Q4 2024 AZZ Inc Earnings Call

Okay.

Good day and welcome to the a Z incorporated quarter, four and year end earnings conference call and webcast. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone.

To withdraw your question. Please press Star then two.

Please note this event is being recorded.

I would now like to turn the conference over to Sandy Martin three part advisors. Please go ahead.

Thank you operator, good morning, and thank you for joining us today to review AZZ financial results for the fiscal 2020 for fourth quarter and full year, which ended February 29 2024 joined.

Senior Vice President of marketing and communication and Investor Relations. After today's prepared remarks, we will open the call for questions. Please note. The live webcast for today's call, which can be found at www dot AZZ dot com slash investors dash events before we begin I want to remind everyone that our discussion today will include.

Forward looking statements made under the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995 by their nature forward looking statements are uncertain and outside of the company's control except for actual results or comments containing forward looking statements may involve risks and uncertainties some of which are detailed.

From time to time in documents filed by AZZ with the Securities and Exchange Commission, including the annual report on Form 10-K for the fiscal year. These statements are not guarantees of future performance. Therefore undue reliance should not be placed upon them actual results could differ materially from these expectations. In addition.

On todays call well discuss non-GAAP financial measures non-GAAP financial measures should be considered a supplement to not a substitute for GAAP measures. We refer you to the reconciliation from GAAP to non-GAAP measures in today's earnings press release, I would now like to turn the call over to Tom Ferguson.

Good morning, and thank you for joining US today fiscal 2024 was an exciting and successful year for AZZ, including several important operational and financial achievements.

We're proud of our team's hard work and exceptional accomplishments for the fiscal year.

Today, I will discuss the fourth quarter and full year highlights.

Then ill cover the detailed financial results and Dave will cover industry update.

I will conclude by discussing our current outlook before opening the line for questions.

Today, AZZ as a pure play metal coatings company.

Z leads with North North America's number one market position in each of our two business segments, which includes hot dip galvanizing and coil coating solutions are large scale strategic footprint serves a broad diversified customer base, including long term blue chip customers and the company also brings over 65 years of trusted experts.

Yeah.

We provide sustainable unrivaled coding solutions supported by proprietary customer centric technologies.

Last year, our teams focused on critical operational and financial objectives, and I am pleased to report that both segments performed exceptionally well, particularly in the fourth quarter and the full year.

Our fiscal year results that ended February 2024 reflect the culmination of near and longer term strategic initiatives that generated sales growth margin enhancement and significant working capital improvements.

We're uniquely positioned to serve customers with an expanding competitive moat through extensive technical expertise that solution space capabilities, a deep bench of talented leadership proprietary technologies and strategically placed facilities across the U S and Canada.

In fiscal 2024, we significantly reduced the company's debt and took action to strengthen azz's balance sheet.

Our relentless commitment to operational excellence continues to be the focus of our talented teams and our strong collaborative culture supports our future growth and success.

Turning to our results for the fiscal year, we increased total sales by 16.2% to a record $1.54 billion.

Coatings full year sales were $656 million up 3% versus the prior year.

And freak out metal sales were $881 million up 28, 4% compared to the prior year.

Pretty good its fiscal 2024 included 52 weeks of sales versus 42 weeks for the prior year.

Our full year adjusted EBITDA increased to $334 million and we generated cash provided by operations of 245 million for the year.

We will discuss the uses of cash in a few moments finally adjusted earnings per share grew to $4.53 up almost 35% compared to the previous year's EPS for.

For the fiscal 2020 for fourth quarter, which is usually our weakest due to slower construction activity. During the winter months total sales of $366 million increased by eight 9% with metal coatings up three 3% and freak out metals up 13, 4% entirely from organic organic.

Expansion.

Also for the quarter, we increased adjusted earnings per share by 210% to 93 cents and grew adjusted EBITDA by 29% to $74 million. This led to strong cash flow from operations for the quarter of $64 million.

As a result, adjusted EBITDA margins were 28, 6% for metal coatings, and 17, 8% for freak out metals within our targeted range for each segment in short our continued dedication to delivering best in class customer service and quality led to increase sales improve profitability and significant cash flow for the fourth.

Quarter four year.

