AZZ INC. (NYSE:AZZ) Files An 8-K Results of Operations and Financial Condition

AZZ INC. (NYSE:AZZ) Files An 8-K Results of Operations and Financial Condition
Item 2.02 Results of Operations and Financial Condition.

Story continues below

On March 29, 2018, AZZ Inc. (the “Company”) issued a press release announcing its intent to restate certain previously issued annual and interim financial statements and the anticipated impacts to its consolidated financial statements for the Relevant Periods (as defined below). A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review

On March 26, 2018, the management of the Company in conferring with the Company’s independent registered public accounting firm, BDO USA, LLP (“BDO”), concluded that the Company’s previously issued audited consolidated financial statements (and any related audit reports of BDO) contained in the Company's 2017 Annual Report on Form 10-K (which includes consolidated financial statements for years ending February 28, 2015, February 29, 2016 and February 28, 2017) and the unaudited consolidated financial statements contained in the Company's Quarterly Reports on Form 10-Q for the quarters ended May 31, 2017 and August 31, 2017 (collectively, the “Relevant Periods”) should no longer be relied upon due to an accounting error. The Company determined that it should have applied the percentage-of-completion method of accounting under the FASB’s Accounting Standards Codification No. 605-35, Construction-Type and Production-Type Contracts ("ASC 605-35"), for certain contracts of the Company as further described below. After conferring with the Company’s management and BDO, the Audit Committee of the Board of Directors of the Company concurred with the above conclusion of the Company’s management.

The Company will file amendments to its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for the Relevant Periods to restate the previously issued annual and interim financial statements. Although the Company cannot yet estimate when it will complete the restatements and file the amended annual and periodic reports, the Company is working diligently and expeditiously towards completion of the restatements and intends to file the amended annual and periodic reports as soon as reasonably practicable and prior to filing its Quarterly Report on Form 10-Q for the quarter ended November 30, 2017.

The table below sets forth the anticipated impacts to the consolidated statements of income (unaudited, in thousands, except per share data):

Year Ended

February 28, 2017

February 29, 2016

As

Reported

Correction

As

Restated

As

Reported

Correction

As

Restated

Net Sales

$

858,930

$

4,608

$

863,538

$

903,192

$

(13,792

)

$

889,400

Cost of Sales

654,146

4,790

658,936

673,081

(11,799

)

661,282

Gross Profit

204,784

(182

)

204,602

230,111

(1,993

)

228,118

Operating Income

98,360

(182

)

98,178

122,288

(1,993

)

120,295

Income Before Income Taxes

84,749

(182

)

84,567

104,368

(1,993

)

102,375

Income Tax Expense

23,828

(68

)

23,760

27,578

(747

)

26,831

Net Income

$

60,921

$

(114

)

$

60,807

$

76,790

$

(1,246

)

$

75,544

Earnings Per Common Share

Basic Earnings Per Share

$

2.35

$

(0.01

)

$

2.34

$

2.98

$

(0.05

)

$

2.93

Diluted Earnings Per Share

$

2.33

$

$

2.33

$

2.96

$

(0.05

)

$

2.91

Weighted Average Shares Outstanding

Basic

25,965

25,965

25,800

25,800

Diluted

26,097

26,097

25,937

25,937

Year Ended

February 28, 2015

As

Reported

Correction

As

Restated

Net Sales

$

816,687

$

3,005

$

819,692

Cost of Sales

610,991

1,928

612,919

Gross Profit

205,696

1,077

206,773

Operating Income

106,825

1,077

107,902

Income Before Income Taxes

90,130

1,077

91,207

Income Tax Expense

25,187

25,591

Net Income

$

64,943

$

$

65,616

Earnings Per Common Share

Basic Earnings Per Share

$

2.53

$

0.03

$

2.56

Diluted Earnings Per Share

$

2.52

$

0.03

$

2.55

Weighted Average Shares Outstanding

Basic

25,676

25,676

Diluted

25,778

25,778

Three Months Ended

May 31, 2017

August 31, 2017

As

Reported

Correction

As

Restated

As

Reported

Correction

As

Restated

Net Sales

$

208,551

$

(834

)

$

207,717

$

190,407

$

7,195

$

197,602

Cost of Sales

159,285

160,168

148,938

5,609

154,547

Gross Profit

49,266

(1,717

)

47,549

41,469

1,586

43,055

Operating Income

21,907

(1,717

)

20,190

15,056

1,586

16,642

Income Before Income Taxes

18,732

(1,717

)

17,015

11,396

1,586

12,982

Income Tax Expense

5,492

(644

)

4,848

3,067

3,662

Net Income

$

13,240

$

(1,073

)

$

12,167

$

8,329

$

$

9,320

Earnings Per Common Share

Basic Earnings Per Share

$

0.51

$

(0.04

)

$

0.47

$

0.32

$

0.04

$

0.36

Diluted Earnings Per Share

$

0.51

$

(0.04

)

$

0.47

$

0.32

$

0.04

$

0.36

Weighted Average Shares Outstanding

Basic

26,012

26,012

25,970

25,970

Diluted

26,093

26,093

26,036

26,036

Six Months Ended

August 31, 2017

As

Reported

Correction

As

Restated

Net Sales

$

398,958

$

6,361

$

405,319

Cost of Sales

308,223

6,492

314,715

Gross Profit

90,735

(131

)

90,604

Operating Income

36,963

(131

)

36,832

Income Before Income Taxes

30,128

(131

)

