AZZ Inc (AZZ) 2014 Q4 法說會逐字稿

Good morning and welcome to the AZZ incorporated fourth-quarter and fiscal year 2014 financial results conference call. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Joe Dorame of Lytham Partners. Please go ahead, sir.

Good morning and thank you for joining us today to review the financial results of AZZ incorporated for the fourth quarter and the fiscal year 2014 ended February 28, 2014. As Denise indicated, my name is Joe Dorame. I am with Lytham Partners and we are the investor relations consulting firm for AZZ incorporated. With us on the call representing the Company are Mr. Tom Ferguson, Chief Executive Officer; Mr. Dana Perry, Chief Financial Officer; and Mr. Paul Fehlman, incoming Chief Financial Officer.

At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. If anyone participating on today's call does not have a full text copy of the press release, you can retrieve it from the Company's website at azz.com or numerous financial websites.

Before we begin with prepared remarks, I would like to remind everyone certain statements made by the management team of AZZ during this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Except for the statements of historical fact, this conference call may contain forward-looking statements that involve risks and uncertainties, some of which are detailed from time to time in documents filed by AZZ with the United States Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended February 28, 2013.

Those risks and uncertainties include, but are not limited to, changes in customer demand and response to products and services offered by the Company, including demand by the electrical power generation markets, electrical transmission and distribution markets, the industrial markets and the hot dip galvanizing markets, prices and raw material costs, including zinc and natural gas, which are used in the hot dip galvanizing process, changes in the economic conditions of the various markets the Company serves, foreign and domestic, customer-requested delays of shipments, acquisition opportunities, currency exchange rates, adequate financing and availability of experienced management employees to implement the Company's growth strategies. The Company can give no assurance that such forward-looking statements will prove to be correct. 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. With that said, let me turn the call over to Mr. Tom Ferguson, Chief Executive Officer of AZZ. Tom?

Thank you, Joe. Good morning to all of you and we thank you for your continued interest in AZZ. First, I'd like to recognize Dana Perry for his 39 years of service to AZZ since this will be his final earnings call as our CFO, although he will be remaining on the Board of Directors. His support as I have transitioned into the Company is tremendously appreciated.

I would also like to welcome Paul Fehlman who is transitioning into Dana's CFO role. Paul brings a wealth of financial experience and expertise to the team and especially bolsters our international capabilities. I feel quite good to have a stable executive team as we enter fiscal year 2015. We are committed to continuing to grow this business and to do it in a manner that is fiscally responsible and that will continue to drive value for our shareholders.

While it has only been five months since my appointment, I remain committed to maintaining the strategy of growth in both our galvanizing and electrical and industrial segments. We will focus on the continued expansion of our galvanizing services business both organically and through acquisitions. As the industry leader, we are committed to leveraging our strong standard of operating practices to improve profitability and service. We are completing our integration of NLI, which is the nuclear component and certification company we acquired back in 2012 and WSI, which is the specialty welding overlay business we acquired from Aquilex last year.

And we are transitioning our emphasis from integration to growth. We recently organized our electrical and industrial businesses into three internal platforms -- the nuclear, industrial and electrical. This allows us to leverage sales resources more effectively for similar markets, drive operational excellence where we have similar processes and supply chain demands and provide more focus on innovation and technology development. We are accelerating our international growth initiatives while increasing the emphasis on safety and operational excellence. We see opportunities both domestically and internationally in the oil and gas sector, as well as in most segments of the electric utility sector with particular emphasis in the nuclear arena. We have received our first orders for our new Brazil WSI site and are accelerating our efforts to establish operational capability in China and the Middle East.

While I felt like we were gaining some operational traction in the fourth quarter, we did have significant weather-related impacts of $5 million to $10 million on sales and $0.02 to $0.03 of [EGS]. I am quite thankful and appreciative of the effort both Tim Pendley's galvanizing team and Ashok Kolady's electrical industrial team made to recover as much of that as possible because both were impacted.

