AZZ Inc (AZZ) 2001 Q4 法說會逐字稿

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Good day, everyone, and welcome to the AZZ Incorporated Fourth Quarter and fiscal 2002 financial results conference call.

Today's conference is being recorded. For opening remarks and introductions, I would like to turn the conference over to Mr. with RCG Capital Markets Group. Please go ahead, sir.

Thank you, Angie.

Welcome, everyone. We appreciate your time and attention today after the close of the market to participate in AZZ's fourth quarter/yearend finance results conference call.

Joining the call today will be Mr. David Dingus, President and Chief Executive Officer. Along with him will be Mr. Dana Perry, Vice-President of Finance and Chief Financial Officer.

I'm sure everyone's had an opportunity to receive and/or access a copy of the release that was issued earlier today. If for some reason you have been unable to do so, please feel free to contact our office immediately, and we'll be glad to get a copy of the full release out to you. You can call us at 480-675-0400, and we'll be glad to respond to your request.

Please allow me a moment to review the following: this conference call has been made available by the way of Webcast technology on the Internet and direct dial via a conference call service to all interested parties. Except for the statements of historical fact, this conference call may contain forward-looking statements, which involve risks and uncertainties, some of which are detailed from time to time in the documents filed by the company with the Securities and Exchange Commission. Such statements are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, as well as recently adopted Regulation FD.

Those risks and uncertainties previously may include, but are not limited to, changes in demand, prices and raw material costs, including zinc and natural gas, which are used in the hot-dip galvanizing process, changes in economic conditions of various markets the company serves, foreign and domestic customer request delays of shipments, acquisition opportunities, adequacy of financing and availability of experienced management employees to implement the company's growth strategy, and customer demand and response to products and services offered by the company. The company can give no assurance that such forward-looking statements will prove to be correct.

With that out of the way, I'd like to turn the call initially over to Mr. David Dingus, President and Chief Executive Officer, AZZ Incorporated. David?

Thank you, , and thanks to all of you for taking the time to join us for our quarterly conference call.

Our fiscal year, which was completed on February 28th, 2002, was a critical milestone in the implementation of our strategies and our positioning of the company for the future. Since our initiation of a strategy to diversify away from the oil field services market in the early 1990's, in terms of size and product line expansion, this is one of the most significant steps taken by our company. We have essentially doubled our participation in the markets of global power generation, distribution and transmission with the two acquisitions of in Greenville, South Carolina, and General -- Central Electric, which is headquartered in Fulton, Missouri. These have added some 70 million to our annual volume, and both of these acquisitions were completed on favorable terms. Additionally, despite changing banking conditions and policies as a result of the recession and national tragedies, we secured syndicated financing, which not only facilitated these acquisitions under desired favorable terms and conditions, but gave us cash availability that will meet the working capital expenditures and capital programs on an ongoing basis.

AZZ is a market leader, and has enhanced its position as an integrated supplier of proven solutions. While the operating results for the quarter saw minimal favorable impact from these activities, it has not diminished our enthusiasm for the future of the company and our belief that these steps strengthened our company.

Excuse me. The fourth quarter and fiscal year were below our initial expectations, but we exceeded the most recent guidance and analyst's forecast. Now, the current market conditions and the significant adjustments of customer planned buying has lowered our overall volume potential, and is expected to impact us in the coming fiscal year. The U.S. recession, extremely mild winter, low utility pricing and, of course, the high profile bankruptcy of Enron have dramatically changed the markets we serve. With the capital markets insisting that independent power producers and major suppliers improve their balance sheet and provide reassurance to the market that the issues which surrounded Enron with off-balance sheet debt have caused share pricing to be dramatically lowered and inhibited, if not eliminated, their access to capital markets for expansion and continued implementation of additional capacity.

