical platform, partially offset by
the continued reduction of international backlog, including China , related to
several non-recurring contracts, and, to a lesser extent, divestitures that
occurred in fiscal year 2021. For the three months ended November 30, 2021 , net
bookings increased $53.6 million , or 27.6%, to $248.0 million , compared to same
period of fiscal 2021, as a result of strong bookings in our Electrical platform
and continued strong sales in the Metal Coatings segment. The book-to-sales
ratio increased to 1.07, from 0.86.
The table below includes the progression of backlog (in thousands):
Period Ended Period Ended
Backlog 2/28/2021 $ 186,119 2/29/2020 $ 243,799
Net bookings 229,805 174,865
Acquired backlog - -
Sales recognized (229,826) (213,293)
Backlog 5/31/2021 186,098 5/31/2020 205,371
Book to sales ratio 1.00 0.82
Net bookings 231,821 208,627
Sales recognized (216,447) (203,372)
Backlog 8/31/2021 $ 201,472 8/31/2020 $ 210,626
Book to sales ratio 1.07 1.03
Net bookings 247,984 194,376
Backlog adjusted due to divestiture - (4,026)
Sales recognized (231,737) (226,623)
Backlog 11/30/2021 217,719 11/30/2020 174,353
Book to Sales ratio 1.07 0.86
19--------------------------------------------------------------------------------
Table of Contents
QUARTER ENDED
Segment Sales
The following table reflects the breakdown of sales by segment (in thousands):
Three Months Ended November 30,
2021 2020
Sales:
Metal Coatings $ 133,373 $ 115,616
Infrastructure Solutions 98,364 111,007
Total Sales $ 231,737 $ 226,623
For the three months ended November 30, 2021 (the "current quarter"),
consolidated sales increased $5.1 million , or 2.3%, compared to the three months
ended November 30, 2020 (the "prior year quarter"). Sales for the Metal Coatings
segment increased $17.8 million , or 15.4%, for the current quarter, compared to
the prior year quarter. The increase was primarily due to improved price
realization for our superior quality and service and the acquisition of a metal
coatings business during the fourth quarter of fiscal 2021.
Sales for the Infrastructure Solutions segment decreased $12.6 million , or
11.4%, for the current quarter, compared to the prior year quarter. In the
Industrial platform, the decrease was primarily due to net sales decreases in
our international operations and the divestiture of SMS during the third quarter
of fiscal 2021, partially offset by an increase in domestic sales. In the
Electrical platform, sales decreased due to a delay in material receipts
resulting from supply chain disruptions and the constrained labor market at
several of our enclosure and switchgear plants in our domestic operations, and
lower sales in China as several projects near completion. These decreases were
partially offset by an increase in our domestic bus duct sales.
Segment Operating Income
The following table reflects the breakdown of operating income by segment (in
thousands):
Three Months Ended November 30, 2021 Three
Months Ended
Infra- Infra-
structure structure
Metal Coatings Solutions Corporate Total Metal Coatings Solutions Corporate Total
Operating income (loss):
Sales $ 133,373 $ 98,364 $ - $ 231,737 $ 115,616 $ 111,007 $ - $ 226,623
Cost of sales 96,361 78,412 - 174,773 83,553 88,395 - 171,948
Gross margin 37,012 19,952 - 56,964 32,063 22,612 - 54,675
Selling, general and
administrative 4,288 10,763 11,821 26,872 3,673 12,033 9,522 25,228 Restructuring and impairment charges - - - - (281) 1,857 - 1,576 Total operating income (loss)$ 32,724 $ 9,189 $ (11,821) $ 30,092 $ 28,671 $ 8,722 $ (9,522) $ 27,871 Operating income for the Metal Coatings segment increased$4.1 million , or 14.1%, for the current quarter, compared to the prior year quarter. The current quarter increase was due to improved sales as described above and the achievement of operational efficiencies in our Surface Technologies platform. Operating income for the Infrastructure Solutions segment increased by$0.5 million , or 5.4%, for the current quarter, compared to the prior year quarter. Industrial platform sales increased for our domestic operations, and the segment benefited from the divestiture of SMS during the third quarter of fiscal year 2021, which incurred losses in the prior year. These increases were partially offset by a decrease in operating income in our international operations. In the Electrical platform, operating income decreased for our enclosures and switchgear products due to increased costs for labor and materials as a result of the 20 -------------------------------------------------------------------------------- Table of Contents constrained labor market and supply chain disruptions. The decrease was partially