Although the results of the fourth quarter did not meet our internal targets, I believe the headwinds and distractions we have faced during the past year are diminishing as we enter into the new fiscal year and beyond. We had a book-to-ship ratio of 1.1 to 1; thus building some backlog going into fiscal year 2015. We have also seen a nice increase in quotations and opportunities as we finished out fiscal year 2014. Given that activity, the capability of my leadership team and the traction we are gaining on our key initiatives, I remain comfortable with our guidance of $850 million to $900 million in sales and $2.40 to $2.80 EPS for fiscal year 2015.

Now I'd like to make some comments on our operating segments. For the fourth quarter, electrical and industrial products and services recorded revenues of $103.2 million with an operating margin of 9.9%. Sales and income were negatively impacted by weather delays, both due to our plants being shut down or due to freight delays. For fiscal year 2014, the electrical and industrial products and services segment revenue came in lower than forecast due to delays in nuclear project shipments in NLI and also international projects at WSI sliding out to fiscal 2015.

In spite of these delays, AZZ achieved record revenue for the segment at $416 million. $200.6 million of this year-over-year increase was due to the 11-month contribution from the Aquilex SRO acquisition, which is what we now refer to as WSI. Excluding the contribution from the acquisition, year-over-year sales were 8% lower at $215.5 million versus $233.6 million in fiscal year 2013. The legacy electrical business, excluding NLI and WSI, was affected by slowdown in international orders for high-voltage transmission business, particularly in China and Canada. Orders from Canada and switchgear, electrical enclosures and high-voltage transmission products were significantly lower than forecasted. Our hazardous duty lighting business also experienced a slowdown in fiscal 2014, so all these businesses ended the year at $164 million in revenue with an operating margin of 15%.

WSI integration is nearing completion and we are pleased with the progress so far. We focused on international growth and strengthening the salesforce during the year and it is starting to yield results. The opportunity pipeline is very strong and we are forecasting a strong second half of fiscal year 2015 for this business. WSI recorded revenues of $200.6 million and operating margin of 8%. We expect higher revenue and margins for the current fiscal year.

As we reported last quarter, we continue to see the effects of the construction delays for the two domestic nuclear projects and two plants in China. The low number of scheduled outages in calendar year 2013 also affected our order intake for the year. We remain optimistic in our outlook for the nuclear market as planned outages return to a normal cycle in this calendar year. International inquiries remain strong for power generation and transmission distribution products, which partially offsets the current weakness in the domestic market.

We are expecting an uptick in quotations in the Middle East and China as this year goes on. The domestic transmission and distribution market is stable. We do not anticipate any significant change year-over-year. With the addition of WSI's leading proprietary welding technologies and NLI's ASME nuclear component certification capabilities, AZZ is very well-positioned to better serve the aging energy infrastructure market and power generation, refining and petrochemical throughout the world. We anticipate improved margins for both NLI and WSI in fiscal 2015.

For the fourth quarter, galvanizing services recorded revenues of $77.5 million at an operating margin of 24.1%. Fourth-quarter revenue for the segment came in lower than forecasted due to the impact of the extremely harsh North American winter, particularly impacting the south and central parts of the United States. Overall, volume was flat compared to the prior quarter.

The galvanizing service segment completed its second-best year on record just short of surpassing last year's record performance in volume and revenue and established a new record for operational income. Petrochemical volume gaining traction in the fourth quarter finished up compared to the previous period. Volumes in the electrical utility market, along with the bridge and highway market, continued their lackluster performance through the quarter trailing the previous year's levels. Improvements in our agricultural-related sector offset the softness in the industrial and recreation markets throughout the year. We anticipate fiscal year 2015 to be another record year of performance based on a strong petrochemical sector and solid improvements in the electrical utility and bridge and highway markets. With that, let me now turn the call over to Paul Fehlman for a review of the financial results. Paul?