We also continue to invest in our operational technology platforms in fiscal 2024, as we seek to more deeply integrate our business with our customers. Our metal coatings segment has a platform called digital galvanizing system more D. G S.

So we benefit from our improved productivity inefficiencies and customers are provided faster and more effective communication and better visibility into their projects from beginning to is for pre K metals customers utilized coils are a proprietary platform, which provides 24 seven access 365 days a year to real time inventory scheduling.

And other vital information customer you customers utilized to help run their business on a daily basis across Briquettes network of 13 facilities.

These innovative platforms and passion for excellent service among our teams position AZZ is a highly differentiated metal coatings provider to customers throughout North America.

Our strategic transformation over the past two years has been a catalyst for generating significantly higher run rate EBITDA and cash flow as Philip will discuss more in a moment, we continued to strengthen azz's balance sheet and allocate capital prudently last year, we've reduced our debt by $115 million over the last year and repriced our term loan a revolver.

Over to lower interest cost.

We also deployed significant funds to the Greenfield aluminum coil coating facility in Washington, Missouri as part of our organic growth plans. This critical project remains on schedule.

We are highly focused on creating long term value for our sustainable solutions, we believe that by continually investing in our people are relentlessly executing our strategy, we will accelerate azz's value creation, we plan to continue scaling our business through organic and inorganic growth and leveraging our highly differentiated value prop.

Positioned to customers as we create long term value for our shareholders with that I'll turn it over to Philip.

Thanks, Tom and good morning, everybody as Tom mentioned, we reported fiscal year 'twenty 'twenty, four fourth quarter sales of $367 million compared to $337 million in last year's fourth quarter.

Total sales increased eight 9% over the fourth quarter of last year.

With medical sales up three 3% in pre Covid metals up 13, 4%.

Fourth quarter gross profit was $81 million or 22, 1% of sales compared with $61 3 million or 18, 2% of sales in the prior year fourth quarter gross margins improved by 390 basis points as a result of lower zinc costs in the metal coatings segment and lower overhead costs in the pre cut metal segment is performance.

Proved over a year ago period.

Also gross profit benefited from reclassifying intangible asset amortization to our corporate center, partially offset by increased labor and other variable costs.

Selling general and administrative expenses were $38 $8 million in the fourth quarter.

Compared with $25 1 million in the prior year fourth quarter. The fourth quarter included $6 8 million in legal accruals related to the resolution of long outstanding commercial disputes.

Excluding the fourth quarter legal accruals SG&A expenses for the fiscal fourth quarter would've been $32 million, 8.7% of sales compared to seven 4% in the prior year fourth quarter.

Operating income was $42 $3 million or 11, 5% of sales an improvement of 16, 8% and seven and 70 basis points from last year's fourth quarter of $36 2 million or 10, 8% of sales.

Interest expense for the fourth quarter was $24 7 million compared to $27 1 million in the prior year due to lower outstanding debt and repricing the company's term loan b and revolving credit facility late in the year I will discuss our capital allocation efforts in a moment.

Equity and earnings of unconsolidated subsidiaries for the fourth quarter increased to $4 3 million compared to $1 6 million for the same quarter last year. The increase is due to higher minority interest earnings from our 40% ownership and the avail JV as they continue to perform to expectation.

Current quarter income tax was $4 1 million, reflecting an effective tax rate of 18, 7% in the quarter compared to 34, 8% in the prior year fourth quarter, where the rates were much higher due to the impact of the transformative M&A activities during the prior year.

Reported.

Net income for the fourth quarter was $17 $9 million compared to $7 4 million for the fourth quarter of prior year adjusted.

Adjusted net income for the fourth quarter was $27 $5 million compared to $7.6 million in the prior year up more than two and a half times over the prior year.

Our adjusted diluting the excuse me our adjusted diluted earnings per share of <unk> 93 cents as Tom spoke about compared to 30 cents in the prior year fourth quarter.

Since the preferred convertible shares are dilutive in the current quarter to adjusted EPS. The preferred dividends are added back to earnings for the company's adjusted EPS computation under a full conversion assumption the preferred convertible shares weighted average shares outstanding in the quarter or approximately $29 5 million shares.

Yeah.

