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What changed in AZZ INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of AZZ INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+359 added−304 removedSource: 10-K (2024-04-22) vs 10-K (2023-04-25)

Top changes in AZZ INC's 2024 10-K

359 paragraphs added · 304 removed · 218 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeMackey 53 Chief Legal Officer and Secretary 2014 Matt Emery 56 Chief Information and Human Resource Officer 2013 Chris Bacius 62 Vice President, Corporate Development 2014 David Nark 55 Senior Vice President of Marketing, Communications and Investor Relations Vice President of Marketing and Communications 2019 2017-2019 Bryan Stovall 58 Chief Operating Officer – Metal Coatings President - AZZ Galvanizing Solutions Senior Vice President - Metal Coatings 2020 2019 2018-2019 Kurt Russell 52 Chief Operating Officer - Precoat Metals President - Precoat Metals Division of Sequa Corporation 2022 2016-2022 Each executive officer was elected by the Board of Directors to hold office until the next Annual Meeting or until their successor is elected.
Biggest changeMackey 54 Chief Legal Officer and Secretary 2014 Matt Emery 57 Chief Information and Human Resource Officer 2013 Tiffany Moseley 52 Chief Accounting Officer Vice President, Business Risk Management - Valero Energy Corporation, a manufacturer of transportation fuels and petrochemical products 2023 2019-2021 Chris Bacius 63 Vice President, Business Development 2014 David Nark 56 Senior Vice President of Marketing, Communications and Investor Relations Vice President of Marketing and Communications 2019 2013-2019 Bryan Stovall 59 Chief Operating Officer – Metal Coatings President - AZZ Galvanizing Solutions Senior Vice President - Metal Coatings 2020 2019 2018-2019 Kurt Russell 54 Chief Operating Officer - Precoat Metals President - Precoat Metals Division of Sequa Corporation, a portfolio company owned by Carlyle, a global private equity firm 2022 2016-2022 Each executive officer was elected by the Board of Directors to hold office until the next annual meeting of shareholders or until their successor is elected.
Available Information Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, are available free of charge on or through our web site, www.azz.com/investor-relations, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or the SEC.
Available Information Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, are available free of charge on or through our web site, www.azz.com/investor-relations, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission ("SEC").
Equal Opportunity Employment is a fundamental principle of our Company, where employment and applications for employment are evaluated based upon a person’s capabilities and qualifications without discrimination based on actual or perceived race, color, religion, sex, age, national origin, disability, genetic information, marital status, veteran status, sexual orientation, or any other protected characteristic as established by applicable local, state, federal law or international laws.
Equal Opportunity Employment is a fundamental principle of our Company, where employment and applications for employment are evaluated based upon a person’s capabilities and qualifications without discrimination based on actual or perceived race, color, religion, sex, age, national origin, disability, genetic information, marital status, veteran status, sexual orientation, or any other protected characteristic as established by applicable local, state, federal or international laws.
Our programs vary by location, but most include the following benefits: Health Financial Work/Life Medical, Dental and Vision Competitive Base Salaries Company/Voluntary Life Insurance Medical Insurance Premium Reduction Hourly Overtime and Shift Differential Pay Compensated Time Off and Holiday Pay Health Screenings Cash Incentive Program (annual) Accidental Death & Dismemberment Prescription Drug Coverage Employee Stock Purchase Plan Paid Short-Term and Long-Term Disability 24/7/365 Virtual and Telehealth Services 100% 401(k) match for the first 1% and 50% match between 2% and 6% Flexible Work Arrangements Annual Flu Immunizations Pre-tax Contributions to Eligible Savings Accounts Family Emergency Leave Employee Assistance Program Tuition reimbursement Military Leave Growth and Development We invest in and provide ongoing development and continuous learning opportunities for all of our employees.
Our programs vary by location, but most include the following benefits: 6 Table of Contents Health Financial Work/Life Medical, Dental and Vision Competitive Base Salaries Company/Voluntary Life Insurance Medical Insurance Premium Reduction Hourly Overtime and Shift Differential Pay Compensated Time Off and Holiday Pay Health Screenings Cash Incentive Program (annual) Accidental Death & Dismemberment Prescription Drug Coverage Employee Stock Purchase Plan Paid Short-Term and Long-Term Disability 24/7/365 Virtual and Telehealth Services 100% 401(k) match for the first 1% and 50% match between 2% and 6% Flexible Work Arrangements Annual Flu Immunizations Pre-tax Contributions to Eligible Savings Accounts Family Emergency Leave Employee Assistance Program Tuition reimbursement Military Leave Growth and Development We invest in and provide ongoing development and continuous learning opportunities for all of our employees.
Item 1. Business AZZ Inc. ("AZZ", the "Company", "our" or "we") was established in 1956 and incorporated under the laws of the state of Texas. We are a provider of hot-dip galvanizing and coil coating solutions to a broad range of end-markets, predominantly in North America.
Item 1. Business AZZ Inc. ("AZZ", the "Company", "our" or "we") was established in 1956 and incorporated under the laws of the state of Texas. We are a provider of hot-dip galvanizing and coil coating solutions to a broad range of end-markets in North America.
Annually, all employees have the opportunity and are encouraged to provide feedback on their employee experience through an anonymous employee survey. The feedback received through this survey is used to drive actions to improve the overall experience for employees across the Company, as well as to support continuous improvement in leader effectiveness and to enhance our corporate culture.
Periodically, all employees have the opportunity and are encouraged to provide feedback on their employee experience through an anonymous employee survey. The feedback received through this survey is used to drive actions to improve the overall experience for employees across the Company, as well as to support continuous improvement in leader effectiveness and to enhance our corporate culture.
We have three distinct operating segments: the AZZ Metal Coatings segment, the AZZ Precoat Metals segment, and the AZZ Infrastructure Solutions segment. The Company's AZZ Metal Coatings segment is a leading provider of metal finishing solutions for corrosion protection, including hot-dip galvanizing, spin galvanizing, powder coating, anodizing and plating to the North American steel fabrication and other industries.
We have three distinct operating segments: the AZZ Metal Coatings segment, the AZZ Precoat Metals segment, and the AZZ Infrastructure Solutions segment. Our AZZ Metal Coatings segment is a leading provider of metal finishing solutions for corrosion protection, including hot-dip galvanizing, spin galvanizing, powder coating, anodizing and plating to the North American steel fabrication industry and other industries.
AZZ Metal Coatings Segment The AZZ Metal Coatings segment provides hot-dip galvanizing, spin galvanizing, powder coating, anodizing and plating, and other surface coating applications to the steel fabrication and other industries through facilities located throughout the United States and Canada. Hot-dip galvanizing is a metallurgical process in which molten zinc reacts to steel.
AZZ Metal Coatings Segment The AZZ Metal Coatings segment provides hot-dip galvanizing, spin galvanizing, powder coating, anodizing and plating, and other metal coating applications to the steel fabrication industry and other industries through facilities located throughout the United States and Canada. Hot-dip galvanizing is a metallurgical manufacturing process in which molten zinc reacts with steel.
We strive to build, maintain and create a work environment that attracts and retains employees who are high contributors, have outstanding skills, are engaged in our culture, and who embody our Company mission: to create superior value in a culture where people can grow both professionally, and personally and where T.R.A.I.T.S. matter.
We strive to build, maintain and create a work environment that attracts and retains employees who are high contributors, have outstanding skills, are engaged in our culture, and who embody our Company mission: to create superior value in a culture where people can grow both professionally and personally, and where TRAITS matter.
In connection with the Board’s responsibility to oversee our legal compliance and conduct business based upon a foundation of the highest business ethics and social responsibility, the Board has adopted the following policies: 8 Table of Contents • Code of Conduct, which applies to the Company’s officers, directors and employees (including our Chief Executive Officer, Chief Financial Officer, Principle Accounting Officer, and Finance department members); • Vendor Code of Business Conduct that applies to dealings with our customers, suppliers, vendors, third-party representatives, including agents and business partners; • Human Rights Policy; and • Environmental Health and Safety Policy.
In connection with the Board’s responsibility to oversee our legal compliance and conduct business based upon a foundation of the highest business ethics and social responsibility, the Board has adopted the following policies: • Code of Conduct, which applies to the Company’s officers, directors and employees; • Vendor Code of Business Conduct that applies to dealings with our customers, suppliers, vendors, and third-party representatives, including agents and business partners; • Human Rights Policy; and • Environmental Health and Safety Policy.
The AZZ Infrastructure Solutions is dedicated to delivering safe and reliable transmission of power from generation sources to end customers, and automated weld overlay solutions for corrosion and erosion mitigation to critical infrastructure in markets worldwide.
AIS Investment Holdings LLC is primarily dedicated to delivering safe and reliable transmission of power from generation sources to end customers, automated weld overlay solutions for corrosion and erosion mitigation to critical infrastructure in markets worldwide.
The zinc alloying provides corrosion protection and extends the life-cycle of fabricated steel for several decades. As of February 28, 2023, we operated 41 galvanizing plants, six surface technologies plants and one tubing plant, which are located in various locations throughout the United States and Canada.
The zinc alloying provides corrosion protection and extends the lifecycle of fabricated steel for several decades. As of February 29, 2024, we operated 41 galvanizing plants, six surface technologies plants and one tubing plant, located in various locations throughout the United States and Canada.
Our ultimate goal is to achieve zero serious injuries through continued investments in core safety programs and injury reduction initiatives. The Company utilizes a mixture of leading and lagging indicators to assess the health and safety performance of our operations.
We review and monitor safety performance closely. Our goal is to achieve zero serious injuries through continued investments in core safety programs and injury reduction initiatives. We utilize a mixture of leading and lagging indicators to assess the health and safety performance of our operations.
("DAAM"), a privately held hot-dip galvanizing company based in Edmonton, Alberta Canada. The acquisition supported our goal of continued geographic expansion as well as portfolio expansion of our metal coatings solutions. On December 31, 2021, we completed the acquisition of the assets of Steel Creek Galvanizing Company, LLC, a privately held hot-dip galvanizing company based in Blacksburg, South Carolina.
The acquisition added two galvanizing facilities and a service depot and supported our goal of continued geographic expansion as well as portfolio expansion of our metal coatings solutions. On December 31, 2021, we completed the acquisition of the assets of Steel Creek Galvanizing Company, LLC, a privately held hot-dip galvanizing company based in Blacksburg, South Carolina.
We primarily serve distributors, fabricators or manufacturers that ultimately provide manufactured paint and coatings solutions to construction, appliance, HVAC, transportation, container, and general industrial markets, as well as numerous original equipment manufacturers.
