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AZZ Inc.
NYSE: AZZ
Corporate Presentation
October 2016
2
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. This release may contain forward-looking
statements that involve risks and uncertainties including, but not limited to, changes in customer demand and response to
products and services offered by AZZ, including demand by the power generation markets, electrical transmission and
distribution markets, the industrial markets, and the hot dip galvanizing markets; prices and raw material cost, 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 shipments, acquisition opportunities,
currency exchange rates, adequacy of financing, and availability of experienced management and employees to implement
AZZ’s growth strategy. 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 29, 2016 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.
Forward Looking Statements
3
AZZ is a global provider of specialty electrical equipment and highly
engineered services to the power generation, transmission,
distribution and industrial markets as well as a leading provider of
hot dip galvanizing services to the North American steel fabrication
market
Our Vision: We envision a world where AZZ’s innovation, quality, and
service minded people enable a safer and more sustainable
infrastructure while providing superior returns for shareholders
Corporate Overview and Vision
4
Total Company: Sales by Segment
45%
55%
Actual FY2014
$752 million
44%
56%
Actual FY2015
$817 million
Energy
Galvanizing
45%
55%
Actual FY2016
$903 million
5
49%
19%
32%
FY2014
$752 million
Total Company: Sales by Market Segment
Transmission & Distribution
Industrial - General Industry, Oil & Gas, Construction
Power Generation
53%
16%
31%
FY2015
$817 million
52%
21%
27%
FY2016
$903 million
Served Markets
Oil & Gas
Renewable
Transmission & Distribution
Nuclear
Refining / Petrochem
Power Generation
Combined Cycle
Our products help
power up the world
from any generation
source and our services
ensure the safety of
lives and equipment.
Industrial & OEM
6
Customers & Partners
7
8
Leading Market
Positions
Diversified
Portfolio of
Businesses
Strong Long
Term Growth
Drivers
Strong Historical
Financial
Performance
New Leadership
Instilling New
Culture
Key Investment Considerations
9
Galvanizing
Leading Market Positions
Industrial Solutions
Electrical Solutions
• Largest galvanizer in North America
• World’s largest producer of weld metal overlay services
• Global leader in cost efficient turnkey bus systems as preferred resource for
utilities in 45 countries
• Preferred partner in arc-resistant Switchgear
• Gold standard for custom designed enclosures and control center structures
10
Industrial Solutions (WSI & SMS
Operations)
Specialty Welding and Overlays
Alloy 600 and Stress Corrosion Cracking
Mitigation
Critical Boiler, Drum and Vessel
Components
Boiler Construction and Overhauls
Structural Repair and Upgrade
Specialized Engineering Support
Corrosion/Erosion Protection
Diversified Portfolio of Businesses
11
Electrical Solutions (Legacy Electrical &
Industrial Products)
High & Medium Voltage Bus Systems
Switchgear Systems
Enclosure Systems
Tubular Products
Hazardous and Specialty Lighting
Systems
Galvanizing
Largest galvanizer in North America
Corrosion protection services for steel
fabrication industry
Leader in quality, dependability, and
service
Diversified end markets
Diversified Portfolio of Businesses
12
• FY 2016 – 29th consecutive year of profitability
• 10 Year CAGR – Revenues 17.1%, Net Income 25.7%
• Strong balance sheet and cash flows
• Superior operating margins in legacy businesses
• Solid Quarterly Cash dividend
Strong Financial Performance
13
• Aging U.S. energy and industrial infrastructure and required
investment
• Emerging North American energy independence
• International demand for electricity and energy
Key Long-Term Growth Drivers
14
New culture based on:
• Operational excellence through 6-sigma practices and
accountability
• Accountability and change integrated throughout all layers of management