Thanks, Tom. For the fiscal year 2014, we recognized net sales of $751.7 million, EPS of $2.32 and a backlog of $229.9 million. This reflects a year-over-year increase of 32% in revenues, a decrease of 2% in EPS and an increase in backlog of 3.6%. We posted 15.7% growth in annual net cash flow from operations year-over-year, up $14.5 million to $107.3 million. Full-year revenues in our electrical and industrial services segment were up 78% to $416.1 million compared to fiscal 2013 while operating income rose 34% to $45.9 million compared to the prior year.

Operating margin for the segment fell to 11% compared to the prior year margin of 14.7% reflecting nonrecurring period expense costs related to acquisitions, as well as the effects of purchase price accounting from our acquisition of WSI. Excluding WSI, full-year operating margins in the segment would have been 13.9%.

In our galvanizing services segment, full-year revenues were down just under 0.5% to $335.6 million compared to fiscal 2013 while operating incomes rose 4.8% to $92 million compared to the prior year. For the full year, we recognized nonrecurring charges related to losses from the fire at our Joliet galvanizing facility, as well as gains from the settlement of a lawsuit while also recognizing certain nonrecurring insurance proceeds from the Joliet fire.

For the fourth quarter of fiscal 2014, we are reporting revenues of $181 million, EPS of $0.40 as compared to $140.4 million in revenues and EPS of $0.52 in the same quarter last year. As noted earlier, our backlog at the end of the fourth quarter grew to $229.9 million, reflecting a book-to-bill ratio of 1.1 for the quarter.

In addition to the fourth-quarter weather effects Tom discussed earlier, we have separately disclosed on the table attached to the press release several nonrecurring items during the quarter. These include the continued losses related to the Joliet fire, as well as expenses related to acquisitions. During the prior year fourth quarter, we also recorded similar nonrecurring items. Earnings per share for the fourth quarter of fiscal 2014 without these reoccurring items would have been $0.42 per diluted share compared to $0.57 for the fourth quarter of fiscal 2013 on a comparable basis.

Revenues for the electrical and industrial products and services segment for the fourth quarter of fiscal 2014 were $103.5 million as compared to $61.9 million for the same quarter last year, an increase of 67.1%. Operating income for the segment increased 11.7% to $10.2 million compared to $9.2 million for the same period last year. Operating margins for the fourth quarter were 10% for the quarter as compared to 14.8% for the prior period.

Revenues for the galvanizing services segment for the fourth quarter were $77.5 million compared to the $78.5 million in the same period last year, a decrease of 1.2%. Operating income was $18.7 million as compared to $17.2 million in the prior period, an increase of 9%. Operating margins for the fourth quarter were 24.1% compared to 21.9% in the same period last year.

During fiscal 2014, we utilized our strong cash flow to pay down debt, driving a year-end debt balance of $406 million and the year-end debt to EBITDA leverage ratio of 2.7 times. We continue to believe that our balance sheet is one of our core strengths and when coupled with our strong cash flows and our access to borrowing under existing banking agreements, we have adequate flexibility to support growing our operating platform.

Based upon the evaluation of information currently available to management, we continue to anticipate our fiscal year 2015 revenues to be in the range of $850 million to $900 million and for earnings to be within the range of $2.40 to $2.80 per diluted share. Our estimates assume, of course, that we will not have any appreciable change in our current market conditions, competitive activity, including pricing or additional significant delays in the delivery or timing in the receipt of orders in our electrical and industrial products and services segment or any change in demand for our galvanizing services. We continue to be optimistic about our future as we continue to position the Company to provide a sustainable platform of expanded products and services offerings, both domestic and international. With that, I will turn it back to Tom for our concluding remarks. Tom?

Thanks, Paul. Our vision is to be the innovative solutions leader in protecting metals and electrical systems used throughout the world's infrastructure. We believe we are well-positioned to achieve this vision as we enter fiscal year 2015 and are confident in our ability to grow our businesses profitably. The completion of another successful year, our 27th consecutive year of profitability, the financial strength of the Company and a great group of employees with stable leadership is reflected in the confirmation of our fiscal year 2015 guidance.