We primarily serve distributors, fabricators and manufacturers that ultimately provide manufactured painted products to the construction, appliance, HVAC, transportation, container, and general industrial markets, as well as numerous original equipment manufacturers.
Our customers, and us as their toll processor, also face competition from alternative forms of coated metal, like powder-coated metal, or from other potential substrates such as wood, plastics, or concrete that could be used in place of painted metal. Paint and customer-owned substrate availability are important for our toll-coating process.
Our customers, and us as their toll processor, also face competition from alternative forms of coated metal, like powder-coated metal, or from other potential substrates such as wood, plastics, or concrete that could be used in place of painted metal.
The Board has adopted charters for each of its Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. You may review the Corporate Governance Guidelines, Codes of Conduct or any of our sustainability or corporate social responsibility policies, and our Committee charters under the heading "Investor Relations," subheadings "Corporate Governance," or "Corporate Social Compliance" on our website at: www.azz.com.
You may review the Corporate Governance Guidelines, Codes of Conduct or any of our sustainability or corporate social responsibility policies, and our Committee charters under the heading "Investor Relations," 8 Table of Contents subheadings "Corporate Governance," or "Corporate Social Compliance" on our website at: www.azz.com.
In fiscal year 2023, we continued to demonstrate excellence in safety across our 61 plants worldwide, and incident rates as indicated below: TRIR LTIR DART Metal Coatings Segment 4.31 1.23 2.98 Precoat Metals Segment 2.41 0.64 1.35 Information About Our Executive Officers Name Age Business Experience of Executive Officers for Past Five Years Position or Office with Registrant or Prior Employer Held Since Thomas E.
In fiscal year 2024, we continued to demonstrate excellence in safety across our 61 plants worldwide, and incident rates as indicated below: TRIR LTIR DART AZZ Metal Coatings Segment 3.28 1.15 2.22 AZZ Precoat Metals Segment 2.03 0.68 0.90 7 Table of Contents Information About Our Executive Officers The names, ages, and experience of our executive officers as of April 22, 2024 are as follows: Name Age Business Experience of Executive Officers for Past Five Years Position or Office with Registrant or Prior Employer Held Since Thomas E.
As of February 28, 2023, our U.S. employees had the following race and ethnicity demographics: White 44.7 % Hispanic 33.5 % African American 14.7 % Asian 1.2 % Multi-Racial 1.5 % American Indian or Alaska Native 0.7 % Native Hawaiian or Other Pacific Islander 0.1 % Not Stated 3.8 % Approximately 51.6% of our employees are diverse, as reported to the Equal Employment Opportunity Commission on an annual basis.
As of February 29, 2024, our U.S. employees had the following race and ethnicity demographics: White 44.0 % Hispanic 35.4 % African American 13.6 % Asian 1.2 % Multi-Racial 1.4 % American Indian or Alaska Native 0.8 % Not Stated 3.6 % Approximately 52.4% of our employees are diverse, as reported to the Equal Employment Opportunity Commission.
The AZZ Precoat Metals segment provides aesthetic and corrosion protective coatings and related value-added services for steel and aluminum coil, primarily serving the construction; appliance; heating, ventilation, and air conditioning (HVAC); container; transportation and other end markets in the United States.
The AZZ Precoat Metals segment provides aesthetic and corrosion protective coatings and related value-added services for steel and aluminum coil, primarily serving the construction; appliance; heating, ventilation, and air conditioning (HVAC); container; transportation and other end markets in North America. The AZZ Infrastructure Solutions segment consists of our 40% interest in AIS Investment Holdings LLC (the "AVAIL JV").
As of February 28, 2023, our employees had the following gender demographics: Women Men U.S. Employees 14.3% 85.7% Global Employees (1) 13.8% 86.2% (1) Includes employees in Canada. 6 Table of Contents Additionally, 12.5% of the executive team and 22.2% of our independent directors are female.
As of February 29, 2024, our employees had the following gender demographics: Women Men U.S. Employees 15.0% 85.0% Global Employees (1) 14.3% 85.7% (1) Includes employees in Canada. Additionally, 22.2% of the executive team and 22.2% of our non-employee Board members are female.
Ferguson 66 President and Chief Executive Officer 2013 Philip Schlom 58 Senior Vice President, Chief Financial Officer Vice President and Chief Accounting Officer/Interim Chief Financial Officer Vice President - Finance, Audit, Controls and Continuous Improvement, Exterran Corporation 2020 2019 2017-2019 Tara D.
Ferguson 67 President and Chief Executive Officer 2013 Philip Schlom 59 Senior Vice President, Chief Financial Officer Vice President and Chief Accounting Officer/Interim Chief Financial Officer 2020 2019 Tara D.
On September 30, 2022, AZZ contributed its AZZ Infrastructure Solutions segment, excluding AZZ Crowley Tubing ("AIS") to a joint venture, AIS Investment Holdings LLC (the "AIS JV") and sold a 60% interest in the AIS JV to Fernweh Group LLC ("Fernweh").
AIS Investment Holdings LLC was wholly-owned by AZZ until September 30, 2022, when we contributed our AZZ Infrastructure Solutions business, excluding AZZ Crowley Tubing and excluding certain receivables retained by AZZ ("AIS"), to the AVAIL JV and sold a 60% interest in the AVAIL JV to Fernweh Group LLC ("Fernweh").
There are currently no concerns regarding the availability of customer-owned bare substrate as an input to our coil coating process, despite recent increases in substrate price and lead times.
Although paint prices have risen in recent years, we carry limited risk associated with paint cost, as it is a pass-through to our customer base. There are currently no concerns regarding the availability of customer-owned bare substrate as an input to our coil coating process, despite recent volatility in substrate price and lead times.
AZZ has created and implemented training and audit processes and incident learning communications to help mitigate safety events and to reduce the frequency and severity of accidents.
AZZ has created and implemented training and audit processes and incident learning communications to help mitigate safety events and to reduce the frequency and severity of accidents. AZZ has safety teams and has a formal mentor training program that includes a diverse group of management and hourly employees that contribute to the overall safety culture of our facilities.
The acquisition supported our goal of continued geographic expansion as well as portfolio expansion of our metal coatings solutions. The AZZ Precoat Metals segment provides advanced applications of protective and decorative coatings and related value-added services for steel and aluminum coil, primarily serving the construction; appliance; heating, ventilation, and air conditioning (HVAC); container; transportation and other end markets.
Financial Statements and Supplementary Data—Note 18." AZZ Precoat Metals Segment AZZ Precoat Metals engages in the advanced application of protective and decorative coatings and related value-added manufacturing for steel and aluminum coil primarily serving the construction; appliance; heating, ventilation and air conditioning (HVAC); container; transportation and other end markets.
AZZ Precoat Metals segment office is located in St. Louis, Missouri and operates through 13 plants located in the United States. Competition AZZ Precoat Metals operates in a highly competitive industry as an independent toll coater, where we compete with other independent toll coaters, captive toll coaters, completely captive coaters, and integrated steel and aluminum mills.
The AZZ 4 Table of Contents Precoat Metals segment operates through 13 plants located in the United States, and is constructing a new facility in Washington, Missouri that is expected to be operational by 2025. Competition AZZ Precoat Metals operates in a highly competitive industry, where we compete with other toll coil coaters, and integrated steel and aluminum mills.
The segment's product offerings included custom switchgear, electrical enclosures, medium and high voltage bus ducts, explosion proof and hazardous duty lighting. In addition to our product offerings, our AZZ Infrastructure Solutions segment focuses on life-cycle extension for the power generation, refining and industrial infrastructure, through providing automated weld overlay solutions for corrosion and erosion mitigation.
In addition to our product offerings, our AZZ Infrastructure Solutions segment also focuses on life-cycle extension for the power generation, refining and industrial infrastructure, through providing automated weld overlay solutions for corrosion and erosion mitigation. For additional information regarding the AZZ Infrastructure Solutions financial results, see "Item 8.
The SEC’s website, www.sec.gov, contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our website and the information posted on our website is not a part of this Annual Report on Form 10-K.
The SEC’s website, www.sec.gov, contains reports, proxy and information statements, and other information regarding issuers, including AZZ, that file electronically with the SEC.
We intend to disclose future amendments to, or waivers from, certain provisions of this Code of Conduct on our website. Our website and the information posted on our website is not a part of this Annual Report on Form 10-K. You may also obtain a copy of these documents by mailing a request to: AZZ Inc.
We intend to disclose future amendments to, or waivers from, certain provisions of the Code of Conduct on our website. You may also obtain a copy of these documents by mailing a request to: AZZ Inc. Investor Relations One Museum Place, Suite 500 3100 West 7th Street Fort Worth, TX 76107
Our Employees As of February 28, 2023, we employed approximately 3,837 people worldwide, of which 3,594 were employed in the U.S. and 243 were employed in Canada. After the Precoat Metals acquisition, we welcomed approximately 1,119 Precoat employees to our workforce. The Company's total workforce consisted of approximately 85% hourly employees and 15% salaried employees.
Our Employees As of February 29, 2024, we employed approximately 3,873 people worldwide, of which 3,575 were employed in the U.S. and 298 were employed in Canada. Our total workforce consisted of approximately 84% hourly employees and 16% salaried employees.
We do not depend on any single customer for a significant amount of our sales, and we don't believe the loss of any single customer would have a material adverse effect on our consolidated sales or net income. Recent Acquisitions On February 28, 2022, we entered into an agreement to acquire all the outstanding shares of DAAM Galvanizing Co. Ltd.
We do not depend on any single customer for a significant amount of our sales, and we do not believe the loss of any single customer would have a material adverse effect on our consolidated sales or net income. Resources Paint and customer-owned substrate availability are important for our toll-coating process.
We value our employees by continuously investing in a healthy work-life balance, offering competitive compensation and benefit packages and a team-oriented environment centered on professional service and open communication amongst our employees. We are dedicated to our employees by fully training and equipping them and providing a safe environment to grow personally and professionally.
We are dedicated to our employees by fully training and equipping them and providing a safe environment to grow personally and professionally.
We may or may not continue to use these or other strategies to manage commodity risk in the future. We typically serve fabricators or manufacturers that provide solutions to the electrical and telecommunications, bridge and highway, petrochemical and general industrial markets, and numerous original equipment manufacturers.
Our galvanizing markets are generally limited to areas within relatively close proximity to our metal coating plants. We typically serve fabricators or manufacturers that provide solutions to the transmission and distribution, bridge and highway, petrochemical and general industrial markets, and numerous original equipment manufacturers.
