AZZ Inc. Reports Fiscal Year 2025 First Quarter Results
Record Quarterly Sales and Margin Expansion on Organic Growth Generated Significant Cash Flow
Fiscal Year 2025 First Quarter Overview (as compared to prior year(1)):
- Total Sales
$413.2 million , up 5.7%- Metal Coatings sales of
$176.7 million , up 4.7% Precoat Metals sales of$236.5 million , up 6.5%
- Metal Coatings sales of
- Net Income of
$39.6 million , up 38.8%; Net loss to common shareholders of$36.8 million reflects the redemption premium payment on the Series A Preferred Stock of$75.2 million - Adjusted net income of
$44.0 million , up 31.9%; Adjusted net income for common shareholders of$42.8 million - GAAP loss of
$1.38 per diluted share reflects the redemption premium payment, Adjusted diluted EPS of$1.46 , up 28.1% - EBITDA of
$94.1 million or 22.8% of sales, versus prior year of$85.4 million or 21.8% of sales - Segment EBITDA margin of 30.9% for Metal Coatings and 20.2% for
Precoat Metals - Cash flow from operations of
$71.9 million supported debt reduction of$25.0 million , resulting in net leverage ratio of 2.8x - Strengthened balance sheet with secondary public offering of common stock to fully redeem the Series A Preferred Stock
(1) |
Adjusted Net Income, Adjusted EPS, EBITDA and net leverage ratio are non-GAAP financial measures as defined and reconciled in the tables below. |
This quarter, we continued to generate strong operating cash flows that permitted us to further strengthen our balance sheet. We completed a secondary public offering of common stock, and fully redeemed the Company's Series A Preferred Stock. Additionally, we repriced our Term Loan B, resulting in a 50-basis point reduction in our borrowing rate with no other changes to our terms, covenants, or maturity date. We further reduced debt by
As we communicated last quarter, we are well positioned to take advantage of an increase in infrastructure projects and are pleased to see the rebound in many end markets. We remain encouraged about our sales prospects driven by the secular tailwinds that exist for non-building construction relating to infrastructure and renewables projects, reshoring of manufacturing, and continued migration to more environmentally friendly pre-painted steel and aluminum. I want to thank our AZZ team for their dedicated performance and focus on executing well in the first quarter of fiscal year 2025," Ferguson concluded.
Fiscal Year 2025 First Quarter Segment Performance
AZZ Metal Coatings
Sales of
AZZ Precoat Metals
Sales of
Balance Sheet, Liquidity and Capital Allocation
The Company generated significant operating cash of
The Company also completed a secondary public offering of common stock for net proceeds of
Financial Outlook - Fiscal Year 2025 Guidance
Reiterating previously communicated guidance issued
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Reiterating FY25 Guidance(1) |
Sales |
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Adjusted EBITDA |
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Adjusted Diluted EPS |
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(1) |
FY2025 Revised Guidance Assumptions: |
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a. |
Excludes the impact of any future acquisitions. |
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b. |
Includes approximately |
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c. |
Adjusted Diluted EPS guidance includes the addback of amortization related to the Company's intangible assets. |
Conference Call Details
A replay of the call will be available at (877) 344-7529 or (412) 317-0088 (international), replay access code: 6878580, through
About
Safe Harbor Statement
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," "could," "should," "expects," "plans," "will," "might," "would," "projects," "currently," "intends," "outlook," "forecasts," "targets," "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. Forward-looking statements speak only as of the date they are made and are subject to risks that could cause them to differ materially from actual results. Certain factors could affect the outcome of the matters described herein.