offset by an increase in operating income for our lighting and tubing products. Corporate expenses increased$2.3 million , or 24.1%, for the current quarter, compared to the prior year quarter. The increase is primarily due to increases related to payroll and compensation costs, as well as external consulting costs associated with our ongoing strategic review. Restructuring and Impairment Charges During the current quarter, we continued to execute a plan to divest certain non-core businesses. During the first nine months endedNovember 30, 2020 , we closed on the sale of two businesses, and the board of directors approved a plan to divest certain other businesses within the Company. As ofNovember 30, 2021 , one additional business in our Infrastructure Solutions segment and one non-operating location in our Metal Coatings segment continue to be classified as held for sale. The assets and liabilities of the businesses expected to be disposed of within the next twelve months are included in "Assets held for sale" in the accompanying consolidated balance sheets. During the current quarter, no restructuring and impairment charges were recorded. During the prior year quarter, we recorded certain charges related to these restructuring activities, which are summarized in the table below: Three
Months Ended
Infra-
structure
Metal Coatings Solutions Total
Write down on assets held for sale to
estimated sales price $ (231) $ - $ (231)
Write down of assets expected to be abandoned (43) - (43)
(Gain)/loss on sale of subsidiaries (7) 1,859 1,852
Costs associated with assets held for sale - (2) (2)
Total charges $ (281) $ 1,857 $ 1,576
Other (income) expense, net
Other expense was $1.4 million for the current quarter, compared to other income
of $0.7 million for the prior year quarter. The increase was primarily due to
unfavorable foreign exchange transaction adjustments in the current year.
Interest Expense
Interest expense for the current quarter decreased $0.6 million , or 28.3%, to
$1.6 million , compared to $2.3 million for the prior year quarter. The decrease
in interest expense was primarily attributable to the Company's 2020 Senior
Notes, which were funded in late fiscal 2021. While the borrowings under the
2020 Senior Notes increased $25.0 million to $150.0 million , they carry lower
interest rates than the Company's previous senior notes.
Income Taxes
The provision for income taxes reflects an effective tax rate of 22.0% for the
current quarter, compared to 25.1% for the respective prior year quarter. The
decrease in the effective tax rate was primarily attributable to unfavorable
adjustments recorded in the prior year quarter, related to an IRS audit
settlement for research and development tax credits.
21
--------------------------------------------------------------------------------
Table of Contents
NINE MONTHS ENDED NOVEMBER 31, 2021 COMPARED TO THE NINE MONTHS ENDED NOVEMBER
31, 2020
Segment Sales
The following table reflects the breakdown of sales by segment (in thousands):
Nine Months Ended November 30,
2021 2020
Sales:
Metal Coatings $ 390,701 $ 351,643
Infrastructure Solutions 287,309 291,644
Total Sales $ 678,010 $ 643,287
For the nine months ended November 30, 2021 (the "current nine-month period"),
consolidated sales increased $34.7 million , or 5.4%, compared to the nine months
ended November 30, 2020 (the "prior year nine-month period"). Sales for the
Metal Coatings segment increased $39.1 million , or 11.1%, for the current
nine-month period, compared to the prior year nine-month period. The increase in
sales was primarily due to improved price realization for our superior quality
and service and the acquisition of a metal coatings facility during the fourth
quarter of fiscal 2021. The volume of steel processed also increased in the
current period, compared to the prior year period.
Sales for the Infrastructure Solutions segment decreased $4.3 million , or 1.5%,
for the current nine-month period, compared to the prior year nine-month period.
Sales decreased in the Industrial platform, primarily due to the divestiture of
SMS in the third quarter of fiscal year 2021, partially offset by sales
increases in both domestic and international operations (as the prior year was
significantly impacted by COVID-19). In the Electrical platform, sales decreased
due to a delay in material receipts due to supply chain disruptions and the
constrained labor market at several of our enclosure and switchgear plants in
our domestic operations, and lower sales in China as several projects near
completion. The decrease in our enclosure and switchgear plants was partially
offset by an increase in our domestic bus duct sales.