We believe our current relations with our workforce are strong. Diversity and Inclusion We embrace the diversity of our employees, customers, vendors, suppliers, stakeholders and consumers, including their unique backgrounds, experiences, creative solutions, skills and talents. Everyone is valued and appreciated for their distinct contributions to the growth and sustainability of our business.
Everyone is valued and appreciated for their distinct contributions to the growth and sustainability of our business.
For additional information on the AZZ Metal Coatings segment's operating results, see Results of Operations within Item 7. For additional financial information by segment, see Note 14 to the consolidated financial statements. 4 Table of Contents AZZ Precoat Metals Segment On May 13, 2022, the Company completed the Precoat acquisition for a net purchase price of approximately $1.3 billion.
For additional information on the AZZ Precoat Metals segment's operating results, see "Item 7. Management's Discussion and Analysis—Results of Operations." For additional financial information by segment, see "Item 8.
Our galvanizing markets are generally limited to areas within relatively close proximity to our metal coating plants as customers seek to minimize freight costs. Zinc, the principal raw material used in the galvanizing process, is currently readily available, but can be subject to volatile pricing.
Resources Zinc, the principal raw material used in the galvanizing process, is currently readily available, but can be subject to volatile pricing. We manage our exposure to changes in the price of zinc by entering into agreements with our zinc suppliers and such agreements generally include fixed premiums.
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The AZZ Infrastructure Solutions segment is reported as discontinued operations, and financial data for the segment has been segregated and presented as discontinued operations for all periods presented.
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For the years ended February 28, 2023 and February 28, 2022, financial data for the AZZ Infrastructure Solutions business is segregated and reported as discontinued operations. Unless stated otherwise, the discussion of our business and financial information throughout this Annual Report on Form 10-K refers to our continuing operations and results from continuing operations.
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On May 13, 2022, the Company completed the acquisition of the Precoat Metals business division ("Precoat Metals") of Sequa Corporation ("Sequa"), a portfolio company owned by Carlyle, a global private equity firm (the "Precoat Acquisition"). As a result of the Precoat Acquisition, the Company changed its reportable segments, and added AZZ Precoat Metals as a new reportable segment.
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Strategy AZZ is North America’s leading independent post-fabrication hot-dip galvanizing and coil coating solutions company with leading positions in markets we serve. Our business segments provide sustainable, unmatched metal coating solutions that reduce emissions, extend the lifecycle, and enhance the appearance of buildings products and infrastructure that are essential to everyday life.
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Strategy We have a developed strategy and periodically review our performance, opportunities, market conditions and competitive threats. During fiscal year 2023, we completed our comprehensive, Board-led review of our portfolio capital allocation plans and utilized leading independent financial, legal and tax advisors in support of this review.
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We strive to provide high quality manufactured solutions to our customers while delivering long-term value to our shareholders by: 3 Table of Contents • Integrating human capital, diversity and environmental initiatives into our operations and corporate culture; • Ensuring shareholder engagement is embedded into developing and executing on AZZ’s strategic goals; • Driving profitable growth in both AZZ Metal Coatings and AZZ Precoat Metals segments; and • Targeting increased capital returns to shareholders.
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On May 13, 2022, the Company completed the Precoat acquisition for approximately $1.3 billion. The transaction is further described in "AZZ 3 Table of Contents Precoat Metals Segment — Recent Acquisitions" below. In addition, on September 30, 2022, AZZ contributed AIS to the AIS JV and sold a 60% interest in the AIS JV to Fernweh.
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Seasonality Our business is cyclical in nature, as seasonal fluctuations affect volumes, revenue, and earnings. Historically, we experience increases in our business during the warmer months, and slowdowns during the winter, as the largest portion of our business is related to the construction industry.
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We believe the strategic actions we executed in fiscal 2023 will accelerate our strategy to become a predominantly metal coatings focused company, which we believe will more rapidly enhance shareholder value.
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Volumes, operating costs and earnings can also be adversely affected by inclement weather, especially the impact of severe winter weather in our fourth fiscal quarter.
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We manage our exposure to commodity pricing of zinc by utilizing agreements with zinc suppliers that include fixed cost contracts to reduce the risk associated with escalating commodity prices. When possible, we also secure firm pricing for natural gas supplies with utilities.
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We may or may not continue to use these or other strategies to manage commodity risk in the future. Recent Acquisitions On February 28, 2022, we entered into an agreement to acquire all the outstanding shares of DAAM Galvanizing Co. Ltd. ("DAAM"), a privately held hot-dip galvanizing company based in Edmonton, Alberta Canada.
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The acquisition expanded our geographical reach in metal coating solutions and broadened our offerings in strategic markets. In January 2021, we completed the acquisition of the assets of Acme Galvanizing, Inc., a privately held hot-dip galvanizing and zinc electroplating company based in Milwaukee, Wisconsin.
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The acquisition expanded our geographical reach in metal coating solutions and broadened our offerings in strategic markets. For additional information on the AZZ Metal Coatings segment's operating results, see "Item 7. Management's Discussion and Analysis—Results of Operations." For additional financial information by segment, see "Item 8.
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The acquisition expanded our geographical reach in metal coating solutions and broadened our offerings in strategic markets. Recent Divestitures In fiscal 2021, we closed or disposed of certain AZZ Metal Coatings locations that were in under-performing and lower growth geographies or had previously been idle through the consolidation of operations.
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The acquisition of Precoat Metals in fiscal year 2023 supported our goal of continued geographic expansion as well as portfolio expansion of our metal coatings solutions.
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In July 2020, we completed the sale of our Galvabar business, which was included in the AZZ Metal Coatings segment. We received net proceeds of $8.3 million and recognized a loss on the sale of $1.2 million.
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Financial Statements and Supplementary Data—Note 18." AZZ Infrastructure Solutions segment AZZ's Infrastructure Solutions segment consists of the equity in earnings of the Company's 40% investment in the AVAIL JV, as well as other expenses directly related to AIS receivables and liabilities that were retained following the divestiture of the AIS business.
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While Galvabar would normally be considered a core business for AZZ, we determined that this technology is better suited for a company with both rebar manufacturing and established rebar distribution capabilities. In accordance with the sale agreement, we may receive royalties associated with future sales for a three-year period following the sale.
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The AVAIL JV is a leading provider of specialized products and services primarily designed to support industrial and electrical applications. The segment's product offerings include custom switchgear, electrical enclosures, medium and high voltage bus ducts, and explosion proof and hazardous duty lighting products, which supports the delivery of safe and reliable transmission of power from generation sources to end customers.
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Paint lead times and pricing have recently stabilized following increases related to recent supply chain concerns; we carry very limited risk associated with paint purchases as it is a pass-through to our customer base.
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Financial Statements and Supplementary Data—Note 19." Human Capital Management At AZZ, our culture is defined by trust, respect, accountability, integrity, teamwork and sustainability ("TRAITS"). We value our employees by continuously investing in a healthy work-life balance, offering competitive compensation and benefit packages and a team-oriented environment centered on professional service and open communication among our employees.
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AZZ Infrastructure Solutions segment AZZ's Infrastructure Solutions segment, is a leading provider of specialized products and services primarily designed to support industrial and electrical applications. On September 30, 2022, we contributed our AZZ Infrastructure Solutions business, excluding AZZ Crowley Tubing, to a joint venture and sold a 60% interest in the joint venture to Fernweh AIS Acquisition LP.
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Of our total employees as of February 29, 2024, 624 were covered by collective bargaining agreements. 5 Table of Contents Diversity and Inclusion We embrace the diversity of our employees, customers, vendors, suppliers, stakeholders and consumers, including their unique backgrounds, experiences, skills and talents.
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Following the transaction on September 30, 2022, we account for our retained investment in the AZZ Infrastructure Solutions segment as an equity method investment, and the results of operations are included in continuing operations, in "Equity in earnings of unconsolidated subsidiaries" in our consolidated statements of operations.
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References to our website in this Annual Report on Form 10-K are provided as a convenience, and the information on our website is not, and shall not be deemed to be a part of this Annual Report on Form 10-K or incorporated into any other filings we make with the SEC.
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Competition The markets for our AZZ Infrastructure Solutions segment products are highly competitive and consist of large multi-national companies, along with numerous small independent companies. Competition is based primarily on product quality, range of product line, price and service.
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The Board has adopted charters for each of its Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee.
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While some of the segment's competitors are much larger than us, we believe our noncontrolling interest in AZZ Infrastructure Solutions segment offers some of the most technologically advanced solutions and engineering resources developed from a legacy of proven, reliable product options, allowing the segment to be well positioned to meet the most challenging application-specific demands.
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Copper, aluminum, steel and nickel based alloys are the primary raw materials used by this segment. We do not foresee any availability issues for these materials; however, have experienced commodity pricing escalations over the past year.
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We do not contractually commit to minimum purchase volumes; increases in price for these items are normally managed through escalation clauses in our contracts with customers, which the customers may not always accept.
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In addition, we work to obtain firm pricing contracts from our suppliers for these materials at the time we receive orders from our customers in order to minimize price volatility risk. We work to re-price open quotations, after 30 days, to reduce inflationary risks on commodities utilized in our manufacturing processes.
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For additional information regarding the AZZ Infrastructure Solutions financial results, see Note 6 in Item 8. Financial Statements and Supplementary Data. 5 Table of Contents Human Capital Management At AZZ, our culture is defined by trust, respect, accountability, integrity, teamwork and sustainability (T.R.A.I.T.S.).
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AZZ has safety teams and has a formal mentor training program that includes a diverse group of management and hourly employees that contribute to the overall safety culture of our facilities. 7 Table of Contents The Company reviews and monitors safety performance closely.
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Investor Relations One Museum Place, Suite 500 3100 West 7th Street Fort Worth, TX 76107

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

97 edited+41 added−10 removed34 unchanged
Biggest changeIn addition, an event of default under the Credit Agreement would permit the lenders under the Credit Agreement to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay amounts due and payable under the Credit Agreement, those lenders could proceed against the collateral granted to them to secure that indebtedness.
Biggest changeFurthermore, if we were unable to repay amounts due and payable under the Credit Agreement, those lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders accelerate the repayment of our borrowings, we and our guarantors may not have sufficient assets to repay that indebtedness.
Our business segments are cyclical and are sensitive to economic downturns. Our business often aligns with the economic environments that we operate within, and, especially in our Precoat Metals segment, is subject to seasonality within the annual operating cycle of the business. Our customers may delay or cancel new or previously planned projects.
Our business segments are cyclical and are sensitive to economic downturns. Our business often aligns with the economic environments that we operate within, especially in our Precoat Metals segment, and is subject to seasonality within the annual operating cycle of the business. Our customers may delay or cancel new or previously planned projects.