As we look ahead, we will continue to focus on aggressively expanding or businesses both domestically and internationally. We will continue to leverage our expertise and our internal spirit of innovation to enhance our position as the solutions leader in protecting metal and electrical systems that drive infrastructure throughout the world. We have the products and services, the people and the reputation to devise the necessary solutions to not only meet, but exceed our customers' needs. We are excited about the opportunities before us in fiscal year 2015 and beyond. Thank you for your participation today. We'd like to open it up for any questions at this time.

(Operator Instructions). John Franzreb, Sidoti & Company.

Good morning, Tom and Paul. First, I would like to wish Dana good luck on his retirement. Dana, it has been a pleasure working with you all these years. Tom, in your press release, you mentioned that WSI was able to pull in some jobs. But, in your prepared remarks, you mentioned that there was a pushout of jobs into 2015. Could you talk a little bit about the dynamics of what is going on at WSI and how those jobs are able to move back and forth so readily?

Yes, I think we've -- as we were forecasting and we prepared our guidance for the fourth quarter, we were looking at a certain set of jobs being shipped out of WSI and they were able to add a couple that had shipped out earlier or slipped out earlier in the year, but then they were able to pull some other stuff into the quarter and that is why it is kind of a timing issue in terms of what our expectations were. So overall, we feel real good about their ability to just reprioritize some jobs that they can deliver a little bit earlier.

Can you give a sense of magnitude of how much was moved into the fourth quarter?

I have got Ashok sitting here, so --.

The fourth-quarter jobs that moved in is slightly less than $10 million.

Okay, that actually makes sense to me. Okay. And regarding the SG&A, it seemed to drop rather significantly in Q4 versus Q3 and actually for the balance of the first three quarters of the year. What were the moving parts there that impacted SG&A?

We had felt kind of the softness, as you know, when I came on board and so we tightened up on our SG&A spend so nothing really particularly significant in any of that, other than delaying a little bit of spend and some hires into the year, into the new year making sure that we made some adjustments on personnel as we now enter the new year. So nothing that I would really point to of real significance.

Okay. And one last question. The weather-related issues, did that spill into Q1 of fiscal 2015 and if so, what kind of progression would you expect the earnings to look like going forward for the balance of the year?

It has continued to impact our galvanizing, but I guess the good news is it's hitting us early in the quarter instead of at the end of it, so a little more time to recover and I think particularly on the electrical and industrial side, the impacts there on weather probably are not going to affect the quarter. So I think it is going to be a fairly normal cadence in terms of the first quarter.

Okay. Thank you very much, guys.

Schon Williams, BB&T Capital Markets.

Hi, good morning.

Hey, good morning.

And again, echo the congrats to a well-deserved retirement for Dana and welcome to Paul. Very solid company you are joining here. I wanted to focus a little bit maybe piggybacking on the last question as to the trends. I mean there is not a lot of visibility on our end as to when some of the shipment from the E&I side are going to go, actually go out the door. Obviously, you are expecting a decent ramp here on the E&I side. So I was wondering if could we talk about either specific expectations for Q1 or maybe if you are not comfortable talking about Q1, but maybe first half of the fiscal year versus second half of the fiscal year.

Just when we look at the guidance, both the revenue and the margin guidance, how should we be baking in kind of the traditional seasonality versus some of these shipments that go out the door? I mean, for instance, E&I, typically shipments in Q1 are actually down versus fiscal Q4, but I mean I would expect maybe that is not the case this time around just given what is sitting in the backlog. So just help us think about the timing as we progress throughout the year.

Yes, I think the -- just a first comment, I would anticipate the second half being stronger than the first half, but the only caveat to that is with some of these large nuclear projects, particularly the two new plants in the US and the two plants in China, I think like everybody, they'd probably like to be able to predict when they are going to complete things. So we've been talking about that for probably most of the past year I guess. So while we are pretty confident they will ship this year, I'd kind of hedge that a little bit and say it could be as late as the second half. We are going to do everything we can on our side to make sure we are ready to ship whenever they are available.