Segment Operating Income
The following table reflects the breakdown of operating income by segment (in
thousands):
Nine Months Ended November 30, 2021 Nine
Months Ended
Infra- Infra-
structure structure
Metal Coatings Solutions Corporate Total Metal Coatings Solutions Corporate Total
Operating income (loss):
Sales $ 390,701 $ 287,309 $ - $ 678,010 $ 351,643 $ 291,644 $ - $ 643,287
Cost of sales 282,198 225,806 - 508,004 258,983 241,328 - 500,311
Gross margin 108,503 61,503 - 170,006 92,660 50,316 - 142,976
Selling, general and
administrative 12,615 35,665 34,394 82,674 12,262 37,726 29,879 79,867 Restructuring and impairment charges - - - - 11,043 9,226 - 20,269 Total operating income (loss)$ 95,888 $ 25,838
Operating income for the Metal Coatings segment increased$26.5 million , or 38.3%, for the current nine-month period, compared to the prior year nine-month period. The increase was primarily due to impairment and restructuring charges recognized in fiscal 2021 of$11.0 million , the increase in sales as described above and the achievement of operational efficiencies in our surface technologies platform. Operating income for the Infrastructure Solutions segment increased by$22.5 million , or 668.1%, for the current nine-month period, compared to the prior year nine-month period. Gross margins improved on operating leverage within both the Industrial and Electrical platforms compared to prior year, as well as a divestiture of an under-performing business in the Industrial platform in the third quarter of fiscal year 2021. In addition, in the prior year to date period, operating income was 22 -------------------------------------------------------------------------------- Table of Contents impacted by an impairment on assets being classified as assets held for sale and other asset impairments of$9.2 million , as discussed below. Corporate expenses increased$4.5 million , or 15.1%, for the current nine-month period, compared to the prior year nine-month period. The increase is primarily due to increases in payroll and compensation costs, and external consulting costs associated with the ongoing strategic review. Restructuring and Impairment Charges During the current nine-month period, we continued to execute a plan to divest certain non-core businesses. During the prior year nine-month period, we closed on the sale of two businesses, and the board of directors approved a plan to divest certain other businesses within the Company. As ofNovember 30, 2021 , one additional business in our Infrastructure Solutions segment and one non-operating location in our Metal Coatings segment continue to be classified as held for sale. The assets and liabilities of the businesses expected to be disposed of within the next twelve months are included in "Assets held for sale" in the accompanying consolidated balance sheets. During the current nine-month period, no restructuring and impairment charges were recorded. During the compared to the prior year nine-month period, we recorded certain charges related to these restructuring activities, which are summarized in the table below: Nine
Months Ended
Infra-
structure
Metal Coatings Solutions Total
Write down on assets held for sale to
estimated sales price $ 2,930 $ 4,100 $ 7,030
Write down of assets expected to be abandoned 6,922 - 6,922
Loss on sale of subsidiaries 1,191 1,859 3,050
Write down of excess inventory - 2,511 2,511
Costs associated with assets held for sale - 756 756
Total charges $ 11,043 $ 9,226 $ 20,269
Other (income) expense, net
Other expense was $1.4 million for the current nine-month period, compared to
$0.8 million for the prior year nine-month period. The increase was primarily
due to unfavorable foreign exchange transaction adjustments for foreign costs
and intercompany loans in the current year.
Interest Expense
Interest expense for the for the current nine-month period decreased $2.3
million , or 31.1%, to $5.1 million , compared to $7.4 million for the prior year
nine-month period. The decrease was primarily attributable to the Company's 2020
Senior Notes, which were funded in late fiscal 2021. While the borrowings under
the 2020 Senior Notes increased $25.0 million to $150.0 million , they carry
lower interest rates than the Company's previous senior notes.
Income Taxes
The provision for income taxes reflects an effective tax rate of 22.9% for the
current nine-month period, compared to 32.3% for the prior year nine-month
period. The current year decrease in the effective tax rate of 940 basis points
is the result of the prior year impact of restructuring and impairment charges
and an IRS settlement for research and development tax credits for multiple
years, which more than offset current year recognition of uncertain tax
positions.
23
--------------------------------------------------------------------------------
Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
We have historically met our cash needs through a combination of cash flows
from operating activities along with bank and bond market debt. Our cash
requirements generally include cash dividend payments, capital improvements,
debt repayment, acquisitions, and share repurchases. We believe that our cash
position, cash flows from operating activities and our expectation of continuing
availability to draw upon our credit facilities are sufficient to meet our cash
flow needs for the foreseeable future.