International agreements and national or regional legislation and regulatory measures to further reduce greenhouse gas emissions and require companies to more efficiently use energy, water and reduce waste, are in various stages of discussion and/or implementation across the globe.
International agreements, national and regional legislation, and regulatory measures to further reduce greenhouse gas emissions and require companies to more efficiently use energy, water and reduce waste, are in various stages of discussion and/or implementation across the globe.
These laws, regulations and policies, as well other sustainability demands made by governmental and non-governmental bodies may result in the need for future capital, compliance, operating and maintenance costs.
These laws, regulations and policies, as well as other sustainability demands made by governmental and non-governmental bodies may result in the need for future capital, compliance, operating and maintenance costs.
We cannot exercise sole decision-making authority regarding the AIS Business, including, but not limited to, hiring and retaining employees and executive officers, management of and payments into its multiemployer pension plans, governance issues, entering into new markets or exiting existing markets, making certain acquisitions or dispositions, and other material strategic transactions, which in each case could create the potential risk of creating operational issues and/or impasses on decisions or decisions at the AIS JV-level not in our best interest.
We cannot exercise sole decision-making authority regarding the AIS Business, including, but not limited to, hiring and retaining employees and executive officers, management of and payments into its multiemployer pension plans, governance issues, entering into new markets or exiting existing markets, making certain acquisitions or dispositions, and other material strategic transactions, which in each case could create the potential risk of creating operational issues and/or impasses on decisions or decisions at the AVAIL JV-level not in our best interest.
The market price of our stock may be influenced by many factors, some of which are beyond our control, including the following: • the inability to meet the financial estimates of analysts who follow our common stock; • strategic actions by us or our competitors; • announcements by us or our competitors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments; • variations in our quarterly operating results and those of our competitors; 17 Table of Contents • general economic and stock market conditions; • risks relating to our business and our industry, including those discussed above; • changes in conditions or trends in our industry, markets or customers; • cyber-attacks, terrorist acts or armed hostilities; • future sales of our common stock or other securities; • repurchases of our outstanding shares; • material weaknesses in our internal control over financial reporting; and • investor perceptions of the investment opportunity associated with our Company relative to other investment alternatives.
The market price of our stock may be influenced by many factors, some of which are beyond our control, including the following: • the inability to meet the financial estimates of analysts who follow our common stock; • investor perceptions of the investment opportunity associated with our Company relative to other investment alternatives; • strategic actions by us or our competitors; • announcements by us or our competitors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments; • variations in our quarterly operating results and those of our competitors; • general economic and stock market conditions; 19 Table of Contents • risks relating to our business and our industry, including those discussed above; • changes in conditions or trends in our industry, markets or customers; • cyber-attacks, terrorist acts or armed hostilities; • future sales of our common stock or other securities; • repurchases of our outstanding shares; and • material weaknesses in our internal control over financial reporting.
We test goodwill and intangible assets with an indefinite life for potential impairment annually, in the fourth quarter, and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of the Company below its carrying amount.
We test goodwill and intangible assets with an indefinite life for potential impairment annually, in the fourth quarter, and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of the goodwill below its carrying amount.
Risks Related to Legal Liability and Regulations Actual and potential claims, lawsuits, and proceedings could ultimately reduce our profitability and liquidity and negatively impact our financial condition. The Company could be named as a defendant in legal proceedings claiming damages from us in connection with the operation of our business.
Risks Related to Legal Liability, Taxes, and Regulations Actual and potential claims, lawsuits, and proceedings could ultimately reduce our profitability and liquidity and negatively impact our financial condition. The Company could be named as a defendant in legal proceedings claiming damages from us in connection with the operation of our business.
On September 30, 2022, we completed a disposition of 60% of the equity of AIS Investment Holdings LLC, a Delaware limited liability company (the "AIS JV"), which consists of our former AZZ Infrastructure Solutions Segment (excluding AZZ Crowley Tubing) (the "AIS Business"), with Fernweh AIS Acquisition LP, a Delaware limited partnership.
On September 30, 2022, we completed a disposition of 60% of the equity of AIS Investment Holdings LLC, a Delaware limited liability company (the "AVAIL JV"), which consists of our former AZZ Infrastructure Solutions Segment (excluding AZZ Crowley Tubing) (the "AIS Business"), with Fernweh AIS Acquisition LP, a Delaware limited partnership.
In addition, our trade secrets and proprietary know-how may otherwise become known or be independently discovered by others. No guarantee can be given that others will not independently develop substantially equivalent proprietary information or manufacturing and service know-how and techniques, or otherwise gain access to our proprietary technology.
In addition, our trade secrets and proprietary know-how may otherwise become known or be independently discovered by others. No guarantee can be given that others will not independently develop substantially equivalent or superior proprietary information or manufacturing and service know-how and techniques, or otherwise gain access to our proprietary technology.
Pursuant to the terms of the agreement, AZZ no longer has a controlling interest in the AIS JV, and therefore the AIS JV is operating and will continue to operate independently. As the non-controlling interest holder in the AIS JV, our influence on all aspects of the AIS Business will continue to diminish.
Pursuant to the terms of the agreement, AZZ no longer has a controlling interest in the AVAIL JV, and therefore the AVAIL JV is operating and will continue to operate independently. As the non-controlling interest holder in the AVAIL JV, our influence on all aspects of the AIS Business will continue to diminish.
A number of factors, including financing conditions and potential bankruptcies in the industries we serve, could adversely affect our customers and their ability or willingness to fund their internal projects in the future and pay for services or equipment.
A number of factors, including financing conditions and potential bankruptcies in the industries we serve, could adversely affect our customers and their ability or willingness to fund their internal projects in the future and pay for services.
Additionally, investments in joint ventures or partnerships, such as the AIS JV, may, under certain circumstances, involve risks not present when a third-party is not involved, including the possibility that joint venture partners may become bankrupt, fail to fund their share of required capital contributions to various parties, or otherwise struggle operationally or financially.
Additionally, investments in joint ventures or partnerships, such as the AVAIL JV, may, under certain circumstances, involve risks not present when a third-party is not involved, including the possibility that joint venture partners may become bankrupt, fail to fund their share of required capital contributions to various parties, or otherwise struggle operationally or financially.
We cannot predict whether additional U.S. and foreign customs quotas, duties (including antidumping or countervailing duties), tariffs, taxes or other charges or restrictions, requirements as to where raw materials must be purchased, reporting obligations pertaining to "conflict minerals" mined from certain countries, additional workplace regulations, or other restrictions on our imports will be imposed upon the importation or exportation of our products in the future or adversely modified, or what effect such actions would have on our costs of operations.
We cannot predict whether additional U.S. and foreign customs quotas, duties (including antidumping or countervailing duties), tariffs, taxes or other charges or restrictions, requirements as to where raw materials must be purchased, reporting obligations pertaining to "conflict minerals" mined from certain countries, additional workplace regulations, or other restrictions on our imports will be imposed upon the importation or exportation of our manufactured solutions in the future or adversely modified, or what effect such actions would have on our costs of operations.
Despite our continued due diligence efforts, in the future we may be unable to verify the origin of all conflict minerals used in our component products. As a result, we could potentially face reputational and other challenges with our customers that require that all of the components incorporated in our products be certified as conflict-free.
Despite our continued due diligence efforts, in the future we may be unable to verify the origin of all conflict minerals used in our component products. As a result, we could potentially face reputational and other challenges with our customers that require that all of the components incorporated in our manufactured solutions be certified as conflict-free.
We rely on a combination of patents, copyrights, trademarks and trade secret protection and contractual rights to establish and protect our intellectual property.
We rely on a combination of copyrights, trademarks and trade secret protection and contractual rights to establish and protect our intellectual property.
Should a review indicate impairment, a write-down of the carrying value of the goodwill or intangible asset would occur, resulting in a non-cash charge, which could have a material adverse effect on our financial statements, impact our creditability with our shareholders, or impact our relationships with our customers, suppliers or supporting banks.
Should a review indicate impairment, a write-down of the carrying value of the goodwill or intangible asset would occur, resulting in a non-cash charge, which could have a material adverse effect on our financial statements, impact our credibility with our shareholders, or impact our relationships with our customers, suppliers or supporting banks.
Our business is also subject to risks associated with U.S. and foreign legislation and regulations relating to imports, including quotas, duties, tariffs or taxes, and other charges or restrictions on imports, which could adversely affect our operations and our ability to import or export products at current or increased levels, and substantially all of our import operations are subject to customs duties on imported products imposed by the governments where our production facilities are located, including raw materials.
Our business is also subject to risks associated with U.S. and foreign legislation and regulations relating to imports, including quotas, duties, tariffs or taxes, and other charges or restrictions on imports, which could adversely affect our operations and our ability to import or export manufactured solutions at current or increased levels, and substantially all of our import operations are subject to customs duties on imported manufactured solutions imposed by the governments where our production facilities are located, including raw materials.
Regulations related to conflict minerals could adversely impact our business. Pursuant to the Dodd-Frank Act, which established annual disclosure and reporting requirements for publicly-traded companies that use tin, tantalum, tungsten or gold (collectively, "conflict minerals") mined from the Democratic Republic of Congo and adjoining countries in their products, we are subject to certain annual disclosures and audit requirements.
Regulations related to conflict minerals could adversely impact our business. Pursuant to the Dodd-Frank Act, which established annual disclosure and reporting requirements for publicly-traded companies that use tin, tantalum, tungsten or gold (collectively, "conflict minerals") mined from the Democratic Republic of Congo and adjoining countries in their manufactured solutions, we are subject to certain annual disclosures and audit requirements.
Our investment in the AIS Joint Venture could be materially and adversely affected by our lack of sole decision-making authority over the majority of the strategic and operational decisions of the business, corporate governance matters, and our reliance on our AIS Joint Venture partner's financial condition.
Our investment in the AVAIL Joint Venture could be materially and adversely affected by our lack of sole decision-making authority over the majority of the strategic and operational decisions of the business, corporate governance matters, and our reliance on our AVAIL Joint Venture partner's financial condition.
Changes in U.S. or international social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories or countries where we currently manufacture, distribute and/or sell our products or conduct our business, as well as any negative sentiment toward the U.S. as a result of such changes, could adversely affect our business.
Changes in U.S. or international social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories or countries where we currently manufacture, distribute and/or sell our manufactured solutions or conduct our business, as well as any negative sentiment toward the U.S. as a result of such changes, could adversely affect our business.