Fourth quarter, adjusted EBITDA was $73 $9 million or 22% of sales compared to $57 2 million or 17% of sales in the last year of 320 basis point improvement in adjusted EBITDA margin was primarily driven by improved operational efficiencies and our Precut metals segment.

And continued strong earnings by our metal coating segment.

For the full fiscal year ending in February our sales were just over $1 5 billion up 16.2% over last year. The pre Covid results include 52 weeks of sales in the full fiscal year compared to only 42 weeks in the prior.

Gross profit increased to $363 million or 23, 6% of sales from a year ago, improving 120 basis points over the year ago gross margin on the same operational efficiencies I just spoke about during the fourth quarter.

SG&A costs were $141 9 million nine 2% of sales on par with the SG&A as a percentage of sales from last year.

Operating income was $221 $6 million or 14, 4% of sales or 130 basis points improved when compared to operating income of 13, 1% of sales in the prior year.

Reported net income from continuing operations was $101.6 million for the year compared to $66 3 million last year. Adjusted net income was $132 $8 million for the year were $4 53 per share compared to $95 2 million or $3 36 per share last fiscal year a saw.

At 35% EPS improvement year over year.

Adjusted EBITDA for the year was $333 6 million or 21, 7% of sales compared to $2 $67 4 million or 22% of sales in the prior fiscal year, which represents an increase in EBIT dollars or 24, 8% compared to the prior fiscal year.

Let's turn to our financial position and balance sheet now we generated strong cash flow from operations of $2 $44.5 million and free cash flow of $149.3 million.

As we executed on several working capital initiatives during the year.

Our free cash flows computers as cash flows from operating activities less capital expenditures.

Capital expenditures for the year were $95 $1 million, including typical safety maintenance and growth spending as well as approximately $47 $7 million related to the new Greenfield aluminum coating plant under construction in Washington, Missouri.

We'll cover the project in a few moments.

In fiscal 'twenty, five we expect capital expenditures to be approximately $100 million to $120 million.

Including 50 to 60 million related to the Washington facility as we complete construction and ready the site for production.

We reduced debt during the year by $115 million exceeding the 75 to 100 million target, we provided as part of our annual guidance. Additionally, with our focus on working capital and strong overall debt reduction we exceeded our originally stated leverage goal back in May of 'twenty two by reaching.

Debt leverage net leverage ratio of 2.9 times with a target of getting under three.

In addition.

And during the last year, we successfully successfully repriced our term loan b twice and repriced, our $400 million revolving credit facility repricing. The term loan B in August 23, and again in March 'twenty for each time, reducing our margin by 50 basis points for a total one percentage point reduction.

Additionally, we repriced our revolving credit facility in December 'twenty, 'twenty, three which moved us from a sofa fixed so for rate of sulfur plus four twenty-five margin to a tiered pricing grid.

February 24.

With our year end.

Leverage ratio being below three we expect our.

Gulfport revolving credit rate to be margin of sulfur plus 275, or another 25 basis point reduction in margin.

In addition, we are pleased to share that S&P global upgraded our senior secured debt rating from double B minus to B from B, a two notch increase and Fitch ratings initiated coverage on the company with a very similar rating.

Acknowledging the progress we have made since the acquisition of Precut metals in may of 2022 or.

Our capital structure provides a strong foundation as we move forward and our liquidity position remains strong with no debt maturities until 2027.

We continue to be under a swap agreement that fixes more than half the variable rate debt.

Finally, we paid cash dividends on common and preferred stock totaling $31 $4 million for the year, we made no share repurchases during the year since we focused on debt reduction with that I'd like to turn the call over to David North.

Thank you Philip and good morning, everyone. Tom began today's discussion by describing Azz's number one market position in two highly differentiated value added metal coating segments that provides scale expertise and customer centric technology uniquely positioned to serve the north American steel and aluminum markets our services.

Provide sustainable environmentally friendly solutions that extend the life of our customers' products through our specialized coating materials process. Our business is well positioned to benefit from secular growth drivers related to infrastructure and renewables investments reassuring the U S and north American manufacturing as well as important conversions from plastics.

Aluminum.

Looking back at our fiscal fourth quarter, which concluded in February both.

Both segments benefited from unseasonably warmer weather that favorably impacted the construction industry regarding our end markets metal coatings was supported by robust transmission and distribution activity and a continued ramp of Interstate bridge and highway projects in the quarter.