• Early stages of adoption already reaping benefits
• Returns-based metrics and margin growth
• More financially driven organization
• Incentives aligned with performance throughout organization
• RONA focus on investments
• Unlocking value at recently acquired businesses (WSI & NLI)
• Management changes – “right players on the field”
• Emphasis on project management
• Seeking higher margins through sales leverage, cost control, and selective
bidding
A New Culture taking hold
15
Improving Energy segment operating margins through
emphasis on
international growth
operational excellence
leveraging fixed costs through top-line growth
Growing our Galvanizing segment
organically
by acquisition
seeking adjacent opportunities in metal finishing
Continuing emphasis on cash flow and efficient capital
deployment
Focus Areas for Fiscal Year 2017
AZZ has significant growth opportunities that will provide a platform
for sustainable earnings growth
16
Galvanizing
17
Galvanizing Market Opportunity
Includes Galvanized:
• Steel Sheet
• Tube Steel
Global Galvanized Steel Market
Post-Fabrication
Galvanized Steel
Electrical Utility
Industrial
Petrochemical Bridge & Highway
OEM
AZZ
Served Markets
Evaluating other metal finishing process technologies
18
Galvanizing Locations
Acquired 6 locations in
Texas, Louisiana, and
Mississippi from Trinity
Industries in June 2015,
Closed 1, Shuttered 1 in
September 2016
Locations: 41 facilities in 19 states and 3 Canadian Provinces
New Location:
AZZ Galvanizing - Reno,
NV Opened January 2016
Acquired :
Olson Industries in Atkinson, NE
in February 2016
19
Galvanizing Revenue by Market
35%
12%
35%
5%
13%
FY 2014
$336 million
Electrical Utility OEM's Industrial Bridge & Highway Petrochemical
30%
13% 36%
7%
14%
FY 2015
$358 million
30%
13% 36%
7%
14%
FY 2016
$402 million
20
Operating Margins: Galvanizing
26.1% 26.1% 26.1% 26.2%
24.7%
23.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
21
Energy Segment
22
35%
17%
48%
FY2016
$501 million
36%
19%
45%
FY2015
$458 million
Energy: Revenue Mix
36%
13%
51%
FY2014
$416 million
Transmission & Distribution Industrial Power Generation
23
16.7%
14.2%
13.7%
10.7%
8.4%
11.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
13.8% Op
Margin w/o
Purch Price
Accounting
Operating Margins: Energy
15.9% Op
Margin w/o
Purch Price
Accounting 13.8% Op
Margin w/o
Purch Price
Accounting 11.2% Op
Margin w/o
Purch Price
Accounting
24
Energy Backlog
($ in Millions)
Table includes acquired backlog from NLI during FY 2013 and Aquilex
SRO (WSI) during the first quarter of FY 2014, and reflects ending
backlog including NLI and WSI balances for all periods shown
$(millions) FY 2012
FY 2013 FY 2014
FY 2015
FY 2016
Beginning Backlog 108.4 138.6 221.7 325.0 332.6
Acquired Backlog 0.0 88.1 95.1 0.0 0.0
Ending Backlog 138.6 221.7 325.0 332.6 334.5
Consolidated Financials
FY2016 P&L Recap
Consolidated AZZ Actual Prior Year
$(000) Except EPS FY2016 FY2015 Delta ($) Delta (%)
Bookings 905,053 824,269 80,784 9.8%
Backlog 334,456 332,595 1,861 0.6%
Sales 903,192 816,687 86,505 10.6%
Gross Profit 230,111 205,696 24,415 11.9%
Gross Margin (%) 25.5% 25.2%
SG&A 107,823 98,871 8,952 9.1%
SG&A (%) 11.9% 12.1%
Operating Income 122,288 106,825 15,463 14.5%
Operating Margin (%) 13.5% 13.1%
Other Income / (Expense), net (2,765) (134) (2,631)
Interest Expense 15,155 16,561 (1,406) (8.5)%
Tax Expense 27,578 25,187 2,391 9.5%
Net Earnings 76,790 64,943 11,847 18.2%
Diluted EPS $2.96 $2.52 $0.44 17.4%
26
27
Consolidated Net Sales
($ in Millions)
$381
$469
$571
$752
$817
$903
$0
$200
$400
$600
$800
$1,000
2011 2012 2013 2014 2015 2016
Fiscal Year
Actual
28
Earnings Per Share
(Fully Diluted)
$1.39
$1.61
$2.37 $2.32
$2.52
$2.96
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
2011 2012 2013 2014 2015 2016
Fiscal Year
29
Cash Flow
($ in Millions)
-$20.0
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Cash Provided By Operations Net Income Free Cash Flow
30
CAPEX / Depreciation & Amortization
($ in Millions)
$16.4
$19.8
$24.9
*$43.5