If the Company does not have enough cash to service its debt or fund other liquidity needs, the Company may be required to take actions such as requesting a waiver from lenders, reducing or delaying capital expenditures, selling assets, restructuring or refinancing all or part of the existing 14 Table of Contents debt, or seeking additional equity capital.
If the Company does not have enough cash to service its debt or fund other liquidity needs, the Company may be required to take actions such as requesting a waiver from lenders, reducing or delaying capital expenditures, selling assets, restructuring or refinancing all or part of the existing debt, or seeking additional equity capital.
Our failure to comply with the restrictive covenants described above and/or the terms of any future indebtedness from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their due date and the termination of future funding commitments by our lenders.
Our failure to comply with the restrictive covenants described above and/or the terms of any future indebtedness from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay 15 Table of Contents these borrowings before their due date and the termination of future funding commitments by our lenders.
Any changes in regulations, the imposition of new regulations, or the enactment of new legislation could have an adverse impact on our business to the extent it becomes easier for workers to obtain union representation. 13 Table of Contents Changes in labor or employment laws, including minimum wage rules, could increase our costs and may adversely affect our business.
Any changes in regulations, the imposition of new regulations, or the enactment of new legislation could have an adverse impact on our business to the extent it becomes easier for workers to obtain union representation. Changes in labor or employment laws, including minimum wage rules, could increase our costs and may adversely affect our business.
There can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge. Changes to our tax positions resulting from future tax legislation and administrative initiatives or challenges from taxing authorities could adversely affect our results of operations and financial condition.
There can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be 17 Table of Contents successful in any such challenge. Changes to our tax positions resulting from future tax legislation and administrative initiatives or challenges from taxing authorities could adversely affect our results of operations and financial condition.
We operate in locations throughout the U.S. and Canada and, as a result, we are subject to the tax laws and regulations of U.S. federal, state, local and the Canadian g overnments. From time to time, various legislative or administrative initiatives may be proposed that could adversely affect our tax positions.
We operate in locations throughout the U.S. and Canada and, as a result, we are subject to the tax laws and regulations of U.S. federal, state, and local governments and the Canadian g overnment. From time to time, various legislative or administrative initiatives may be proposed that could adversely affect our tax positions.
Any of the foregoing operational risks could materially reduce the expected return of our prior investment in the AIS JV and materially and adversely affect our business, results of operations, financial condition and the trading price of our securities.
Any of the foregoing operational risks could materially reduce the expected return of our prior investment in the AVAIL JV and materially and adversely affect our business, results of operations, financial condition and the trading price of our securities.
Our substantial indebtedness and restrictive debt covenants could materially adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in he economy or our industry, our ability to meet our obligations under our outstanding indebtedness and could divert our cash flow from operations for debt payments.
Our indebtedness and restrictive debt covenants could materially adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry, our ability to meet our obligations under our outstanding indebtedness and could divert our cash flow from operations for debt payments.
Changes to U.S. trade policy, tariff and import/export regulations and foreign government regulations could adversely affect our business, operating results, foreign operations, sourcing and financial condition.
Changes to U.S. trade policy, tariff and import/export regulations and foreign government regulations could adversely affect our business, operating results, foreign operations, sourcing of materials and financial condition.
Accordingly, our operating results in any particular quarter may not be indicative of the results expected for any other quarter or for the entire year. Our business requires skilled labor, and we may be unable to attract and retain qualified employees.
Accordingly, our operating results in any particular quarter may not be indicative of the results expected for any other quarter or for the entire year. 9 Table of Contents Our business requires skilled labor, and we may be unable to attract and retain qualified employees.
Certain economic conditions may also impact the financial condition of one or more of our key suppliers, which could affect our ability to secure raw materials and components to meet our customers’ demand for our products in the future.
Certain economic conditions may also impact the financial condition of one or more of our key suppliers, which could affect our ability to secure raw materials and components to meet our customers’ demand for our manufactured solutions in the future.
New tariffs, changes in existing tariffs and other changes in U.S. trade policy have the potential to adversely impact the economies in which we operate or certain sectors thereof, our industry and the global demand for our products, and as a result, could have a material adverse effect on our business, operating results and financial condition.
New tariffs, changes in existing tariffs and other changes in U.S. trade policy have the potential to adversely impact the economies in which we operate or certain sectors thereof, our industry and the demand for our manufactured solutions, and as a result, could have a material adverse effect on our business, operating results and financial condition.
The financial impact of the heightened focus on sustainability practices for all companies to increase efficiencies in consumption of resources and future regulations regarding greenhouse gas emissions will depend on a number of factors including, but not limited to: • the sectors covered; • future permitted levels for greenhouse gas emissions; • the extent to which we would be entitled to receive emission allowance allocations or would need to invest in additional compliance equipment or compliance instruments, either on the open market or through auctions; • the price and availability of emission allowances and credits; and • the impact of legislation or other regulation on our ability to recover the costs incurred through the pricing of our products and services.
The financial impact of the heightened focus on sustainability practices for all companies to increase efficiencies in consumption of resources and regulations regarding greenhouse gas emissions will depend on a number of factors including, but not limited to: • the sectors covered; • future permitted levels for greenhouse gas emissions; 14 Table of Contents • the extent to which we would be entitled to receive emission allowance allocations or would need to invest in additional compliance equipment or compliance instruments, either on the open market or through auctions; • the price and availability of emission allowances and credits; and • the impact of legislation or other regulation on our ability to recover the costs incurred through the pricing of our manufactured solutions.
Failure of our patents, copyrights, trademarks and trade secret protection, non-disclosure agreements and other measures to provide protection of our technology and our intellectual property rights could enable our competitors to more effectively compete with us and could result in an adverse effect on our business, financial condition and results of operations.
Failure of our copyrights, trademarks and trade secret protection, non-disclosure agreements and other measures to provide protection of our technologies and our intellectual property rights could enable our competitors to more effectively compete with us and could result in an adverse effect on our business, financial condition or results of operations.
Disputes between AZZ Inc, and our joint venture partner could result in litigation or arbitration that would increase our expense and distract our 15 Table of Contents executive officers and directors from focusing their time and efforts on AZZ Inc.'s business and could result in subjecting the AIS Business to additional risk.
Disputes between AZZ Inc, and our joint venture partner could result in litigation or arbitration that would increase our expense and distract our executive officers and directors from focusing their time and efforts on AZZ Inc.'s business and could result in subjecting the AIS Business to additional risk.
Accordingly, we might not be able to prevent the AIS JV from taking actions adverse to our interests in the AIS JV.
Accordingly, we might not be able to prevent the AVAIL JV from taking actions adverse to our interests in the AVAIL JV.
The occurrence of any of the risks described below could have an adverse effect on our consolidated results of operations, cash flows and financial condition: • political and economic instability in the country, Canada, we conduct business; • social unrest, acts of war and terrorism, natural disasters, and global outbreaks of contagious diseases; • inflation, or hyper-inflation; • significant currency fluctuations, currency devaluations or restrictions on currency conversions; • governmental activities that limit or disrupt markets, restrict payments or limit the movement of funds; • trade restrictions, tariffs and economic embargoes by the United States or other countries; and • travel restrictions placed upon personnel.
The occurrence of any of the risks described below could have an adverse effect on our consolidated results of operations, cash flows and financial condition: • political and economic instability in the countries where we conduct business; • social unrest, acts of war terrorism, severe weather events, other natural conditions, and global outbreaks of contagious diseases; • inflation, or hyper-inflation or recession; • significant currency fluctuations, currency devaluations or restrictions on currency conversions; • governmental activities that limit or disrupt markets, restrict payments or limit the movement of funds; • trade restrictions, tariffs and economic embargoes by the United States or other countries; and • travel restrictions placed upon personnel.
We may not be able to obtain indemnity or reimbursement from our suppliers or other third parties for the warranty costs or liabilities associated with our supplier products.
We may not be able to obtain indemnity or reimbursement from our suppliers or other third parties for the costs or liabilities associated with our suppliers' products.
While the Company actively is engaged in building our environmental, social and governance programs, changes in laws or governmental regulations could negatively impact our business or the demand for our products and services by customers, other industry related participants, or our investors, and could result in a negative impact to our operations, profitability, or our ability to perform projects in the future.
While the Company actively is engaged in enhancing our environmental, social and governance programs, changes in laws or governmental regulations could negatively impact our business or the demand for our manufactured solutions by customers, other industry related participants, or our investors, and could result in a negative impact to our operations, profitability, or our ability to perform projects in the future.
Various regulations have been implemented regarding emissions, the global environment and other sustainability matters. We cannot predict future changes in the law and government regulations regarding emissions, the global environment and other sustainability matters, or what actions may be taken by our customers or other industry participants in response to any future legislation.
We cannot predict future changes in the law and government regulations regarding emissions, the environment and other sustainability matters, or what actions may be taken by our customers or other industry participants in response to any future legislation.
We carry certain limits of insurance to mitigate the potential effects of events that could impact our businesses, as well as disaster recovery plans related to any potential natural disasters that might occur within regions in which we have operations, or at any of the Company locations.
We carry certain limits of insurance to mitigate the potential effects of events that could impact our businesses, as well as disaster recovery plans related to any potential severe weather events and other natural conditions that might occur within regions in which we have operations, or at any of the Company locations.
Certain competitors may have lower cost structures or larger economies of scale on raw materials and may, therefore, be able to provide their products and services at lower prices than we are able to provide. If our response to competitor pricing actions is not timely, we could be impacted by loss of market share.
Certain competitors in each of our segments may have lower cost structures or larger economies of scale on raw materials and may, therefore, be able to provide their manufactured solutions at lower prices than we are able to provide. If our response to competitor pricing actions is not timely, we could be impacted by loss of market share.
Other various factors impact demand for our products and services, including the price of commodities (such as zinc, natural gas or other commodities), paint, economic forecasts and financial markets.
Other various factors impact demand for our manufactured solutions, including the price of commodities (such as zinc, natural gas or other commodities), paint, economic forecasts and financial markets.
In addition, the spread of contagious diseases, could adversely affect the economies and financial markets of many countries, and result in an economic downturn that could affect the demand for our products and services.
In addition, the spread of contagious diseases, could adversely affect the economies and financial markets of many countries, and result in an economic downturn that could affect the demand for our manufactured solutions.
There are costs associated with complying with these disclosure requirements, including costs for due diligence to determine the source of any conflict minerals used in our products and other potential changes to products, processes, or sources of supply.
There are costs associated with complying with these disclosure requirements, including costs for due diligence 13 Table of Contents to determine the source of any conflict minerals used in our manufactured solutions and other potential changes to manufactured solutions, processes, or sources of supply.