This press release may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand for our manufactured solutions, including demand by the construction markets, the industrial markets, and the metal coatings markets. 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 manufactured solutions; delays in additional acquisition opportunities; an increase in our debt leverage and/or interest rates on our debt, of which a significant portion is tied to variable interest rates; availability of experienced management and employees to implement AZZ's growth strategy; a downturn in market conditions in any industry relating to the manufactured solutions that we provide; economic volatility, including a prolonged economic downturn or macroeconomic conditions such as inflation or changes in the political stability in
Company Contact:
(817) 810-0095
www.azz.com
Investor Contact:
Three
(214) 616-2207
www.threepa.com
---Financial tables on the following page---
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Condensed Consolidated Statements of Income |
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(dollars in thousands, except per share data) |
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(unaudited) |
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Three Months Ended |
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2024 |
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2023 |
Sales |
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$ 413,208 |
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$ 390,873 |
Cost of sales |
|
310,538 |
|
293,854 |
Gross margin |
|
102,670 |
|
97,019 |
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|
|
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Selling, general and administrative |
|
32,921 |
|
31,523 |
Operating income |
|
69,749 |
|
65,496 |
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|
|
|
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Interest expense, net |
|
(22,774) |
|
(28,706) |
Equity in earnings of unconsolidated subsidiaries |
|
3,824 |
|
1,420 |
Other income (expense), net |
|
204 |
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(38) |
Income before income taxes |
|
51,003 |
|
38,172 |
Income tax expense |
|
11,401 |
|
9,650 |
Net income |
|
39,602 |
|
28,522 |
Dividends on Series A Preferred Stock |
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(1,200) |
|
(3,600) |
Redemption premium on Series A Preferred Stock |
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(75,198) |
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— |
Net income (loss) available to common shareholders |
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$ (36,796) |
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$ 24,922 |
Basic earnings (loss) per common share |
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$ (1.38) |
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$ 1.00 |
Diluted earnings (loss) per common share |
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$ (1.38) |
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$ 0.98 |
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Weighted average shares outstanding - Basic |
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26,751 |
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24,940 |
Weighted average shares outstanding - Diluted |
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26,751 |
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29,150 |
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Segment Reporting |
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(dollars in thousands) |
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(unaudited) |
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Three Months Ended |
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2024 |
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2023 |
Sales: |
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Metal Coatings |
$ 176,651 |
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$ 168,794 |
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236,557 |
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222,079 |
Total Sales |
$ 413,208 |
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$ 390,873 |
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EBITDA |
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Metal Coatings |
$ 54,645 |
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$ 51,862 |
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47,687 |
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43,156 |
Infrastructure Solutions |
3,795 |
|
1,398 |
Total Segment EBITDA(1) |
$ 106,127 |
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$ 96,416 |
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(1) See the non-GAAP disclosure section below for a reconciliation between the various measures calculated in accordance with GAAP to the non-GAAP financial measures. |
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Condensed Consolidated Balance Sheets |
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(dollars in thousands) |
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(unaudited) |
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As of |
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Assets: |
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Current assets |
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$ 396,342 |
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$ 366,999 |
Property, plant and equipment, net |
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555,355 |
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541,652 |
Other non-current assets, net |
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1,284,082 |
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1,286,854 |
Total assets |
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$ 2,235,779 |
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$ 2,195,505 |
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Liabilities, Mezzanine Equity, and Shareholders' Equity: |
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Current liabilities |
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$ 223,865 |
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$ 194,306 |
Long-term debt, net |
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929,800 |
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952,742 |
Other non-current liabilities |
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114,882 |
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113,966 |
Mezzanine Equity |
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— |
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233,722 |
Shareholders' Equity |
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967,232 |
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700,769 |
Total liabilities, mezzanine equity, and shareholders' equity |
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$ 2,235,779 |
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$ 2,195,505 |
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Condensed Consolidated Statements of Cash Flows |
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(dollars in thousands) |
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(unaudited) |
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Three Months Ended |
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2024 |
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2023 |
Net cash provided by operating activities |
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$ 71,944 |
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$ 46,893 |
Net cash used in investing activities |
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(27,379) |
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(17,027) |
Net cash provided by (used in) financing activities |
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(38,542) |
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(29,545) |
Effect of exchange rate changes on cash |
|
174 |
|
737 |
Net increase in cash and cash equivalents |
|
6,197 |
|
1,058 |
Cash and cash equivalents at beginning of period |
|
4,349 |
|
2,820 |
Cash and cash equivalents at end of period |
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$ 10,546 |
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$ 3,878 |
Non-GAAP Disclosure
Adjusted Net Income, Adjusted Earnings Per Share and EBITDA
In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in
Management defines adjusted net income and adjusted earnings per share to exclude intangible asset amortization, acquisition expenses, transaction related expenses and certain legal settlements and accruals, from the reported GAAP measure. Management defines EBITDA as earnings excluding depreciation, amortization, interest and provision for income taxes. Management believes EBITDA is used by investors to analyze operating performance and evaluate the Company's ability to incur and service debt and its capacity for making capital expenditures in the future.
Management provides non-GAAP financial measures for informational purposes and to enhance understanding of the Company's GAAP consolidated financial statements. Readers should consider these measures in addition to, but not instead of or superior to, the Company's financial statements prepared in accordance with GAAP, and undue reliance should not be placed on these non-GAAP financial measures. Additionally, these non-GAAP financial measures may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.