But I guess at this point is your kind of your best guess that it is going to be more of a second half? Are they scheduled for the first half, but you want to be conservative and say that it may go out to the second half?

Yes, I think that's my personal conservatism is to give us as much time during this year as we can to get those things out, but, right now, the China jobs are scheduled for late summer, August-September timeframe.

Okay, that's helpful. And then could you just talk about a little bit -- obviously the lack of outages hurt you significantly in fiscal 2014. Can you talk about why you think that is not going to be a headwind as we move forward?

Yes, I think the big issue there is I believe a lot of the nuclear sites delayed outages pending potential Fukushima regulations and the regulations really have not come out yet, but that I think the signal from the government is they are more related to planning less hardware-type effects. So the fact that outages were delayed a year, usually they will get back into a normal cadence for the next couple years and so we'll have a little bit of catch-up.

So I am confident just because of the nature of the way the nuclear plants handle their outages, we are going to see a higher number. Currently the plan as they release their plans for this year is up above 65 outages versus low 50s last year. That is what gives me some confidence and we see that impact in NLI because of the component side of the business, as well as on the WSI side.

All right, thanks, guys. I'll get back in queue.

Noelle Dilts, Stifel.

Hi, good morning and again, Dana, congratulations on your retirement.

Thank you.

My first question, I just wanted to go to get a little bit more just granularity on your guidance. Has there been any change in terms of what you are expecting by segment in terms of profit -- I'm sorry -- in terms of revenue or profit versus when you gave some of those details in January?

No, actually -- this is Paul -- we haven't talked about any change. We are not going to be projecting any change from those numbers.

Okay. And then second, just going back to this opportunity -- the opportunity in NLI. In the past, you've talked a bit about what you see in terms of revenue opportunity from both some of these outages and from Fukushima -- post-Fukushima upgrades. Again, any changes in terms of the thinking there in terms of the size of the opportunity?

No, not really. As I look at it, we've got a very strong sales organization in NLI and now as we have crossed it across all our nuclear opportunities, I think we look to be able to grow both by taking on new opportunities, as well as benefit from just the higher number of outages where that is kind of run rate business and if you take an average of say 60 outages a year in the US, then that forms a pretty good base. So the fact we are expecting some catch-up is just good news for NLI or should be as the year goes on.

Then on the international side, we are seeing activity in China picking back up. And so while I don't think the nuclear sector is real robust in terms of new equipment, because we are especially focused on the maintenance side of the sector, it tends to be -- maybe we are a little more bullish on it than some other folks might be.

Okay. And then you sounded pretty -- you sounded pretty optimistic on the petrochem market within galvanizing for this year. Could you just kind of talk about what you are seeing there in terms of -- give us some sort of sense of the pace of improvement you are seeing to date and just kind of what you are getting in terms of inquiries in that market?

It is up a few percentage points, which -- for us and mostly what we are seeing is a higher level of inquiries. We are seeing projects moving forward and we will start to see more -- we will be getting more of the metal to galvanize as that goes on. So I guess the real positive is we are just seeing what were budgeted projects now so far has been fairly small ones, which isn't necessarily bad news for us, but we've seen those move forward. And there are several larger ones that we are seeing positive signs that they are going to go ahead and move those forward.

Okay, great. Thanks.

(Operator Instructions). Brent Thielman, D.A. Davidson.

Hey, good morning.

Good morning.

Could you provide what range of WSI revenue is built into guidance for fiscal 2015?

I don't have that right in front of me, Brent. I will just get back with you on that. Roughly $225 million to $250 million range.

Okay, perfect, thank you. And then I'm sorry if I missed this at the start, but did you provide what the NLI revenue and operating profit are for the quarter?

I think we did that on a (inaudible) basis, didn't we, in our press release?

Yes, Tom talked a little bit about that and it was on the -- it was in the prepared remarks and it was in the press release. But that is nothing we typically would break out separately because we do operate as E&I officially for our operating segments.