We cannot be certain that our competitors will not develop the expertise, experience and resources to provide services or products that are superior in price, delivery time or quality in the future.
We cannot be certain that our competitors will not develop the expertise, experience and resources to provide manufactured solutions that are superior to ours in price, delivery time or quality in the future.
If we incur additional debt or raise equity through the issuance of preferred stock, the terms of the debt or preferred stock issued may give the holders rights, preferences and privileges senior to those of holders of our common stock, particularly in the event of liquidation.
If we incur additional debt or raise equity through the issuance of additional shares of common stock or other equity-linked securities, the terms of the debt or any shares of common stock or other equity-linked securities issued may give the holders rights, preferences and privileges senior to those of holders of our common stock, particularly in the event of liquidation.
These 10 Table of Contents situations are outside of the Company’s control and any of these events could have a material adverse effect on our business, financial condition, results of operations, or cash flows. Fluctuations in the price and supply of raw materials and natural gas for our business segments may adversely affect our operations.
These situations are outside of the Company’s control and any of these events could have a material adverse effect on our business, financial condition, results of operations, or cash flows. 10 Table of Contents Supply chain disruptions and inflation in the price of energy and certain raw materials for our business segments may adversely affect our operations.
Our quarterly results may be materially and adversely affected by: • changes in political landscapes across the globe; • unstable political economic conditions and public health issues delaying customer operations; • timing and volume of work under new or existing agreements; • general economic conditions; • fluctuations in the budgetary spending of customers, including seasonality; • increases in manufacturing or transportation costs; • variations in margins, due to sales price or manufacturing complexities, of projects performed during any particular quarter; • losses experienced in our operations not otherwise covered by insurance; • delays of raw materials or component suppliers; • a change in the demand or production of our products and our services caused by severe weather conditions; • a change in the mix of our customers, contracts and business; • modifications or changes in customer delivery schedules; • ability or willingness of customers to timely pay their invoices when owed to us; and 9 Table of Contents • changes in interest rates.
Our quarterly results may be materially and adversely affected by the following, among others: • changes in political actions and landscapes across the globe, including global conflicts; • unstable political economic conditions and public health issues or crisis, such as a pandemic, delaying our or our customer's operations; • timing and volume of work under new or existing agreements; • general economic conditions; • fluctuations in the budgetary spending of customers, including seasonality; • increases in manufacturing or transportation costs; • variations in margins, due to sales price or manufacturing complexities, of projects performed during any particular quarter; • losses experienced in our operations not otherwise covered by insurance; • delays of raw materials or component suppliers; • a change in the demand of our manufactured solutions caused by severe weather conditions; • a change in the mix of our customers, contracts and business; • modifications or changes in customer delivery schedules; • ability or willingness of customers to timely pay their invoices when owed to us; and • changes in interest rates.
Risks Related to Financial Matters The Company’s flexibility to operate its business could be impacted by provisions in its debt obligations.
Risks Related to Financial Matters and Our Capital Structure The Company’s flexibility to operate its business could be impacted by provisions in its debt obligations.
Our ability to generate internal growth will be affected by, among other factors, our ability to: • attract new customers, internationally and domestically; • integrate regulatory changes; • increase the number or size of projects performed for existing customers; • hire and retain employees; and • increase volume utilizing existing facilities.
Our ability to generate internal growth will be affected by, among other factors, our ability to: • attract new customers, internationally and domestically; • integrate regulatory changes; • increase the number or size of projects performed for existing customers; • hire and retain employees: • complete construction projects in a timely manner; and 12 Table of Contents • increase volume utilizing existing facilities.
Our consolidated indebtedness increased substantially following the completion of the Precoat Acquisition. This increased level of indebtedness could adversely affect us, including by decreasing our business flexibility. Our Credit Agreement contains a number of restrictive covenants that impose significant operating and financial restrictions on us. These covenants may limit our ability to optimally operate our business.
Our consolidated indebtedness increased substantially following the completion of the acquisition of Precoat Metals ("Precoat Acquisition") in May 2022. This increased level of indebtedness could adversely affect us, including by decreasing our business flexibility. Our Credit Agreement contains a number of restrictive covenants that impose significant operating and financial restrictions on us.
Moreover, our acquisition strategy involves certain risks, including: • risks and liabilities from our acquisitions that may not be discovered during the pre-acquisition due diligence process; • difficulties in the post-acquisition integration of operations and systems; • the termination of relationships with key personnel and customers of the acquired company; • the potential failure to add additional employees to manage the increased volume of business; • additional post-acquisition challenges and complexities in areas such as tax planning, treasury management, financial reporting and legal compliance; • a disruption of our ongoing business or an inability of our ongoing business to receive sufficient management attention; and • a failure to realize the cost savings or other financial benefits we anticipated prior to acquisition.
Moreover, our acquisition strategy involves certain risks, including: • risks and liabilities from our acquisitions that may not be discovered during the pre-acquisition due diligence process; • difficulties in the post-acquisition integration of operations and systems; • the termination of relationships with key personnel and customers of the acquired company; • the potential failure to add additional employees to manage the increased volume of business; • additional post-acquisition challenges and complexities in areas such as tax planning, treasury management, financial reporting and legal compliance; • a disruption of our ongoing business or an inability of our ongoing business to receive sufficient management attention; • a failure to realize the cost savings or other financial benefits we anticipated prior to acquisition; • expansion through acquisition may expose us to new business, regulatory, political, operational, financial, and economic risks associated with such expansion, both inside and outside of the U.S.; and • counterparties to the transaction may fail to perform.
However, approximately one-half of our gross debt outstanding is unhedged. If interest rates increase, so will the interest costs, which could adversely affect cash flow and the ability to pay principal and interest on our debt and the ability to make distributions to shareholders. In addition, rising interest rates could limit our ability to refinance existing debt when it matures.
If interest rates increase, so will our interest costs, which could adversely affect cash flow and the ability to pay principal and interest on our debt and the ability to make distributions to shareholders. In addition, rising interest rates could limit our ability to refinance existing debt when it matures.
We cannot be certain that any individual will continue in such capacity for any particular period of time. The future loss of key personnel, or the inability to hire and retain qualified employees, could negatively impact our ability to manage our business.
We cannot be certain that any individual will continue in such capacity for any particular period of time. The future loss of key personnel, or the inability to hire and retain qualified employees, could negatively impact our ability to manage our business, which could disrupt our operations or otherwise have a material adverse effect on our business.
While we do not believe we have significant concentration of sales with any one customer, we have certain larger customers, which could result in a significant amount of credit exposure if there is a sudden or severe change in the customer’s creditworthiness.
The Company may perform various credit checks and evaluate the customer's previous payment history. While we do not believe we have significant concentration of sales with any one customer, we have certain larger customers, which could result in a significant amount of credit exposure if there is a sudden or severe change in the customer’s creditworthiness.
In addition, we are substantially self-insured for workers’ compensation, employer’s liability, property, general liability and employee group health claims in view of the relatively high per-incident deductibles we absorb under our insurance arrangements for these risks.
The insurance we carry to mitigate many of these risks may not be adequate to cover future claims or losses. In addition, we are substantially self-insured for workers’ compensation, employer’s liability, property, general liability and employee group health claims in view of the relatively high per-incident deductibles we absorb under our insurance arrangements for these risks.
Adoption of new or revised employment and labor laws and regulations could make it easier for our employees to obtain union representation and our business could be adversely impacted. As of February 28, 2023, approximately 668 of our full-time employees were represented by unions.
Adoption of new or revised employment and labor laws and regulations could make it easier for our employees to obtain union representation and our business could be adversely impacted. As of February 29, 2024, 624 (or 16.1%) of our full-time employees were represented by unions under collective bargaining agreements.
The competitive environments can be highly sensitive to technological innovation. It is possible for our competitors, or new market place entrants, both foreign and domestic, to develop new products, production methods or technology which could make existing products, services or methods obsolete or at least hasten their obsolescence or materially reduce our competitive advantage in the markets that we serve.
It is possible for our competitors, or new market place entrants, both foreign and domestic, to develop new manufactured solution methods or technologies which could make our existing manufactured solutions or methods obsolete or at least hasten their obsolescence or materially reduce our competitive advantage in the markets that we serve.
Over the past year there has been a heightened focus by both governmental and non-governmental bodies requesting disclosure of information relating to our corporate sustainable practices as well as customers are increasingly preferring to source from suppliers who have implemented effective sustainability initiatives.
Over the past several years, there has been a heightened focus by both governmental and non-governmental bodies requesting disclosure of information relating to corporate sustainability practices as well as an increase in customers' preference to source from suppliers who have implemented effective sustainability initiatives.
Our financial results could also be adversely affected if an employee causes our operational systems to fail, either as a result of inadvertent error or by deliberately tampering with or manipulating our financial or operational systems. Due to increased technology advances, we are more reliant on technologies to support our operations.
Our financial results could also be adversely affected if an employee causes our operational systems to fail, either as a result of inadvertent error or by deliberately tampering with or manipulating our financial or operational systems.
We currently have $1.13 billion of gross debt outstanding that bears interest at variable rates that reset periodically and are generally based on the Secured Overnight Financing Rate ("SOFR") or Base Rate, as defined in the Credit Agreement. We utilize interest rate swaps to mitigate the interest rate risk, and we have hedged approximately one-half of our gross debt outstanding.
As of February 29, 2024, we have $1.0 billion of gross debt outstanding that bears interest at variable rates that reset periodically and are generally based on the Secured Overnight Financing Rate ("SOFR") or Base Rate, as defined in the Credit Agreement.
If significant financial, operational, or other data processing systems fail, are attacked by intruders or have other significant shortcomings, our financial results could be adversely affected.
If significant financial, operational, or other data processing systems fail, experience actual or attempted cyber-attacks or have other significant shortcomings, our financial results could be adversely affected.
Our U.S.-based employees have the right at any time under the National Labor Relations Act to form or affiliate with a union. If a large portion of our workforce were to become unionized and the terms of the collective bargaining agreement were significantly different from our current compensation arrangements, it could increase our operating costs and adversely impact our profitability.
If a large portion of our U.S. workforce were to become unionized and the terms of the collective bargaining agreement were significantly different from our current compensation arrangements, it could increase our operating costs and adversely impact our profitability.
At this time, the ongoing war between Russia and Ukraine has not materially impacted our operations. Any disruption of our customers or suppliers and their respective contract manufacturers could likely impact our future sales and operating results.