We continue to see beneficial tailwind associated with critical infrastructure projects closely tied to the a I J, a and chipsets, which positively impact our results.

We are seeing signs of a ramp up and the cadence of federal funding as evidenced by the uptick in award announcements by the Department of Energy Commerce and transportation, we believe interest or infrastructure monies are flowing in 'twenty 'twenty four and that D. O T budgets are available in all 50 states going forward.

We expect an elevated number of projects related to T. N D Bridge and highway Datacenters and chip plant work and our future quarters.

Within T. N D. We are encouraged by the U S Department of Energy is October announcement of up to $3 5 billion and grid resilience and innovation partnership program investments for 58 projects across 44 states to strengthen electric grid resilience and reliability across America 16 of these projects specifically relate to grid resilience, which.

<unk> is where hot dip galvanized steel is commonly used.

Within bridge and highway we are encouraged by the announcement. This January of more than $4 9 billion in funding by the department of transportation for 37 different infrastructure projects in the manufacturing sector. The administration announced up to $8 5 billion in direct funding and 11 billion in loans to Intel for the construction of computer chips.

Plants in Arizona, Ohio, New Mexico in Oregon.

And as recently as last week. The administration now it's up to $6 4 billion in direct funding for Samsung electronics to develop computer chip manufacturing and a research cluster here in Texas, Samsung's, Texas manufacturing cluster will include two factories as well as an R&D facility and packaging facility.

The first facility is expected to be operational in 2026.

With the second being operational in 2020 seven both Intel and Samsung are projects that we either have or are currently actively providing hot dip galvanizing or coil coating solutions.

Lastly, we continue to see a slight rebound from our solar and renewables and markets with pockets of regional strength across the United States, where nearly 17 billion and planned investments have been announced so far.

The <unk> metals segment continued to perform better than the market in the fourth quarter with growing volumes based on conversion selling and value pricing volume gains a slight market rebound and favorable mix helped our fourth quarter performance, especially in the construction and appliances categories Freak.

<unk> continued to win captive paint lines and coil coating projects from companies that decided to outsource. These services, although smaller volumes the container and transportation categories continued to be under some pressure in the quarter offset by the construction spending increases.

Projections for calendar 2020 for construction spending coffer significant year over year improvements.

Which include public construction projects private nonresidential spending and higher manufacturing construction compared to last year.

Nonresidential construction continues to perform well with building strength in manufacturing and agriculture. As you saw from our raised guidance. We remain optimistic about the long term expectations for manufacturing reassuring and the transition to pre painted steel and aluminum.

We also see a steady movement from plastics to aluminum the container category throughout North America, our metal coatings and pre Covid metals teams continue to make solid progress with incremental market share gains with new customers in both our hot dip galvanizing and coil coating business with that I'd like to turn it back over to Tom.

Tom: Thanks, Dave.

Fiscal 'twenty 'twenty four it was a pivotal year for the company. Our AZZ teams continued to drive the strategy forward by focusing on serving customers well.

Improving our operations and prudently deploying cash in high return projects throughout fiscal 2024.

Tom: I'm proud of our leaders who demonstrated both private passion as they drove organic growth and improved operational efficiencies to further enhance margins, while we collectively strengthened the company's financial position.

Tom: The company generated significant cash from operations and paid down debt ahead of expectations.

Tom: We ended the year with our net debt to trailing EBITDA at 2.92 times, which is a testament to our cash management disciplined last year.

Tom: As well as our ability to grow adjusted EBITDA by 25% to $334 million.

We continue to build trust with our customers as we partner with them to provide superior quality and service levels.

Tom: Our business segments provided important sustainable metal coated solutions that enhance the longevity and appearance of building products and infrastructure is essential to everyday life.

Tom: We enjoy the fact that our solutions and services are synonymous with sustainability.

As Dave mentioned, our business outlook is positive, particularly as we enter the spring and summer months when construction activity is at its strongest.

Tom: Our teams are positioned to find new ways to grow market share and benefit from the expected ramp up of infrastructure spending.

Given AZZ strong market positions in both segments are broad scale and our strategic footprint. We believe we are well positioned for however, the economy shapes up this year.

