On Friday, AZZ Inc. (AZZ) posted results for the first quarter of fiscal 2011. The company recorded a 35.6% decline in GAAP net income to $6.4 million from $9.9 million in the year-ago period. Excluding special items, adjusted earnings came in at 57 cents per share, which edged past the Zacks Consensus Estimate of 56 cents.
AZZ is an electrical equipment and components manufacturer, serving global markets of power generation, transmission and distribution as well as general industrial markets. The Fort Worth, Texas-based company, also offers hot dip galvanizing services to the steel fabrication market across the country.
During the quarter, AZZ’s revenue slipped 18.9% to $77.5 million from $95.5 million in the prior- year quarter. The reduction was primarily caused by a 32.9% decrease in Electrical and Industrial Products segment to $37.2 million due to a reduced order intake in third and fourth quarters of fiscal 2010. However, overall revenue decline was partially offset by a marginal 0.5% growth in Galvanizing Services segment to $40.3 million mainly due to increased volumes.
AZZ’s operating income slipped 35.7% year-over-year to $11.3 million, while operating margin dipped 380 basis points (bps) to 14.6%. The decline was primarily attributable to reduced operating leverage caused by sluggish revenues in the Electrical and Industrial Products division. During the quarter, the company also completed the acquisition of Tulsa, Oklahoma-based North American Galvanizing & Coatings Inc. (NGA), which has eleven facilities located across Colorado, Kentucky, Missouri, Ohio, Oklahoma, Tennessee, Texas and West Virginia.
AZZ exited the quarter with cash and cash equivalents of $110.2 million and long-term debt-to-capitalization ratio of 30%, compared with a cash balance of $57.7 million and long-term debt-to-capitalization of 33% in the year-ago period. During the quarter, the company generated $4.2 million of cash from operations and deployed $3.1 million toward dividends and $2.2 million toward capital expenditure.
Moving forward, AZZ lifted its earnings guidance for fiscal 2011 in the range of $2.65 and $2.80 per share on revenues of $380 million to $395 million, compared with the earlier projection of earnings of $1.85 to $2.20 per share on revenues of $310 million to $330 million. The revised guidance is in line with the Zacks Consensus Estimate of $2.73 per share, which moved up 46 cents over the past week.
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