Okay, that's fair. And then I was just kind of curious what was behind the decision to no longer provide quarterly guidance. Is it just simply because the business has become a bit lumpier with the nuclear work? Just a little discussion there.

Yes, I think, as you can imagine, both Paul and I come out of that [flow served] environment where you have a lot of projects that -- they move by a week and suddenly you look really foolish on your guidance for a quarter. And we just felt -- what we will do going forward is continue to, as best as possible each quarter, start to narrow that full-year guidance for you so that you can see the direction that we are heading because there is -- now with WSI, NLI, as well as several pieces of the legacy electrical business, we are heavy, heavy, heavy projects versus the galvanizing services side that your day-to-day run rate business and since that used to form 60% of our volumes and the project side kind of 40% and now we are inverted. So we just have so much more project activity that is lumpy and that can move by just a couple of weeks and throw quite a bit of income one month out.

Brent, I think we started that last year to kind of help guide you guys on what our quarterly revenues were going to be from the WSI acquisition due to their lumpiness quarter to quarter. And I think that has kind of served its purpose now.

Both have been fully integrated and one of the phrases you will probably be hearing from me a lot is we are becoming less and less of a quarterly business. So we are not a quarterly business; it is becoming more lumpy.

That's fair. I appreciate that. And then the four large nuclear projects you talked about, can you remind us what the sort of revenue associated with those are roughly?

Yes, it's -- probably those four constitute a little under $50 million of volume.

Okay, great. And sorry, one last one, amortization of the acquisitions in E&I, was that about $3.4 million this quarter?

That sounds about right.

And that is down about by half next year or I guess this year, fiscal 2015 on a quarterly run rate?

What is going to happen, Nuclear Logistics, NLI, we were [impassing] their backlog over a 2.5 year period and that piece of the amortization goes away at the end of our third quarter.

Q3. Okay.

We've had a benefit this year and then next year is when you will start seeing the real benefit of that wind-down.

Benefit in fiscal 2016?

Yes.

Got it. Thanks. Great, thank you, guys.

Jon Braatz, Kansas City Capital.

Good morning, gentlemen. And Dana, good luck in retirement. I appreciate all the help. Tom, a question. You mentioned that bidding activity and quoting activity is up a little bit and I know you have only been there four months, but some of the initiatives that you've instituted and started, are you seeing some, especially on the international side, are you seeing some benefit from that? Are you seeing that in some of the quoting activity or is it more still just sort of the legacy opportunities?

Yes, I am not going to take a whole lot of credit for that. I think we are seeing the legacy -- the benefit from the legacy -- I will say that we have had a tickup just from the reorganization along this nuclear platform line. That is where we had a real strong salesforce in NLI and I think they have already started -- well, both sides, WSI and NLI, they had different customer bases that they had strength with and we are seeing some of that benefit already just as they've come together under one leadership. So I'd say that is part of the new structural changes, but the run rate stuff in galvanizing and traditional legacy electrical and those kind of things, that is all just a result I think of being stable and being focused on it.

Okay. And then, secondly, the Joliet facility, now it is up in full production, what kind of revenue contribution does that facility generate? I know it was the largest facility -- I think it was the largest facility you have. Is it still the largest facility after the rebuild?

It is in the top echelon. Just for competitive reasons, I'd rather not give any numbers by site.

Okay, I understand. Let me ask you this. Incrementally, I know you had diverted some production to other facilities. So if not, what's coming back onstream will not all be incrementally new. Am I correct in that?

That's correct. I think we will pick up a few percentage points overall.

Okay, okay, okay. All right, Tom, thank you very much.

Sure thing.

William Bremer, Maxim Group.

Good morning, gentlemen.

Good morning, Bill.

Just a quick one. The incoming orders are pretty impressive. Can you give us an idea of the mix of those orders and more importantly, the underlying pricing there? Are they better sequentially or should we look at them as -- are they better say year-over-year?