Now, the primary issue for addressing these Street concerns has been substantial reductions in capital expending for new power generation. GE has substantially lowered their forecast production of gas service, and this will severely impact calendar 2003 production, and may cause delays for 2002 scheduled deliveries. And while the recession has had a large impact on energy demand and has overshadowed long-term needs, a return of a robust economy, more traditional weather conditions and customer's access to capital markets all will impact future demand for AZZ's products. While we may not see the explosive growth of the past repeated. We believe that long-term demand, not only in the U. S. but internationally, should provide us with continued growth and expansion opportunities.

Now, while the contribution from the recently acquired companies was less than expected in the fourth quarter, they were marginally accretive for the year. Issues related to the change in accounting for percentage of completion at Central Electric, some low-margin jobs included in the acquired backlog and higher than anticipated costs associated with the rationalization of manufacturing functions all contributed to these reduced results. However, the customer and market acceptance of these actions has exceeded our expectations.

The continuation of the industrial sector recession adversely impacted our galvanizing business during this quarter, and also impacted our industrial electric business. Our galvanizing services segment continued to operate at a depressed level and significantly below the same 12-month period of a year ago. Accordingly, we have made adjustments to our cost structure. This, combined with lower zinc costs and reduced cost of natural gas, has assisted us in reducing the severity of the tremendous downturn in the industrial sector of the economy, and the results on impact on our galvanizing business. And we feel that we have reached the bottom in the downturn of this market, and a continuation of the positive overall economic indicators will, hopefully, spill over into the industrial sector in the second half of calendar 2002, and we would hope to see some positive results from this act. Competitive conditions continue to put downward pressure on pricing and maintenance of market share.

Now, the markets we serve in power generation, transmission and distribution continue at a very fluctuating pace, with daily announcements of changing customer plans and conditions. Now, while we've taken this into consideration in our planning, we still anticipate that the distribution substation and related infrastructure spending of utilities to continue at a pace equivalent to the past fiscal year. Now, while recent weeks have shown some lowering of quotation activity, there has been no widespread announcements of lowering of spending in this area. If this were to happen, it could impact our fiscal 2003 projections unfavorably.

The international quotation activity appears on the rise, and materialization of these international orders could help offset adjustments in the North American market over the next three to five years. In previous conference calls and presentations, we've cautioned that the long-term outlook for this market could be impacted by our customer's access to the capital markets. As you're aware, this has occurred and has impacted our business.

There's also some speculation that foreign investors may take advantage of lower stock prices and lower market capitalization of struggling U.S. power suppliers and brokers. It is difficult to determine what impact this would have in the near-term. We will closely monitor these trends and keep you advised on how it might impact our business.

Now, to offset a portion of the market downturn, we believe our recent acquisition, the expansion of our product offering along with installation services will allow for market share increases and a higher level of service to our customers. Now, we have significantly more to offer our customer base in terms of packaging and providing proven solutions. Now, as stated earlier, if there is a continuation of the spending on the distribution capabilities and infrastructure of utility companies, we should see modest growth in fiscal 2003.

Now, the backlog at year-end was 85 million compared to 34.8 million of a year ago. Our recently acquired companies accounted for 38.8 million of this increase. While this strong backlog will carry us safely through the first six months, we will closely monitor the next few month's bookings to assure that we will be able to achieve our forecast for the third and fourth quarter of fiscal 2003.

Now, with that as an overview of our results, Dana will now give us a review of the operating results for the quarter and year-to-date. Dana?

Thank you, David. I would also like to welcome all of you to our fourth quarter conference call. At this time, I will review our consolidated results for the period ending February 28th, 2002.

AZZ recorded revenues for the quarter ending February 28th, 2002 of 50.5 million, a 63 percent increase compared to 30.9 million in the prior year. For the 12-month period, revenues were 152.9 million, a 26 percent increase compared to 121.4 million. The acquisition of Central Electric and added approximately 22-1/2 million to our year-to-date revenues.