Tom: Labor and employee turnover continues to improve from a year ago.

Since we are a tolling business, we will remain nimble and adjust inventories of painting zinc if demand shifts whether due to our growth initiatives or other macroeconomic impacts our greenfield aluminum coating coil coating facility in Missouri is progressing well and tracking on schedule.

Tom: Work has shifted to the inside of the building with the electrical is installation is underway and the installation of the coating line in process.

Our focus is now turning to our staffing commissioning and qualification efforts, it's exciting to think that our hot testing of the coating line will begin in the third quarter just a few months from now.

Tom: We raised our guidance a couple of weeks ago, and our reader reiterating it today, our fiscal 2025 guidance is for sales in the 1525 to $1 65 billion range adjusted EBITDA in the 300 agenda $360 million range and adjusted EPS guidance at $4 50 to $5.

Tom: Capital expenditures for the current fiscal year are expected to remain unchanged at $100 million to $120 million, including $50 million to $60 million.

Related to the new Washington, Missouri plant.

The equity in earnings from our minority interest in the avail joint ventures is expected to be $15 million to $18 million this year and debt reduction as planned in the $60 million to $90 million range.

We will remain focused on paying down debt, we are seeing some small galvanizing acquisition opportunities beginning to enter the pipeline.

Our dedicated teams are operating confidently as we began the new fiscal year and I want to thank them for their hard work and accomplishments this past year.

Tom: We are energized as we find ourselves already halfway through our first quarter and believe we are well positioned to deliver strong results generate significant cash flow and maximize shareholder value in fiscal 2025 now would the operator, please open up the call for questions.

If you are using a speakerphone please pick up your handset before pressing the keys.

If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

The first question comes from Lucas pipes with B Riley Securities. Please go ahead.

Tom: Mike.

Lucas Nathaniel Pipes: My first question. This is on the balance sheet. Good good job there getting the the leverage ratio to two nine times.

Lucas Nathaniel Pipes: I wonder with with this do you plan to maybe hold a little bit more cash on the balance sheet, then and do you think about acquisitions and if so where do you see more opportunities on the on the pre COVID-19 side or on the metal coatings side. Thank you very much.

Speaker Change: I can start Tom with the balance sheet question.

Speaker Change: Typically what we've done is is we operate pretty low cash balances in and use excess cash to reduce the borrowings on the revolver, we have $400 million revolver with about $355 million in capacity at the end of the year. So the acquisitions. Tom was speaking to we should be able to fund smaller bolt on through the revolver.

Speaker Change: Credit facility Com.

Yeah, Lucas I think you know right now what we're seeing is there's a couple of potential galvanizing opportunities that have popped up that you know the kind of bolt on one off sites that are that our team likes to look at.

Speaker Change: <unk>.

Speaker Change: No idea, how how active are those will be but we.

We would fund those off of the revolver and but naturally we'd have we'd expect to have good EBITDA is above.

Speaker Change: You know above our multiple so.

Lucas: Got it.

And.

When you mentioned bolt on.

Up to what level would you consider of EBITDA or or or volume would you consider bolt on that I'm, just trying to get a sense for kind of quarter yet either.

These are typically in the $10 million to $20 million revenue side. So.

Lucas: Usually theyre going to have safe three or four well, yeah, probably three or $4 million of EBITDA.

Lucas:

We tend to pay roughly six times.

So that that's what we consider bolt on and then our team we anticipate good strong first year synergies often in the 500000 basis point improvement range.

Speaker Change: Very helpful and for for this fiscal year here.

Speaker Change: How many of those do you think are realistic to two tuck in.

Speaker Change: You know there hasn't been any last year of course, we we've taken the.

Speaker Change: We've taken the flag down the waiver out there.

In acquisition mode. So I think we've kind of let folks know that as we've gotten our debt under three times quicker than we'd anticipated that while we're still going to be focused on paying down debt funding.

Speaker Change: The facility in Washington, and a normal capex needs. So we've just recently kind of let it let it out the we're interested again.

Speaker Change: These usually have a four to six months.

Speaker Change: Cycle times from.

From when they become active to when we're able to do do do due diligence and close so you know maybe one or two.

Speaker Change: That'd be about it.

Speaker Change: That's that's very helpful. And then maybe just to round out the conversation on.