Boy, I should've known you were going to ask that question. I have to admit I am struggling to answer it because I am just -- I haven't really gotten a good feel for the rhythm of our pricing. What I would say is the opportunities, as we've mentioned, petrochem is -- we are feeling real good about it across our segments and then we are picking up some international opportunities. So on a relative basis, I have a hard time giving you much to trend with other than to say our pricing is still pretty just stable.

Okay, all right, gentlemen. That is all I have. Thank you.

All right.

John Franzreb, Sidoti & Company.

Yes, just about the reorganization along the platforms, could you talk a little bit about what is in the industrial versus what is in the electrical groupings?

Sure. The industrial is the WSI non-nuclear and it is the SMS, which is kind of the general refinery boiler service piece of that Aquilex SRO business we bought. And then in nuclear is NLI plus the nuclear side of WSI and then electrical is everything else.

Okay. And in that electrical bucket, would you characterize that business as weaker in the fourth quarter versus year ago? Well, just let me stop right there for now.

Yes, I think as I came into it -- that is right about the time I came in. It felt weaker. It felt like it had been probably stronger the previous year.

And Tom, what are your expectations for that business in 2015? Are we at the trough yet or tell me how you see the electrical side of the business playing out in the coming year?

Well, I think we felt better about the incoming at the end of the year for that sector. I think because it is so many disparate pieces, we are going through a very comprehensive strategic review of that particular platform and what do we do with these -- how do we see them progressing and how do we get focused in the right areas to be able to take them to a new level of growth, but we are early in that process quite frankly.

Okay, all right. That's fair enough. All right, thank you for the color.

Noelle Dilts, Stifel.

Hi, first, I was just hoping you could take a bit of a deeper dive into what you are seeing in the transmission market within galvanizing and then also comment on what you are seeing in distribution more on the electrical side.

Yes, on galvanizing, it is just very stable, very flat, very stable. But we anticipate we will continue to focus more on the petrochemical and pick up those opportunities. And then we do -- we would hope to see bridge and highway and the electric utility stuff pick up as the year wears on. So right now, it is pretty flat.

Okay. And the same thing with distribution, you are not really seeing much of an improvement yet?

Distribution on the substation portion of it is ticking up low single digit type of growth and maybe low to mid-single digit growth there, but not in the double digits that we'd like to see coming from off of kind of a low to moderate level.

Okay. And I do a lot of work on the transmission cycle. I guess we are seeing -- we are seeing now and anticipating continued strength in Canada. Is that something you feel you are participating in or is there something limiting you from a market standpoint in participating in some of that activity?

We expanded our -- on the galvanizing side, we'd acquired three galvanizing plants in 2012 and so those -- we've had those in our run rates and they've been participating in that. And we do have one electrical site that we have moved and upgraded and we would hope to participate more with that new upgraded facility.

Okay. And then lastly, can you just comment a bit in terms of what you are seeing in terms of the acquisition pipeline and pricing in the market for acquisitions?

Yes, I mean right now as we are working on the electrical and industrial platform to finish up the integration of WSI, NLI and moving to this market-focused, the three market-focused platforms, so we are not really looking to do much on that side at the moment. So galvanizing -- I think that there is quite a few one-site opportunities out there that we'll be active in pursuing and there is only a couple of multisite galvanizing organizations left in North America. So hard to predict what happens with those given the small number, but we are active. Multiples are pretty normal. I don't -- we haven't seen a lot of movement there.

All right, great. Thank you.

Ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Tom Ferguson for his closing remarks.

Very good. Thank you. I'm looking for my notes here, so I apologize. As we look ahead, we will continue to focus on aggressively expanding our businesses and we will continue to leverage our expertise. We intend to be more innovative in offering solutions. We are excited about our future and I am just excited to be here and look forward because I think over -- 2015 is a pivotal year for us. 2016 and beyond look to be really, really good as I am looking at them. So I want to thank everybody for your participation today and look forward to the next call.

Ladies and gentlemen, the conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.