The following tables provides a reconciliation for the three months ended
Adjusted Net Income and Adjusted Earnings Per Share |
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Three Months Ended |
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2024 |
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2023 |
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Amount |
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Per
Diluted |
|
Amount |
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Per
Diluted |
Net income |
$ 39,602 |
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$ 28,522 |
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Less: Series A Preferred Stock dividends |
(1,200) |
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(3,600) |
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Less: Redemption premium on Series A Preferred Stock |
(75,198) |
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— |
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Net income available to common shareholders |
(36,796) |
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24,922 |
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Impact of Series A Preferred Stock dividends |
1,200 |
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3,600 |
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Net income and diluted earnings per share for Adjusted net income calculation(2) |
(35,596) |
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$ (1.18) |
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28,522 |
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$ 0.98 |
Adjustments: |
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Amortization of intangible assets |
5,793 |
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0.20 |
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6,355 |
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0.22 |
Redemption premium on Series A Preferred Stock(3) |
75,198 |
|
2.49 |
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— |
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— |
Subtotal |
80,991 |
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2.69 |
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6,355 |
|
0.22 |
Tax impact(4) |
(1,390) |
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(0.05) |
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(1,525) |
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(0.05) |
Total adjustments |
79,601 |
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2.64 |
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4,830 |
|
0.17 |
Adjusted net income and adjusted earnings per share (non-GAAP) |
$ 44,005 |
|
$ 1.46 |
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$ 33,352 |
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$ 1.14 |
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Weighted average shares outstanding - Diluted(2) |
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30,194 |
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29,150 |
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|
|
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|
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See notes on page 11. |
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Adjusted Net Income Available to Common Shareholders |
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Three Months Ended |
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|
2024 |
|
2023 |
Net income (loss) available to common shareholders |
$ (36,796) |
|
$ 24,922 |
Total adjustments(5) |
79,601 |
|
4,830 |
Adjusted net income available to common shareholders (non-GAAP) |
$ 42,805 |
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$ 29,752 |
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See notes on page 11. |
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EBITDA |
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Three Months Ended |
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2024 |
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2023 |
Net income |
$ 39,602 |
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$ 28,522 |
Interest expense |
22,774 |
|
28,706 |
Income tax expense |
11,401 |
|
9,650 |
Depreciation and amortization |
20,323 |
|
18,523 |
EBITDA (non-GAAP) |
$ 94,100 |
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$ 85,401 |
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|
|
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See notes on page 11. |
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EBITDA by Segment |
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Three Months Ended |
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Metal |
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Infra-
structure |
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Corporate |
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Total |
Net income (loss) |
$ 47,988 |
|
$ 40,094 |
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$ 3,795 |
|
$ (52,275) |
|
$ 39,602 |
Interest expense |
— |
|
— |
|
— |
|
22,774 |
|
22,774 |
Income tax expense |
— |
|
— |
|
— |
|
11,401 |
|
11,401 |
Depreciation and amortization |
6,657 |
|
7,593 |
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— |
|
6,073 |
|
20,323 |
EBITDA (non-GAAP) |
$ 54,645 |
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$ 47,687 |
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$ 3,795 |
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$ (12,027) |
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$ 94,100 |
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|
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See notes on page 11. |
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Three Months Ended |
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Metal |
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Infra-
structure |
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Corporate |
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Total |
Net income (loss) |
$ 45,446 |
|
$ 37,691 |
|
$ 1,398 |
|
$ (56,013) |
|
$ 28,522 |
Interest expense |
— |
|
— |
|
— |
|
28,706 |
|
28,706 |
Income tax expense |
— |
|
— |
|
— |
|
9,650 |
|
9,650 |
Depreciation and amortization |
6,416 |
|
5,465 |
|
— |
|
6,642 |
|
18,523 |
EBITDA (non-GAAP) |
$ 51,862 |
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$ 43,156 |
|
$ 1,398 |
|
$ (11,015) |
|
$ 85,401 |
|
|
|
|
|
|
|
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See notes on page 11. |
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Debt Leverage Ratio Reconciliation |
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Trailing Twelve Months Ended |
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|
2024 |
|
2024 |
Gross debt |
|
$ 975,250 |
|
$ 1,010,250 |
Less: Cash per bank statement |
|
(19,443) |
|
(24,807) |
Add: finance lease liability |
|
3,474 |
|
3,474 |
Consolidated indebtedness |
|
$ 959,281 |
|
$ 988,917 |
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|
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Net income |
|
$ 112,687 |
|
$ 101,607 |
Depreciation and amortization |
|
81,222 |
|
79,423 |
Interest expense |
|
101,133 |
|
107,065 |
Income tax expense |
|
30,247 |
|
28,496 |
EBITDA per Credit Agreement |
|
325,289 |
|
316,591 |
Cash items(6) |
|
25,443 |
|
25,443 |
Non-cash items(7) |
|
9,825 |
|
9,510 |
Equity in earnings, net of distributions |
|
(13,328) |
|
(12,294) |
Adjusted EBITDA per Credit Agreement |
|
$ 347,229 |
|
$ 339,250 |
|
|
|
|
|
Net leverage ratio |
|
2.8x |
|
2.9x |
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(1) |
Earnings per share amounts included in the "Adjusted net income and Adjusted Earnings Per Share" table above may not sum due to rounding differences. |
(2) |
For the three months ended |
(3) |
On |
(4) |
The non-GAAP effective tax rate for each of the periods presented is estimated at 24.0%. |
(5) |
See the Adjusted Net Income and Adjusted Earnings Per Share table above for detail of adjustments. |
(6) |
Cash items includes certain legal settlements and accruals, costs associated with the AVAIL JV transition services agreement and costs associated with the Precoat Acquisition. |
(7) |
Non-cash items include losses related to the divestiture of the AIS business, stock-based compensation expense and other non-cash expenses. |
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