Speaker Change: On growth.

Do you think about kind of organic growth, where we're with that factor in visa b.

Speaker Change: Some of these bolt ons you mentioned thank you.

Yeah, I think we still you know our normal organic growth, particularly on the metal coating side tends to run with G. D piece of when we can get a couple of acquisitions.

Speaker Change: You know that's going to going to add another five or 6% if on a full year run rate basis.

Speaker Change: On the prepaid side, we've got two things going on one we feel volumes are improving as we saw in the fourth quarter I believe we were up about 9% on volume.

So we're seeing the volumes pick up on the pre good side, which gives us nice organic growth and then as we get into next year finish up this year going into next calendar year. That's when we'll start to have the the Washington site.

Speaker Change: Coming online so we can provide some additional revenue and EBITDA growth.

Gentlemen, very helpful. I appreciate all the color and continued best of luck.

Thanks.

Our next question comes from John Friends with Sidoti and company. Please go ahead.

John Edward Franzreb: Good morning, guys and congratulations on another good quarter.

John Edward Franzreb: John I'd like to start with the revenue profile in the fall.

Fourth quarter.

Suggested there was an unusually warm and unseasonal basis I'm wondering two things.

John Edward Franzreb: That suggests a tad business was pulled from the first quarter into the fourth quarter and be.

John Edward Franzreb: If that was the case would that suggest that maintaining guidance is actually more of a positive thing because you're able to backfill some of that revenue.

Speaker Change: Yeah, that's a good point, Jon I think on the on the metal coatings side, yeah, getting an earlier start it kind of depends on what yeah. So we we we did see some that totally in and stay active.

Speaker Change: Hopefully there is some additional projects that come in the pipeline as the summer as we get into summer months and into fall.

Speaker Change: And then on the pre Covid side, that's you know the normal ordering cycles. So the construction ramp up.

I would not sure a whole lot pulled pulled in.

From from first quarter, but potentially a little bit in terms of inventory buildup among some of our customers. So.

Speaker Change: So yeah, we feel like our like the guidance is solid and then it is traditionally we try to be conservative.

Speaker Change:

Speaker Change: And then that will continue to update that as the year goes on.

Okay Fair enough and you also mentioned in the press release, there was market share gains on the pre Covid, sorry can you talk a little bit about the market share gains and we're getting them from.

Yeah. John This is Dave I think you know as you look at it Theres a couple of areas in the end markets, where we're seeing some improvement and we believe we're outperforming the market in the construction segment.

Also in the the appliance market is another area, where we're outperforming and and I'm seeing some conversions taking place. So those are the two main areas I'd point to.

John: Okay. One last question and I'll get back to you to talk about pricing initiatives on the metal coating side of the business.

Benefited the quarter.

John: So a little bit deeper on that is that in response to.

John: Zinc prices, what's going on in the pricing initiative front in M.

John: M C.

Speaker Change: Yeah, I think you know we've we've always tried to talk about how we.

Speaker Change: Have tried to differentiate our value pricing versus zinc, but it does help zinc has been trending up and so as zinc trends up.

That tends to help support our our price levels.

I also think that you know we continue to add services and any anywhere from adding more transportation so that were <unk>.

Speaker Change: To be more responsive, but that also adds you know basically just revenue and flow through income.

Speaker Change: And any increases or price per hundred weight, if you will.

Speaker Change: So you know I think all of those things of they they bode well.

Speaker Change: We also have improve we added another spin line late.

Speaker Change: Late last year, so we're getting the benefit of that and that tends to be at a at a higher price per hundred weight actually tends to be priced for peace.

So those are all things that have benefited us and we hope to continue to benefit from as we go forward this year.

Speaker Change: Great great. Thanks.

Speaker Change: Thanks for the additional color I'll get back into queue.

Speaker Change: The next question comes from Adam Thalheimer with Thompson Davis. Please go ahead.

Adam Robert Thalhimer: Hey, guys congrats on a strong quarter and Philip Congrats on your retirement.

I don't think that [laughter] and metal coatings. So your gross margins were up 170 basis points in 'twenty and fiscal 'twenty four curious how that might trend in fiscal 'twenty five if there's room for more improvement.