At this time, the ongoing armed conflicts in Ukraine, Israel and the broader Middle East have not materially impacted our operations. However, any disruption of our customers or suppliers and their respective contract manufacturers from the ongoing conflicts or new conflicts could likely impact our future sales and operating results.
If our assumptions and estimates related to such exposures prove to be inadequate or incorrect, or we have material adverse claims or lawsuits, they could harm our business reputation, divert management resources away from operating our business, and result in a material adverse effect on our business, results of operations, cash flow or financial condition. 12 Table of Contents Our operations could be adversely impacted by the effects of future changes to the law and government regulations regarding emissions, the global environment and other sustainability matters.
If our assumptions and estimates related to such exposures prove to be inadequate or incorrect, or we have material adverse claims or lawsuits, such events could harm our business reputation, divert management resources away from operating our business, and result in a material adverse effect on our business, results of operations, cash flow or financial condition.
In addition, our Credit Agreement requires that we meet certain financial tests, including a leverage ratio test.
These covenants may limit our ability to optimally operate our business. In addition, our Credit Agreement requires that we meet certain financial tests, including a leverage ratio test.
We intend to pursue continued growth through acquiring the assets of target companies that will enable us to (i) expand our product and service offerings and (ii) increase our geographic footprint. We routinely review potential acquisitions. However, we may be unable to implement this growth strategy if we are not able to reach agreement on mutually acceptable terms.
We intend to pursue continued growth through acquiring the assets of target companies that will enable us to (i) expand our product and service offerings and (ii) increase our geographic footprint. We routinely review potential acquisitions.
Catastrophic events could have a material adverse effect on our business, financial condition, results of operations, or cash flows. The occurrence of catastrophic events ranging from acts of war and terrorism, natural disasters such as earthquakes, tsunamis, hurricanes, or the outbreaks of epidemic, pandemic or contagious diseases could potentially cause future disruption in our business.
The occurrence of catastrophic events ranging from acts of war and terrorism, severe weather events and other natural conditions such as earthquakes, tsunamis, hurricanes and other severe weather conditions, or the outbreaks of epidemic, pandemic or contagious diseases could potentially cause future disruption in our business.
A breach of the covenants under our Credit Agreement could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness to which across-acceleration or cross-default provision applies.
Such a default may allow the creditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness to which cross-acceleration or cross-default provision applies. In addition, an event of default under the Credit Agreement would permit the lenders under the Credit Agreement to terminate all commitments to extend further credit under that facility.
The terms of the debt may also impose additional and more stringent restrictions on our operations than we currently have. If we raise funds through the issuance of additional equity, our shareholders’ ownership in us would be diluted. If we are unable to raise additional capital when needed, it could affect our financial health, which could negatively affect our shareholders.
The terms of any new debt may also impose additional and more stringent restrictions on our operations than we currently have. If we raise funds through the issuance of additional equity, our current shareholders’ ownership in the Company would be diluted.
These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock is low. 18 Table of Contents Item 1B. Unresolved Staff Comments None.
These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance. Item 1B. Unresolved Staff Comments None.
We seek to maintain our operating margins by increasing the price of our products and services in response to increased costs, but may not be successful in passing these increased costs of operation through to our customers.
We seek to maintain our operating margins by increasing the price of our manufactured solutions in response to increased costs but may not be successful in passing these increased costs of operation through to our customers. Even if successful, there is no guarantee the increased price would not negatively affect the volume of future orders.
Widespread product recalls could result in significant losses due to the costs of a recall, the destruction of product inventory, penalties, and lost sales due to the unavailability of a product for a period of time.
Widespread manufacturing defects and quality system failures could result in significant losses due to the costs of containment, the destruction of customer-owned inventory, consequential damages and lost sales due to the unavailability of a solution for a period of time.
Increased levels of indebtedness could also create competitive disadvantages for us relative to other companies with lower debt levels.
Additionally, we may not be able to borrow money from other lenders to enable us to refinance our indebtedness. Increased levels of indebtedness could also create competitive disadvantages for us relative to other companies with lower debt levels.
We do not insure against all potential losses and could be seriously harmed by unexpected liabilities. Our manufacturing processes and services provided to our customers entail inherent risks, including equipment defects, malfunctions and failures. The insurance we carry to mitigate many of these risks may not be adequate to cover future claims or losses.
Our operations entail inherent risks that may result in substantial liability. We do not insure against all potential losses and could be seriously harmed by unexpected liabilities. Our manufacturing processes and services provided to our customers entail inherent risks, including defects.
A significant product recall, warranty claim, or product liability case could also result in adverse publicity, damage to our business reputation, and a loss of consumer confidence in our products. 11 Table of Contents Risks Related to Strategy Our acquisition strategy involves a number of risks.
A significant warranty claim could also result in adverse publicity, damage to our business reputation, and a loss of consumer confidence in our solutions or offerings all of which could have a material adverse effect on our business financial condition or results of operations. Risks Related to Strategy Our acquisition strategy involves a number of risks.
Our ability to maintain our productivity and profitability could be limited by an inability to employ, train and retain skilled personnel necessary to meet our labor requirements.
Our ability to maintain our productivity and profitability could be limited by an inability to employ, train and retain skilled personnel necessary to meet our labor requirements. A significant increase in the wages paid by competing employers could result in a shortage of skilled personnel, increases in labor-related costs, or both.
Any of these occurrences could disrupt our business, result in potential liability or reputational damage or otherwise have an adverse effect on our financial results. If we are unable to adequately protect our intellectual property, we may lose some of our competitive advantage. We possess intellectual property, which is instrumental in our ability to compete and grow our business.
If we are unable to adequately protect our intellectual property, we may lose some of our competitive advantage. We possess intellectual property, which is instrumental in our ability to compete and grow our business. If our intellectual property rights are not adequately protected, we could lose our competitive advantage.
We monitor our outstanding receivables on a regular basis; however, if a customer with large credit exposure is unable to make payment on its outstanding receivables, we could experience a significant write-off of accounts receivable. If our goodwill or other indefinite-lived intangible assets were to become impaired, our net income and results of operations could be negatively affected.
We monitor our outstanding receivables on a regular basis; however, if a customer with large 16 Table of Contents credit exposure is unable to make payment on its outstanding receivables, we could experience a significant write-off of accounts receivable, which could have a material adverse effect on our results of operations, financial condition or cash flows.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of February 28, 2023, our office and manufacturing operations facilities were as follows: Square Footage Segment Location Number of Facilities Total Owned Leased Metal Coatings United States 44 3,179,193 2,801,118 378,075 Canada 4 193,952 186,645 7,307 Precoat Metals United States 14 3,443,732 2,686,472 757,260 Corporate United States 1 46,939 — 46,939 Total 63 6,863,816 5,674,235 1,189,581 The Company believes that its current facilities are adequate to meet the requirements of its present and foreseeable future operations.
Biggest changeAs of February 29, 2024, our office and manufacturing operations facilities were as follows: Square Footage Segment Location Number of Facilities Total Owned Leased Metal Coatings United States 44 3,121,628 2,801,118 320,510 Canada 4 193,952 186,645 7,307 Precoat Metals United States 13 3,407,682 2,686,472 721,210 Corporate United States 2 68,939 — 68,939 Total 63 6,792,201 5,674,235 1,117,966 We believe that our current facilities are adequate to meet the requirements of our present and foreseeable future operations.
Item 2. Properties The Company's headquarters and executive offices are located in leased office space in Fort Worth, Texas. We also lease office space in several locations related to our operations facilities.
Item 2. Properties Our headquarters and executive offices are in leased office spaces in Fort Worth, Texas and St. Louis, Missouri. We also lease office space in several locations related to our operations facilities.
Removed
See Note 7 to the consolidated financial statements included in Item 8 of this Form 10-K for additional information regarding the Company's lease obligations.
Added
See "Item 8. Financial Statements and Supplementary Data—Note 10" for additional information about our lease obligations. See "Item 7. Management's Discussion and Analysis—Greenfield Aluminum Coil Coating Facility" for information about a new facility under construction in our AZZ Precoat Metals segment.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures Not applicable. 19 Table of Contents PART II
Biggest changeFinancial Statements and Supplementary Data—Note 22" for further discussion. Item 4. Mine Safety Disclosures Not applicable. 21 Table of Contents PART II
Item 3. Legal Proceedings The Company and its subsidiaries are named defendants and plaintiffs in various routine lawsuits incidental to our business. These proceedings include labor and employment claims, use of the Company’s intellectual property, worker’s compensation, environmental matters, and various commercial disputes, all arising in the normal course of business.
Item 3. Legal Proceedings AZZ and its subsidiaries are named defendants and plaintiffs in various routine lawsuits incidental to our business. These proceedings include labor and employment claims, use of intellectual property, worker’s compensation, environmental matters, and various commercial disputes, all arising in the normal course of business.
However, management, after consultation with legal counsel, believes it has strong defenses to all of these matters and does not expect liabilities, if any, from these claims or proceedings, either individually or in the aggregate, to have a material effect on the Company’s financial position, results of operations or cash flows. Item 4.
However, management, after consultation with legal counsel, believes it has strong defenses to all these matters and does not expect liabilities, if any, from these claims or proceedings, either individually or in the aggregate, to have a material effect on our financial position, results of operations or cash flows. See "Item 8.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 19 PART II 20 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 20 Item 6. [Reserved] 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation 22 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 33 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 21 PART II 22 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 22 Item 6. [Reserved] 23 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 38 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeTotal return, as shown, assumes $100 invested on February 28, 2018, in shares of AZZ common stock and each index, all with cash dividends reinvested. The calculations exclude trading commissions and taxes.
Biggest changeCompanies) and the Russell 2000 Index (U.S. Companies). The Company's common stock is listed on the New York Stock Exchange. The shareholder return shown below is not necessarily indicative of future performance. Total shareholder return, as shown, assumes $100 invested on February 28, 2019, in shares of AZZ common stock and each index, all with cash dividends reinvested.
Equity Compensation Plans For information regarding securities authorized for issuance under our equity compensation plans, see Part III, Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters." Purchases of Equity Securities On November 10, 2020, our Board of Directors authorized a $100 million share repurchase program pursuant to which the Company may repurchase our common stock (the "2020 Authorization").
Equity Compensation Plans For information regarding securities authorized for issuance under our equity compensation plans, see Part III, Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters." Purchases of Equity Securities On November 10, 2020, our Board of Directors authorized a $100 million share repurchase program pursuant to which we may repurchase our common stock (the "2020 Authorization").
The lines represent monthly index levels derived from compounded daily returns that include all dividends. B. The indexes weights are calculated daily, using the market capitalization on the previous trading day. C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used. D.