Net income for the quarter was 1.8 million compared to 2.2 million. Diluted earnings per share was 33 cents compared to last year's 42 cents per share. Net income for the 12-month period was 7.8 million compared to 8.2 million reported in the prior year. Diluted earnings per share was $1.50 compared to $1.63. Our acquisitions contributed approximately 1.5 million to operating income, and interest cost associated with these acquisitions was approximately $643,000, or a pre-tax accretion of 857,000.

Revenues for the quarter were just over two -- revenues for the quarter were up just over two percent when the acquisitions were excluded. Our galvanizing segment continued to come under pressure due to the tremendous downturn in industrial markets we serve. Even though this market remains flat, with only minimum anticipated recovery in the near-term, we feel a continuation of the positive economic indicators will, hopefully, improve the industrial sector in the second half of calendar 2002.

Net income as a percent of sales was 5.1 percent compared to 6.7 in the prior year. Again, this lower percentage is primarily due to reduced margins in our galvanizing segment. Sixty-eight percent of our revenues were generated from our electrical and industrial product segment, and 32 percent came from our galvanizing services segment. Again, as David indicated, our backlog at the end of the fiscal year was 85.3 million and, again, this compares to 34.8 million at the end of fiscal 2001. And the acquisitions added approximately 3.8 million to our overall backlog.

Again, this -- David at this time will give us an overview of the electrical/industrial product segment.

This product segment is made up of our highly engineered specialty products to the power generation, transmission/distribution markets, including new industrial construction projects as well as expansion and upgrade of existing facilities, the general industrial market, oil and gas and petrochemical markets.

Our product offerings include the operations of tin facilities and fit into the general product grouping of power distribution centers, , control relay panels, switch gear, lighting, installation services and tubular product. Customers include all major A&E firms, major OEM's, utility companies and major industrial firms.

While most of the fiscal year saw strong market demand, the conditions discussed previously did impact us, and are anticipated to impact us in fiscal 2003. The strong demand for most of the year provided for a year-to-date revenue increase for the electrical/industrial products of 50 percent over the prior period, and a growth in operating earnings for the same period of 29 percent. On a same-store basis, revenues in this sector increased 17 percent, and operating income increased 16 percent. Now, backlog increased on a same-store basis, as well as the consolidated impact of acquisitions.

Now, our production had a record-setting quarter and a year with revenues increasing 22 percent and 17 percent on a year-over-year basis. These products are heavily involved with new power generation and major high-voltage transmission line. A large number of capital expenditure rescheduling by customers will impact this product line in the third and fourth quarter of the next fiscal year and continue until fiscal 2004.

Now, in our power distribution center products, we continue to see substantial gains over the prior year. This is applicable to both Atkinson and our recently acquired . It was an outstanding year for both of these operations. Our specialty lighting products continues to struggle, as they are so reliant upon the industrial market for growth and expansion and, as indicated earlier, they face recessionary conditions.

Our switchgear operations, with their strong utility base, is operating at a strong level, but slightly reduced. This combined with relay and control panel business recently acquired significantly expands our packaging ability, and has already led to market share improvement. We continue to identify additional synergies, which should strengthen our operating results and market share. Now, reduced industrial sector spending has negatively impacted our relay panel business.

Tubular product has a good quarter, but we are seeing softness in our traditional oil and gas markets. We've also been advised that our large automotive customer has changed their design, and will no longer utilize our product offering. This will have the impact of lowering our expected results for next year to a break-even status. That compares to an 11.3 operating margin for the year just completed. We must find ways of adding additional products to this operation to replenish this automotive business.

Now, Dana will now cover the operating results of our electrical and our industrial product segment.

In our electrical and industrial product segment, AZZ recorded revenues for the quarter of 39.3 million, an increase of 113 percent over prior year quarterly results of 18.5 million. Excluding our acquisitions, same-store sales were up 10.7 percent over the prior year. Operating income was 4.8 million compared to 3.4 million, a 41.5 percent increase over the prior year. Again, operating income from our operations prior to acquisitions was 3.5 million compared to 3.4 million in the prior year.