$29.4
$39.9
$22.2 $22.6
$29.4
$43.3
$46.1
$47.4
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
CAPEX D&A
*Includes $12 million for the rebuild of the Joliet Galvanizing facility in Fiscal 2014
31
Total Bank Debt / Long Term Debt to Equity
($ in Millions)
0.32
0.00
0.53
0.44
0.88
0.78
0.63
1.08
0.80
0.68
0.00
0.20
0.40
0.60
0.80
1.00
1.20
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
$350.0
$400.0
$450.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Fiscal Year
Bank Debt Cash Debt to Equity Ratio
Capitalization as of August 31, 2016
5 Year, $300M Senior Credit Facility $ 148.9
6.24% Senior Notes Due Mar 2018 $ 125.0
5.42% Senior Notes Due 2021 $ 28.6
Total Bank Debt $ 302.5
Shareholder Equity $ 510.9
Debt to Equity Ratio 0.59
32
EBITDA Margins
($ in Millions)
10.4%
16.4% 16.7%
21.2%
23.7%
22.3%
21.4%
24.0%
20.7%
18.7%
18.5%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
$0.0
$100.0
$200.0
$300.0
$400.0
$500.0
$600.0
$700.0
$800.0
$900.0
$1,000.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Fiscal Year
Net Sales EBITDA EBITDA Margin
Q & A
Appendix - Businesses
North America’s largest provider of post-fabrication galvanization
Galvanizing
OEM Industrial Bridge & Highway Agriculture
41 facilities in 19 states and 3 Canadian Provinces
35
Welding Services (WSI)
Worldwide provider that develops and delivers design repairs,
component upgrades and specialty maintenance services for all
energy intensive industries
Machine Weld Overlay Shop Services Component Replacement Remote Weld Operation
36
Boiler Construction Boiler Overhaul Component Replacement HSRG Maintenance
Southeastern Mechanical Services (SMS)
SMS provides qualified modifications, repairs and fabrication of boiler
components and pressure parts to industries that rely on boilers and heat
recovery units for steam and/or power generation
37
Switchgear Systems
PowerAisle™ metal clad and arc-resistant switchgear and relay panels
provide the safe and reliable operation of electricity
Renewable /Wind Utility Portable Substation Mining
38
Bus Systems
Electrical bus for domestic and international utilities and industrial markets
Non-Segregated Phase Bus Segregated Phase Bus Isolated Phase Bus Bus Services
600V- 38kV 15kV-69kV 600V-38kV Installation/Emergency Repair
39
High Voltage Bus Systems (HVBS)
AZZ SF6 gas insulated bus provides a long distance power transmission
alternative to transmission lines, high voltage cables, or GIS bus designs
Vertical Underground Overhead Interconnections
40
Enclosure Systems
Factory fabricated electrical enclosures safely and securely protect
instrumentation and control devices across a wide variety of markets
Electrical Industrial Oil & Gas Specialty Applications
41
Hazardous and Specialty lighting for severe and harsh environments
Lighting Systems
Industrial Marine Lighting Food Processing/Inspection Manufacturing
42
Pup Joints and Full Length Tubing serving the Oil Country Tubular Goods Market
Tubular Products
Upset Pipe Thread Pipe Full Length Tubing Pup Joints
43
Reg G Tables
45
GAAP to Non-GAAP EBITDA
Reconciliation
($000's)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Net Income 7,827 21,604 27,688 42,206 37,728 34,963 40,736 60,456 59,597 64,943 76,790
Depreciation 5,535 6,478 7,999 12,921 15,603 18,929 18,855 19,365 25,090 28,051 31,194
Amortization 184 181 200 1,607 1,823 3,237 3,740 9,999 18,214 18,039 16,223
Interest 1,689 1,495 1,495 6,170 6,838 7,731 13,939 13,073 18,407 16,561 15,155
Taxes 4,204 12,910 16,145 24,704 22,655 19,995 22,905 33,913 34,314 25,187 27,578
EBITDA 19,440 42,669 53,527 87,608 84,648 84,855 100,175 136,775 155,623 152,781 166,940
46
GAAP to Non-GAAP Free Cash Flow
Reconciliation
FY 2007 - FY 2016 Free Cash Flow
($000's)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Cash from Operations 6,928 38,926 60,196 82,588 42,085 64,065 92,738 107,275 118,157 143,589
Less Capital Spending 10,659 9,926 20,009 12,037 16,411 19,784 24,923 43,472 29,377 39,861
Free Cash Flow (3,731) 29,000 40,188 70,551 25,674 44,281 67,815 63,804 88,780 103,728