Cash Flows
The following table summarizes our cash flows by category and working capital
for the periods presented (in thousands):
Nine
Months Ended
2021 2020
Net cash provided by operating activities $ 49,668 $ 59,394
Net cash used in investing activities (16,425) (14,987)
Net cash used in financing activities (29,167) (64,229)
Working Capital 230,878 189,642
Net cash provided by operating activities for the current nine-month period was
$49.7 million , compared to $59.4 million for the prior year nine-month period.
The decrease in cash provided by operating activities is primarily attributable
to increased net income, which was impacted by $20.3 million of impairment and
restructuring charges in the prior year nine-month period, and increases in
working capital from contract assets and liabilities, accounts payable and
accrued expenses. These increases were more than offset by decreases in working
capital from accounts receivable, inventories and prepaid assets.
Net cash used in investing activities for the current nine-month period was
$16.4 million , compared to $15.0 million for the prior year nine-month period.
The increase in cash used for investing activities for the current quarter was
primarily attributable decreased proceeds from the sale of subsidiaries, due to
the sale of our Galvabar business in the prior year, partially offset by
decreased capital expenditures in the current year.
Net cash used in financing activities for the current nine-month period was
$29.2 million , compared to $64.2 million for the prior year nine-month period.
The decrease in cash used in financing activities during the current quarter was
primarily attributable to an increase in net draws on our credit facility and a
decrease in repurchases of shares of Company common stock. See "Share
Repurchases" sections below for additional information.
Financing and Capital
On July 8, 2021 , the Company refinanced its current unsecured revolving credit
facility, which was scheduled to mature in March 2022 , with a new five-year
senior unsecured revolving credit facility dated July 8, 2021 by and among the
Company, borrower, Citibank, N.A ., as administrative agent and the other agents
and lender parties thereto (the "2021 Credit Agreement"). The 2021 Credit
Agreement matures in July 2026 and includes the following significant terms:
i.provides for a senior unsecured revolving credit facility with a principal
amount of up to $400.0 million revolving loan commitments, and includes an
additional $200.0 million uncommitted incremental accordion facility;
ii.interest rate margin ranges from 87.5 bps to 175 bps for Eurodollar Rate
loans, and from 0.0 bps to 75 bps for Base Rate loans (as defined in the 2021
Credit Agreement), depending on leverage ratio of the Company and its
consolidated subsidiaries as a group;
iii.includes a letter of credit sub-facility up to $85.0 million for the
issuance of standby and commercial letters of credit,
iv.includes a $50.0 million sublimit for swing line loans;
v.includes customary representations and warranties, affirmative covenants and
negative covenants, and events of default, including restrictions on incurrence
of non-ordinary course debt, investment and dividends, subject to various
exceptions, carve-outs and baskets; and
vi.includes a maximum leverage ratio financial covenant and an interest coverage
ratio financial covenant, each to be tested at each quarter end.
The proceeds of the advances under the 2021 Credit Agreement are to be utilized
primarily to finance working capital needs, capital improvements, dividends,
acquisitions and for general corporate purposes.
24
--------------------------------------------------------------------------------
Table of Contents
The foregoing summary of material terms and provisions of the 2021 Credit
Agreement does not purport to be complete and is qualified in its entirety by
reference to the 2021 Credit Agreement, a copy of which is attached hereto as
Exhibit 10.3 to this Form 10-Q and is incorporated herein by reference.
As of November 30, 2021 , we had $192.0 million of total debt outstanding with
varying maturities through fiscal 2032 and we were in compliance with all of the
covenants related to these outstanding borrowings. As of November 30, 2021 , we
had approximately $348.2 million of additional credit available for future draws
or letters of credit.
Share Repurchase Program
During the current nine-month period, the Company repurchased 564,300 of its
common shares in the amount of $28.9 million at an average purchase price of
$51.16 under the 2020 Share Authorization. For additional information regarding
our share repurchases during the current year-to-date period, see Part II, "Item
2. Unregistered Sales of Equity Securities and Use of Proceeds."
Other Exposures
We have exposure to commodity price increases in both of our operating segments,
primarily copper, aluminum, steel and nickel-based alloys in the Infrastructure
Solutions segment and zinc and natural gas in the Metal Coatings segment. We
attempt to minimize these increases through escalation clauses in customer
contracts for copper, aluminum, steel and nickel-based alloys, when market
conditions allow and through fixed cost contract purchases on zinc. In addition
to these measures, we attempt to recover other cost increases through
improvements to our manufacturing process, supply chain management, and through
increases in prices where competitively feasible.