Year-to-date revenues were 103.3 million compared to 68.9 million. Same-store revenues prior to our acquisition were 80.8 million compared to 68.9, a 17.4 percent increase. Operating income in this segment was 14.6 million, up 29 percent compared to the prior year. Operating income prior to our acquisitions was 13.1 million, up 16 percent from 11.3 million.

We're extremely pleased with the direction of our company has taken in expanding this segment, and look forward to continued growth. The steps we took in fiscal 2002 should allow us to increase market share and provide a higher level of service to our customers. As David indicated, we should see modest growth in fiscal 2003.

At this time, David will give us an overview of our galvanizing segment.

Our galvanizing services segment is made up of the hot-dip galvanizing business. The primary customers within the steel fabrication market that we serve are telecommunications and electrical utilities, highway and bridge, OEM, petrochemical, recreational and the general industrial markets.

As I indicated earlier, we are operating in a very competitive market. This has had a sustained significant downturn. We continue to see increased pricing pressures, which has directly impacted our operating income. Now, the cost of zinc and natural gas have eased in the last few months. As indicated, we anticipate the first half of fiscal 2003 will continue to come under pricing pressures, as we and our competitors strive to maintain market share.

Now, our new galvanizing facility in Fort Worth, Texas, began operation on March 18, 2002. This is a state-of-the-art facility with increased kettle size and overall capacity. Dana will now give us a review of the key operating statistics for the quarter.

Revenues in our galvanizing segment for the quarter were 11.2 million, down 10 percent from 12.4 million recorded in fiscal 2001. These reduced revenues, again, are a direct result of lower volumes of steel being processed. Shipments for the quarter were 71.7 million pounds compared to 80.3 million in the prior year. Operating income was 1.6 million compared to 2 million. Operating margins were 14.3 percent compared to 16.2 percent. Year-to-date revenues were 49.6 million compared to 52.5 million. Operating income was 7.2 million compared to 97 -- excuse me, 9.7 million. Total pounds shipped for the year was 316 million compared to 342 million in the prior year.

Despite continued pricing pressures, the results of lower zinc and natural gas costs combined with cost reductions and cost containment have allowed us to see some leveling in the operating results of this segment. Again, we anticipate we will start to see improvement in the industrial markets we serve in the latter half of fiscal 2003.

At this time, I'll cover some key cash flow items. Earnings before interest, tax, depreciation and amortization for the year was 21.3 million, flat with the prior year's 21.3 million. Cash provided by operations was 13.8 million compared to 12.3 million in the prior year. Appreciation for the year, 6.3 million versus 5.8 in the prior year. Our total capital expenditures this year were 12.7 versus 5.1 in the prior year. Again, the increase in our cap-ex program this year is primarily due to the replacement and rebuilding of our Crowley galvanizing facility. Cap-ex for 2003 will be approximately 5.2 million, and appreciation will be approximately 6.5.

As previously announced, the company adopted FAS 142, Goodwill and Other Intangible Assets, on March 1, 2002. Starting in fiscal 2003, the company will no longer amortize goodwill. Amortization of goodwill was approximately 1.3 million in fiscal 2002. The company does not believe at this time that the adoption of FAS 142 will result in any goodwill impairments.

The following are some of our key balance sheet items on a comparative basis as compared to fiscal 2001. Long-term debt to equity stood at year-end at .98 to one, compared to .52 to one in the prior year, again, due to our acquisition activity and the restructuring of our bank loan. And shareholder's equity was 54.6 million compared to 43.4 million in the prior year.

AZZ is currently -- has a syndicated bank facility consisting of four banks. Our facility consists of a $40 million term known -- term note has been amortized over four years, and a $45 million revolving line of credit. At the end of our fiscal year, the outstanding balance on our term facility was 40 million, and 23.5 million under our revolving line of credit. And, of course, we believe that our current credit facility, along with cash generated from our operations, will be sufficient to accommodate the company's current operations, as well as future growth. We project our total bank debt at the end of fiscal 2003 to be approximately 55 million. Our leverage to total capital will be approximately .46 to one at the end of next fiscal year.