Adam Robert Thalhimer: You know I think this we we talked a lot about D. G S and the leadership teams and our Playbooks.

We believe we are benefiting from that and then we should continue to benefit and hopefully hold pulled those margin improvements and and continued to benefit from the various strategy or tactics that we're using.

Adam Robert Thalhimer: So we feel pretty confident with the team and as long as we as long as volumes hold up I believe we can drive those margins.

Adam Robert Thalhimer: Okay, and then at pre Covid.

Is this normal seasonality between Noah.

Adam Robert Thalhimer: In November and February or it sounded like you also just had a really good quarter in pre Covid in February.

Adam Robert Thalhimer: We did.

Adam Robert Thalhimer: So and part of this is yeah. It was a lighter winter than normal but are also I think just you know we'd mentioned last fourth quarter, where we were carrying a lot of customer inventory and you know we cleaned that out as we got into the fiscal year. Good good good operating performance.

Formats by the team in pre Covid and then so this fourth quarter I think it was the benefit of kind of normal customer inventories sitting in our facilities, which allows us to drive productivity and efficiency and then the volume just we start to start to get wood volume flows through those margins tend to pop nicely.

Okay.

Speaker Change: And then do you guys have.

Speaker Change: A like an actual interest expense and tax rate forecast that's embedded in the guidance.

Speaker Change: We do I mean, we look at the forward curve on our interest rates. So just like everybody else yeah. There were.

We're expecting four to six cuts. This year, then we got out there and we're able to reprice here in March 24.

Speaker Change: Which wouldn't have been part of our original forecast.

Well, we don't have cuts factored in we have the.

Speaker Change: The forward curve, just about exactly what kind of additional cuts and then on the tax rate.

Speaker Change: We have a 21% stat rate and then we're primarily North America. So call. It three three and a half 3% to 4%. So that's kind of 23.5% to 24%.

Tax rates is what we utilized.

Speaker Change: Okay I'll turn it over thank you alright.

Alright, thank you.

Our next question comes from John Pratt's with Kansas City Capital. Please go ahead.

John Pratt: Hey, everyone.

John Pratt: John.

John Pratt: Tom I can talk a little bit about our Washington, Missouri.

John Pratt: As U S.

As you ramp up.

Tom: What can you say about maybe startup costs are costs, you're absorbing you know prior to production and is there a little bit of a drag on us on margins. So for this fiscal year.

Tom: No there shouldn't be I think we we've got all of that plan.

But in our budgets are for how we're going to ramp up and you know naturally we'd get a little bit of contingency in there too so yeah. So.

Tom: So we've got some decisions to make as is as the line checked it out and comes online whether we actually start producing at the end of the year.

Tom: Or whether we just carry carry in and.

Tom: Meet the normal customer demand that's been committed so.

Tom: But in either case I don't look for those that to be a drag. So there should be an up literally okay and how much of our production is committed at this point.

Tom: 75% is a contractually committed.

Tom: And that's kind of how we've with what that is how we built the model N.

Tom: In fact that and so we've got 25% to to go sell although in this case through you know the the customer that made that commitment actually would've liked to have had a 100% of itself. So we've got upside with our with this customer, which we hope to announce here in the next.

Tom: A month or so.

Tom: And then secondly, there is it does give us the opportunity to go go Chase some other business, which you know I always like having that that ability to do that.

Speaker Change: At the most what would you like to see committed.

Speaker Change: By one customer would do.

Speaker Change: You know you're 75% now I mean would you be.

Speaker Change: Ah Okay at 80, 590%.

Speaker Change: Yeah, I think so.

Speaker Change: I always hesitate to get get that.

Speaker Change: Dependent on one customer, but in this case, because it's a seven year contractual arrangement.

I'm less concerned so to speak and obviously with that much business, we do have.

Another plant in Spain in St. Louis that does it's you know it's a smaller cake.

Ability, but we do have another aluminum line well two actually so we do have that opportunity to to pick up business and make sure that we balance it between both plants sure.

Speaker Change: Okay. Thank you very much.

Sure.

This concludes our question and answer session I would like to turn the conference back over to Tom Ferguson for any closing remarks.

Hi, Thank you for your time today as you can tell we're excited about our future and I look forward to updating you on the on our first quarter results in just a few months.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

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