29,997

Income Tax Expense

8,559

(49

)

8,510

Net Income

$

21,569

$

(82

)

$

21,487

Earnings Per Common Share

Basic Earnings Per Share

$

0.83

$

$

0.83

Diluted Earnings Per Share

$

0.83

$

(0.01

)

$

0.82

Weighted Average Shares Outstanding

Basic

25,991

25,991

Diluted

26,065

26,065

The table below sets forth the anticipated impacts to the consolidated balance sheets (unaudited, in thousands):

February 28, 2017

February 29, 2016

As

Reported

Correction

As

Restated

As

Reported

Correction

As

Restated

Assets

Inventories – net

$

123,208

$

(35,583

)

$

87,625

$

102,135

$

(30,793

)

$

71,342

Costs and estimated earnings in excess of billings on uncompleted contracts

20,546

29,716

50,262

32,287

31,195

63,482

Total current assets

296,537

(5,867

)

290,670

309,334

309,736

Total assets

$

977,839

$

(5,867

)

$

971,972

$

982,010

$

$

982,412

Liabilities and Shareholders’ Equity

Customer deposits and billings in excess of costs and estimated earnings on uncompleted contracts

$

32,808

$

(10,732

)

$

22,076

$

24,889

$

(4,645

)

$

20,244

Total current liabilities

141,850

(10,732

)

131,118

148,405

(4,645

)

143,760

Deferred income tax liabilities

51,550

1,825

53,375

49,960

1,893

51,853

Total liabilities

448,200

(8,907

)

439,293

500,794

(2,752

)

498,042

Shareholders’ equity:

Retained earnings

495,030

3,040

498,070

450,754

3,154

453,908

Total shareholders’ equity

529,639

3,040

532,679

481,216

3,154

484,370

Total liabilities and shareholders' equity

$

977,839

$

(5,867

)

$

971,972

$

982,010

$

$

982,412

May 31, 2017

August 31, 2017

As

Reported

Correction

As

Restated

As

Reported

Correction

As

Restated

Assets

Inventories – net

$

131,187

$

(36,466

)

$

94,721

$

144,008

$

(42,075

)

$

101,933

Costs and estimated earnings in excess of billings on uncompleted contracts

27,295

32,337

59,632

32,082

36,616

68,698

Total current assets

325,744

(4,129

)

321,615

325,007

(5,459

)

319,548

Total assets

$

1,004,998

$

(4,129

)

$

1,000,869

$

1,011,401

$

(5,459

)

$

1,005,942

Liabilities and Shareholders’ Equity

Customer deposits and billings in excess of costs and estimated earnings on uncompleted contracts

$

31,527

$

(7,277

)

$

24,250

$

32,659

$

(10,193

)

$

22,466

Total current liabilities

130,699

(7,277

)

123,422

126,273

(10,193

)

116,080

Deferred income tax liabilities

52,431

1,181

53,612

52,293

1,776

54,069

Total liabilities

468,608

(6,096

)

462,512

466,088

(8,417

)

457,671

Shareholders’ equity:

Retained earnings

503,847

1,967

505,814

507,754

2,958

510,712

Total shareholders’ equity

536,390

1,967

538,357

545,313

2,958

548,271

Total liabilities and shareholders' equity

$

1,004,998

$

(4,129

)

$

1,000,869

$

1,011,401

$

(5,459

)

$

1,005,942

The restatements described above result from a correction to the accounting method historically used by the Company to record revenues for certain contracts within its Energy Segment. In particular, the Company determined that for certain contracts for which revenue was recognized upon contract completion and transfer of title, the Company instead should have applied the percentage-of-completion method in accordance with ASC 605-35. In general, the percentage-of-completion method results in a revenue recognition pattern over time as a project progresses as opposed to deferring revenues until contract completion. The Company determined that the impact of applying the percentage-of-completion method to certain of its revenue contracts was materially different from its previously reported results, primarily for certain current asset accounts on its consolidated balance sheets, under its historical practice.

In connection with the restatements, the Company re-evaluated its conclusion regarding the effectiveness of the Company’s disclosure controls and procedures and internal controls over financial reporting for the Relevant Periods and determined that a material weakness existed relating to revenue recognition on certain contracts. In addition, as a result of the material weakness, BDO USA LLP’s report on the Company’s internal control over financial reporting as of February 28, 2017 should no longer be relied upon. Management has begun to develop and institute a plan to remediate this material weakness.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits


AZZ INC Exhibit
EX-99.1 2 a991release.htm EXHIBIT 99.1 Exhibit AZZ Inc. will Restate Form 10-K for the Year Ended February 28,…
To view the full exhibit click here

About AZZ INC. (NYSE:AZZ)

AZZ Inc. is a provider of galvanizing services, welding solutions, specialty electrical equipment and engineered services to the power generation, transmission, distribution, refining and industrial markets. The Company operates through two segments: Energy segment and Galvanizing segment. Its Energy segment provides products and services designed to support industrial, nuclear and electrical applications. Its product offerings include custom switchgear, electrical enclosures, medium and high voltage bus ducts, explosion proof and hazardous duty lighting, nuclear safety-related equipment and tubular products. Its Galvanizing segment provides hot dip galvanizing to the steel fabrication industry through facilities located throughout the United States and Canada. It serves fabricators or manufacturers that provide services to the electrical and telecommunications, bridge and highway, petrochemical and general industrial markets and various original equipment manufacturers.

An ad to help with our costs