The continued weakness in the industrial markets we serve, which primarily affected our galvanizing operations, we believe the outlook at fiscal 2003 will result in earnings consistent with our previous provided guidance.

At this time, I will turn the conference call over to David for closing comments, and then we will open for questions and answers.

The results for the fourth quarter as stated are in line with our revised projections, and is a quarter which saw many accomplishments and strategic positioning for our company. We are cautiously optimistic about our fiscal 2003. Considering the extremely difficult operating conditions not only in power generation but the industrial sector of the economy, the extensive synergies that exist in our expanded operation, combined with the opportunity to expand market share, will help to offset a portion of our declining markets. Excellent customer and market acceptance of our actions has been beyond expectations, and the added management talent has strengthened us as a company and will shorten our reaction time to opportunity.

Now, while there are a number of issues that may develop over the coming months in our constantly adjusting markets, we anticipate that the earnings per share for fiscal 2003 will be in the range of $1.65 to $1.80 per share. Now, as stated earlier, we are anticipating that the established utilities will continue their infrastructure and distribution work, and that the industrial sector has bottomed out and has the potential to see some recovery in the second half of calendar 2002.

Now, despite these lower projections, we are in compliance with, and anticipate remaining in compliance with, our banking covenants. We are committed to our long-term reinvestment program, and have decided that we will suspend the cash dividend for this year. These funds will be made available for reinvestment and debt service. We believe this is a prudent decision to provide the company maximum flexibility to operate at the highest levels of efficiency going forward. Additionally, we believe that this reallocation of resources into operations will provide a platform for enhanced shareholder value in the future.

Our strategic vision remains clear. We remain focused on strong operating efficiencies, committed and enthusiastic in our efforts to continue to expand the company, enhance our solutions capabilities to our customers, and add shareholder value. We appreciate your support, and thank you in advance for continuation of that support.

Again, we want to say thank you for your participation today. We trust that you share with us our excitement over the long-term opportunities that the company has. At this time, we'd like to open it up for any questions that you may have.

Thank you. The question and answer session will be conducted electronically today. If you would like to ask a question, press star, one, on your touchtone telephone. We will take questions in the order received and as many as time permits. Again, that is star, one, to ask a question, and we'll pause a moment to assemble our roster.

And our first question will come from of .

Good afternoon, gentlemen.

Good afternoon, John.

Hi, John.

My first question regards the backlog. In your pre-release, you discussed that backlog at the time was $95 million. Today, it's now at $85 million. What's the difference? In what business is the erosion accounted for? Can you give us a little color there?

Well, in the February forecast, when we said that there was 95 million, that was after coming off of a December where customers had substantially reduced and rescheduled. With this strong February, , then that lowered it from 95 to 85. When we analyze our business and the -- and how critical the backlog is, we break it into pieces. Now, you know -- as you know, galvanizing has no backlog. But, if we say that the projected volume is, say, 195 million to 200 million going forward, of that, 125 million is extremely sensitive to backlog. As of today, we have about 79 million of that in backlog, and so that leaves us with 38 percent to yet book and ship in the fiscal year. So, naturally, the 85, as I said, is sufficient to strongly carry us through the first six months. We would like to get it back to that $90 million plus level to assure us of the confidence and the bullishness in the third and the fourth quarter. But, the percent that we have in backlog versus the percent yet to ship is not unusual for us. But, again, changing market conditions make that more of a challenge. So, again, we're looking at about 48 million that we need to book and ship in order to meet our projections for fiscal year 2003.

Is one business eating into backlog more so than any other? I mean, is Calvert not getting the new order rates? Can you give us something there?

Calvert is actually above our theoretical backlog for -- as it currently stands. Now, our concern there is what backlog do we exit next year going into? The pieces that are of significance to us in terms of that is the relay and the control panel business that serves the industrial sector, and CGIT in the high-voltage transmission lines is below what we would like to see. Those essentially, , if we said that we'd like to be at the -- in the low 90's, those make up 80 percent of what we are projecting as our shortfall.

