AZZ Inc. will Restate Form 10-K for the Year Ended 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

AZZ Inc. will Restate Form 10-K for the Year Ended 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

PR Newswire

FORT WORTH, Texas, March 29, 2018 /PRNewswire/ -- AZZ Inc. AZZ, (the "Company"), a global provider of metal coating services, welding solutions, specialty electrical equipment and highly engineered services, today announced that it has completed the review of the materiality of certain historical accounting treatment of certain contracts in its Energy Segment as originally communicated in its January 9, 2018 press release.  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 financial statements for years ending February 28, 2015, and 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.

AZZ Inc. is a global provider of metal coatings services, welding solutions, specialty electrical equipment and highly engineered services. (PRNewsfoto/AZZ Inc.)

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 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 balance sheet accounts under its historical practice.

Paul Fehlman, senior vice president and CFO of AZZ Inc., commented, "We're moving quickly to complete and issue these amended reports, and want to assure all shareholders that these changes were only for a limited number of subsidiaries in its Energy Segment, caused by a misapplication of FASB's Accounting Standards Codification 605-35, and do not reflect a fundamental change in the Company's underlying business.  Further, the restatements will not impact cash and cash equivalents and do not impact our compliance with our contractual obligations." Fehlman continued, "The attached tables showing the anticipated impacts to the income statements and consolidated balance sheets demonstrate that the restatements will impact the balance sheets to a greater extent than the income statements."

Also, 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.

About AZZ Inc.

AZZ Inc. is a global provider of metal coating services, welding solutions, specialty electrical equipment and highly engineered services to the markets of power generation, transmission, distribution and industrial in protecting metal and electrical systems used to build and enhance the world's infrastructure. AZZ Metal Coatings is a leading provider of metal finishing solutions for corrosion protection, including hot dip galvanizing to the North American steel fabrication industry. AZZ Energy is dedicated to delivering safe and reliable transmission of power from generation sources to end customers, and automated weld overlay solutions for corrosion and erosion mitigation to critical infrastructure in the energy markets worldwide.

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," "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 28, 2017 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.

Contact:

Paul Fehlman, Senior Vice President - Finance and CFO



AZZ Inc. 817-810-0095



Internet:  www.azz.com







Lytham Partners 602-889-9700



Joe Dorame, Robert Blum or Joe Diaz



Internet: www.lythampartners.com

---Financial tables on the following page---

AZZ Inc.

Consolidated Statements of Income

(in thousands, except per share data)

(unaudited)







Years 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





404





25,591



Net Income



$

64,943





$

673





$

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





883





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





595





3,662



Net Income



$

13,240





$

(1,073)





$

12,167





$

8,329





$

991





$

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



 

AZZ Inc.

Consolidated Balance Sheets

(in thousands)

(unaudited)







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





402





309,736



Total assets



$

977,839





$

(5,867)





$

971,972





$

982,010





$

402





$

982,412



Liabilities and Shareholders' Equity

























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





$

402





$

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



           

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/azz-inc-will-restate-form-10-k-for-the-year-ended-february-28-2017-and-the-unaudited-consolidated-financial-statements-contained-in-the-companys-quarterly-reports-on-form-10-q-for-the-quarters-ended-may-31-2017-and-august-31--300621524.html

SOURCE AZZ Inc.

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