Off Balance Sheet Arrangements and Contractual Obligations
As of November 30, 2021 , we did not have any off-balance sheet arrangements as
defined under SEC rules. Specifically, there were no off-balance sheet
transactions, arrangements, obligations (including contingent obligations), or
other relationships with unconsolidated entities or other persons that have, or
may have, a material effect on the financial condition, changes in financial
condition, sales or expenses, results of operations, liquidity, capital
expenditures or capital resources of the Company.
As of November 30, 2021 , we had outstanding letters of credit in the amount of
$20.6 million . These letters of credit are issued for a number of reasons, but
are most commonly issued in lieu of customer retention withholding payments
covering warranty or performance periods.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity
with U.S. GAAP requires us to make judgments, assumptions, and estimates that
affect the amounts reported in the condensed consolidated financial statements
and the accompanying notes. We continuously evaluate our estimates and
assumptions based upon current facts, historical experience, and various other
factors that we believe are reasonable under the circumstances to determine
reported amounts of assets, liabilities, sales and expenses that are not readily
apparent from other sources.
During the current nine-month period, there were no significant changes to our
critical accounting policies and estimates compared to the critical accounting
policies and estimates disclosed in Part II, Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations, of our Annual Report
on Form 10-K for the year ended February 28, 2021 .
Recent Accounting Pronouncements
See Note 1 to the condensed consolidated financial statements, included herein,
for a full description of recent accounting pronouncements, including the actual
and expected dates of adoption and estimated effects on our consolidated results
of operations and financial condition, which is incorporated herein by
reference.
25
--------------------------------------------------------------------------------
Table of Contents
Non-GAAP Disclosures
In addition to reporting financial results in accordance with Generally Accepted
Accounting Principles in the United States ("GAAP"), the Company has provided
adjusted operating income, adjusted earnings and adjusted earnings per share
(collectively, the "Adjusted Earnings Measures"), which are non-GAAP measures.
Management believes that the presentation of these measures provides investors
with a greater transparency comparison of operating results across a broad
spectrum of companies, which provides a more complete understanding of the
Company's financial performance, competitive position and prospects for the
future. Management also believes that investors regularly rely on non-GAAP
financial measures, such as adjusted operating income, adjusted earnings and
adjusted earnings per share, to assess operating performance and that such
measures may highlight trends in the Company's business that may not otherwise
be apparent when relying on financial measures calculated in accordance with
GAAP.
In fiscal 2021, the Company developed and began the implementation of a plan to
divest certain non-core businesses and later, divested several non-core
businesses. During the nine months ended November 30, 2021 , the Company did not
recognize any restructuring and impairment charges. The following tables
provides a reconciliation for the three and nine months ended November 30, 2021
and 2020 between the various measures calculated in accordance with GAAP to the
Adjusted Earnings Measures (in thousands, except per share data):
Three Months Ended November 30, Nine Months Ended November 30,
2021 2020 2021 2020
Operating income 30,092 $ 27,871 87,332 $ 42,840
Restructuring and impairment
charges - 1,576 - 20,269
Adjusted operating income $ 30,092 $ 29,447 $ 87,332 $ 63,109
Three Months Ended Nine Months Ended
November 30, 2020 November 30, 2020
Per Per
Amount Diluted Share Amount Diluted Share
Net income and diluted earnings per share $ 19,703 $ 0.76 $ 23,454 $ 0.90
Adjustments (net of tax):
Restructuring and impairment charges:
Metal Coatings (281) (0.01) 11,043 0.42
Infrastructure Solutions 1,857 0.07 9,226 0.35
Subtotal 1,576 0.06 20,269 0.77
Tax benefit related to restructuring and
impairment charges (347) (0.01) (4,459) (0.17)
Total adjustments 1,229 0.05 15,810 0.61
Adjusted earnings and adjusted earnings per
share $ 20,932 $ 0.80
(1) Earnings per share amounts included in the table above may not sum due to rounding differences.
26
--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source