Now, Dave -- David, you touched on this just now. You suspended the dividend. I'm wondering, are any of your debt covenants at risk? I know you said that you're not currently -- you're currently in compliance with all your debt covenants. But, are any of them at risk, and what was the thinking behind suspending the dividend?

The suspension of the dividend has been a topic of discussion for the last two to three years. Many of our investors have said that they would rather see us put the dividend back into growth and expansions of the company. Dana mentioned that our capital expenditure was in excess of 12 million last year, which is more than double what we traditionally spend and, again, that was expanding of our galvanizing capabilities. Then, we spent the 40 million on the acquisitions, and we believe that, for the long-term, we should maximize cash available for repayment of debt and continued expansion of capacity.

We are in compliance. We have done sensibility models, and -- that say that we can go as low as 20 percent below our fiscal 2003 forecast and not be in breach of covenant.

Well, I'm just curious, because you suspended the dividend. If I heard Dana correctly, it looks like the total debt for fiscal '03 is not changing materially from the end of fiscal '02. Where's the money going, then?

We will actually pay down around $10 million on our term note. Our models indicate about 1.8 to $2 million we'll draw down on our revolving line of credit. We will see some increase in inventories and receivables due to -- in our working capital area this year. Capital expenditures will be approximately 5.2 million. I can't think offhand, ...

OK.

Primarily it.

I'll just ask one question more -- one more question. I'll go back into queue. Could you just give me a breakdown on the international sales versus domestic? You kind of made that as a selling point before.

We're still running at about an 80 percent/20 percent ratio, 80 percent domestic to 20 percent international.

OK, thank you.

Thank you, .

Next, we'll hear from of Security.

Good afternoon.

Good afternoon.

Good afternoon, John.

Let's see, I want to ask you a couple of galvanizing questions and, let's see, are you seeing any pickup in the margins, or are you just trying to get the business still at this point?

The margin improvement in the second six months was two to three points, as we saw. And, as we said, even on lower volume, the reduced price of zinc, the reduced price of natural gas, plus we've taken some aggressive steps in controlling our spending. So, the last few months that -- of the fiscal year we were right in at 14-1/2 to 15-1/2 to 16 percent. This is substantially above the first six months, when it was in the 12 to 14 percent range. So, we believe that if we do see recovery in everything else, that will be additive to that 15, 15-1/2 percent level that we currently operate in, and we'll get back to that 17-1/2 percent level that we -- what we hope.

OK. And have you, or do you plan on, doing any hedging with natural gas, or you just gonna let that go?

What we currently do, we don't -- we do not try to go out on the open market and do actual hedging, buying separate hedge contracts. We work with our utility suppliers and attempt to lock in natural gas prices on a yearly basis on a supplier-by-supplier basis.

Oh, OK.

And about -- little over approximately half of the utilities we work with allow us to do that. Some of the other utilities, Arizona being an example, will not allow us to do anything other than their tariff rates. So, probably about half of our utility costs we try to hedge.

OK.

Through the suppliers.

All right. And so, you sort of talked about the power plants being constrained with how much capacity they can build, and as far as their balance sheets let them. And I was just wondering if you might -- if you think you might see a change in that with -- I've read some reports how people might be expecting brownouts or blackouts with the power situation if, you know, the economy improves. Do you think that might, sort of, help these companies expand their clients?

We certainly hope so. Of course, we believe the question will be will the capital markets perceive that as a long-term payback and reward them with a stock appreciation to allow them an improved credit rating and improved access to the market. There is no doubt that the lowering of the demand as a result of the recession has been more significant than I think anybody's given credit for. The mild winter, we did get some contribution from conservation. But, all that has led to a total elimination of the demand issue, which just long-term.

And I'll give you a local example here in the state of Texas. About three weeks ago, we had a northern come through, and the temperature dropped down to about 20 degrees. And here, they cancelled 20 something power plants in the state of Texas, and we got a notice for voluntary cutbacks just on that one day of 15 to 20 percent. So, it's not going to take much increase in demand to bring back the issue of brownouts and blackouts to get all of the industry to re-focus on long-term we do not have the capacity to meet the demand of a robust economy. So, hopefully, that will translate that in. People will see pricing opportunities, people will see the long-term stability and the requirement of the Calpines and the Dynegy's and the and the NRG's and the ADS's to get back into the capital markets.

But, when their shares are selling at 60 to 70 percent below the 52-week highs, their only access to strengthen their balance sheet, as we said, is to reduce capital spending. And it is not part of the long-term solution of the U.S. economic -- I mean energy issue. That's why we remain encouraged for the long-term.

All right. Well, thank you guys very much.

And, once again, if you'd like to ask a question, press star, one, on your touch-tone telephone.

Next, we'll hear from of Investments.

Good afternoon. I got on a few minutes late, and I didn't -- I'm sorry if I missed the answer to this question. But, what is your expected cap-ex for this year?

Approximately 5.2 million for the fiscal year we're -- 2003. appreciation will be approximately 6.5 million.

OK, thank you very much.

Thank you.

And next, we'll hear from of Sidoti & Company:

Hi, guys, back again.

Okay, John.

In your assumptions for the next year's 165 to 180 cent/share outlook, if you consider that relay and control business and CGIT order rate is low, what kind of revenue assumptions or growth are you looking at some of the other businesses? Is there a disproportionate amount of growth going on, say, in Atkinson or Central? Could you give us a little color onto what your assumptions are to hit the -- maybe the high end of that range? What needs to happen as far as on the revenue size by your businesses?

Yes. The 180, or the high end of the forecast we will -- believe will come from two primary factors. One is an improvement in the industrial sector, which translates into a nice increase in the galvanizing business, and the same industrial sector improvement will translate into increased lighting and increased relay and control panel. The up-tick in any market demand on the other would probably be outside the delivery cycle of this year. So, if we were to hit the 180 level, you would see an outstanding galvanizing year, an outstanding lighting year, and a tremendous hit -- up-tick in the industrial relay panel that serve the industrial market.

OK. Could you just refresh my memory? The galvanizing business did how much in tonnage last fiscal year?

About 341 million.

Three forty-one?

Oh, excuse me, that was the prior year. It was 317, I believe.

Three seventeen last year?

I believe that's right.

And -- versus 341?

Yeah, I think that's right.

And to get to that buck 80, how many pounds do you need to do?

They'll have...

I have not calculated that because, again, you have to make assumptions on the price of zinc and the overall pricing. But, if you take -- for example, we did considerably more in the first six months of last year than we did in the last six months, . But, the last six months had all the favorable costs, so our margin was exactly the same. So, if you can pick up another three to $4 million worth of business in the last six months, that's a 16 to 18 percent margin contribution. You can see how quickly that adds to earnings per share.

Yes, you mentioned that margin and -- actually, earlier in your presentation, you kind of touched on the fact that you've made adjustments to the galvanizing business that would result in cost savings. Can you provide a little bit more clarity on what those adjustments were, and just give us a little background on exactly what you did do? Was it head count? What is it?

It is head count, it is better utilization of when we have a customer, to run it in the most efficient factory rather than the closest factory. It is a reduced overall, again, discretionary spending, promotion programs. Again, there's not a single line item in our budget that we have not taken a hard look at. But, yes, it is head count related.

OK. All right, thank you.

Thank you.

And, Mr. , there appears to be no further questions at this time. I'll turn the conference back over to you for any additional or closing remarks.

Thank you, Angie.

Again, we appreciate your time and consideration today to review AZZ's year-end results. As always, should you need anything in the interim, don't hesitate to call any of us at RCG at 480-675-0400. We look forward to speaking with you at any time and, certainly, look forward to you -- speaking with you at the first quarter results.

And that does conclude today's teleconference. We thank you for your attendance, and have a good day.

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