The lines represent monthly index levels derived from compounded daily returns that include all dividends. B. The indices weights are calculated daily, using the market capitalization on the previous trading day. C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used. D.
Repurchases under the 2020 Authorization will be made through open market or private transactions, in accordance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans, which allows stock repurchases when the Company might otherwise be precluded from doing so. Currently, share repurchases may not exceed 6% of the Company's market capitalization per fiscal year.
Repurchases under the 2020 Authorization will be made through open market or private transactions, in accordance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans, which allows stock repurchases when we might otherwise be precluded from doing so. Currently, share repurchases may not exceed 6% of our market capitalization per fiscal year.
See Note 13 to the consolidated financial statements included in Item 8 of this Form 10-K for additional information regarding our equity incentive plans. 20 Table of Contents Stock Performance Graph The following graph illustrates the five-year cumulative total return on investments in our common stock, the S&P 1500 Building Products Index (U.S.
See Note 17 to the consolidated financial statements included in Item 8 of this Form 10-K for additional information regarding our equity incentive plans. 22 Table of Contents Stock Performance Graph The following graph illustrates the five-year cumulative total return on investments in our common stock, the S&P 1500 Building Products Industry Index (U.S.
The index level for all series was set to $100 on February 28, 2018.
The index level for all series was set to $100 on February 28, 2019.
Dividend Policy The payment of dividends on common shares is within the discretion of our Board and is dependent on our earnings, capital requirements, operating and financial condition and other factors. The Company has a history of paying dividends on common shares on a quarterly basis.
Dividend Policy The payment of dividends on our common stock is within the discretion of our Board of Directors ("Board") and is dependent on our earnings, capital requirements, operating and financial condition and other factors. We have a history of paying dividends on common shares on a quarterly basis.
The Company has the ability to make dividend payments under other provisions of the credit agreement as well, subject to the tests and restrictions outlined therein. Any future dividends payments will be reviewed each quarter and declared by the Board of Directors at its discretion.
We can make dividend payments under other provisions of the credit agreement as well, subject to the tests and restrictions outlined therein. Any future dividends payments will be reviewed each quarter and declared by the Board at its discretion. The 6.0% Series A Convertible Preferred Stock ("Series A Preferred Stock") accumulates a 6.0% dividend per annum.
Dividends paid totaled $16.9 million, $16.9 million, and $17.6 million during fiscal 2023, 2022, and 2021, respectively. Under the Company’s credit agreement, the Company may make dividend payments in an aggregate amount per annum not to exceed 6.0% of market capitalization, so long as no default or event of default shall have occurred and be continuing or would result therefrom.
Under our credit agreement, we may make dividend payments in an aggregate amount per annum not to exceed 6.0% of market capitalization, so long as no default or event of default shall have occurred and be continuing or would result therefrom.
We also withhold common stock shares associated with net share settlements to cover employee tax withholding obligations upon the vesting of restricted stock unit awards under our employee equity incentive program.
We withhold common stock shares associated with net share settlements to cover employee tax withholding obligations upon the vesting of restricted stock unit awards under our employee equity incentive program. As of February 29, 2024, there was $53.2 million remaining to repurchase shares under the 2020 Authorization.
During fiscal 2023, to prioritize repayments of debt, including debt incurred to finance the Precoat Acquisition, the Company did not repurchase shares of common stock under the 2020 Share Authorization. During fiscal 2022, the Company repurchased 601,822 shares of common stock for $30.8 million, or $51.20 per share.
During fiscal 2024 and 2023, to prioritize repayments of debt, including debt incurred to finance the Precoat Acquisition, we did not repurchase shares of common stock under the 2020 Share Authorization.
Comparison of Five Year-Cumulative Total Returns Value of $100 Invested on February 28, 2018 For Fiscal Year Ended on the Last Day of February February 28/29, 2018 2019 2020 2021 2022 2023 AZZ Inc. 100.00 105.00 84.00 117.00 113.00 93.00 S&P Composite 1500 Building Products 100.00 97.00 104.00 152.00 170.00 171.00 S&P Small Cap 600 Index 100.00 104.00 94.00 136.00 140.00 133.00 Notes: A.
Comparison of Five Year-Cumulative Total Returns Value of $100 Invested on February 28, 2019 For Fiscal Year Ended on the Last Day of February February 28/29, 2019 2020 2021 2022 2023 2024 AZZ Inc. 100.00 90.00 103.00 103.00 92.00 136.00 S&P Composite 1500 Building Industry Products 100.00 116.00 150.00 186.00 179.00 224.00 Russell 2000 100.00 102.00 132.00 129.00 123.00 124.00 Notes: A.
As of April 21, 2023, we had approximately 334 holders of record of our common stock, not including those shares held in street or nominee name. Item 11 of this Annual Report on Form 10-K contains certain information related to our equity compensation plans.
As of April 18, 2024, we had approximately 325 holders of record of our common stock, not including those shares held in street or nominee name. A substantially greater number of holders of our common stock are "street name" or beneficial holders whose shares are held of record by banks, brokers and other financial institutions.
Removed
Companies) and the S&P Small Cap 600 Index (U.S. Companies). These indices are prepared by Alliance Advisors. The Company's common stock is listed on the New York Stock Exchange and AZZ operates in two industry segments. The shareholder return shown below is not necessarily indicative of future performance.
Added
We paid dividends on common shares of $17.0 million, $16.9 million, and $16.9 million for the fiscal years 2024, 2023, and 2022, respectively.
Added
Dividends are payable in cash or in kind, by accreting and increasing the Series A Base Amount ("PIK Dividends"). Dividends are payable on the sum of (i) the Series A Base Amount plus (ii) any PIK Dividends. Dividends are accrued daily and paid quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year.
Added
We paid dividends on preferred shares of $14.4 million and $5.8 million, for fiscal years 2024 and 2023, respectively. Following the calendar quarter ending June 30, 2027, we may not elect PIK Dividends and dividends on the Series A Preferred Stock must be paid in cash.
Added
The dividend will increase annually by one percentage point, beginning with the dividend payable for the calendar quarter ending September 30, 2028. We currently intend to pay such dividends in cash when due.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSales for the AZZ Precoat Metals segment, which was acquired on May 13, 2022, were $686.7 million for the current year. 22 Table of Contents Operating Income The following table reflects the breakdown of operating income (loss) from continuing operations by segment (in thousands): Year Ended February 28, 2023 Year Ended February 28, 2022 Metal Coatings Precoat Metals Corporate Total Metal Coatings Precoat Metals Corporate Total Operating income (loss) from continuing operations: Sales $ 636,982 $ 686,667 $ — $ 1,323,649 $ 525,598 $ — $ — $ 525,598 Cost of sales 462,473 565,233 — 1,027,706 379,445 — — 379,445 Gross margin 174,509 121,434 — 295,943 146,153 — — 146,153 Selling, general and administrative 18,556 41,925 61,824 122,305 17,395 — 49,539 66,934 Total operating income (loss) from continuing operations $ 155,953 $ 79,509 $ (61,824) $ 173,638 $ 128,758 $ — $ (49,539) $ 79,219 Operating income for the AZZ Metal Coatings segment increased $27.2 million, or 21.1%, for fiscal 2023, to $156.0 million, as compared to $128.8 million for the prior year.
Biggest changeFiscal year 2024 also includes an accrual related to a legal settlement of $5.8 million for the settlement of a litigation matter that was acquired as part of the Precoat Acquisition and relates to the business activities that were discontinued prior to our acquisition. 25 Table of Contents Year Ended February 28, 2023 Metal Coatings (1) Precoat Metals (2) Infrastructure Solutions (3) Corporate (4) Total Sales $ 636,982 $ 686,667 $ — $ — $ 1,323,649 Cost of sales 462,473 565,233 — — 1,027,706 Gross margin 174,509 121,434 — — 295,943 Selling, general and administrative 18,556 41,925 — 61,824 122,305 Operating income (loss) from continuing operations 155,953 79,509 — (61,824) 173,638 Interest expense — — — (88,800) (88,800) Equity in earnings of unconsolidated subsidiaries — — 2,597 — 2,597 Other income 101 765 — 374 1,240 Income (loss) from continuing operations before income tax $ 156,054 $ 80,274 $ 2,597 (150,250) 88,675 Income tax expense 22,336 22,336 Net income (loss) from continuing operations $ (172,586) $ 66,339 (1) For fiscal year 2023, amortization expense for acquired intangible assets of $7.1 million and $15.5 million is included in AZZ Metal Coatings expenses in "Cost of sales" and in AZZ Precoat Metals in "Selling, general and administrative" expense, respectively.
Our actual results may differ materially from those we currently anticipate as a result of the factors we describe under "Risk Factors" and elsewhere in this Annual Report on Form 10-K.
Our actual results may differ materially from those we currently anticipate as a result of the factors we describe under "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form 10-K.
As defined in the credit agreement, quarterly prepayments will be made against the outstanding principal of the Term Loan B and are payable on the last business day of each May, August, November and February, beginning August 31, 2022, in a quarterly aggregate principal amount of $3.25 million, with the entire remaining principal amount due on May 13, 2029, the maturity date.
As defined in the 2022 Credit Agreement, quarterly prepayments are due against the outstanding principal of the Term Loan B and are payable on the last business day of each May, August, November and February, beginning August 31, 2022, in a quarterly aggregate principal amount of $3.25 million, with the entire remaining principal amount due on May 13, 2029, the maturity date.
Repurchases under the 2020 Authorization will be made through open market or private transactions, in accordance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans, which allows stock repurchases when the Company might otherwise be precluded from doing so. Currently, share repurchases may not exceed 6% of the Company's market capitalization per fiscal year.
Repurchases under the 2020 Authorization will be made through open market or private transactions, in accordance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans, which allows stock repurchases when we might otherwise be precluded from doing so. Currently, share repurchases may not exceed 6% of our market capitalization per fiscal year.
Impairment of Long-Lived Assets, Identifiable Intangible Assets and Goodwill Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination and is not amortized.
Impairment of Goodwill Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination and is not amortized.
The income approach uses future cash flows and estimated terminal values for our reporting units that are discounted using a market participant perspective to determine the fair value of the reporting unit, which is then compared to the carrying value of that reporting unit to determine if there is impairment.
The income approach uses Level 3 fair value inputs, such as future cash flows and estimated terminal values for our reporting units that are discounted using a market participant perspective to determine the fair value of the reporting unit, which is then compared to the carrying value of that reporting unit to determine if there is impairment.
Management also believes that investors regularly rely on non-GAAP financial measures, such as adjusted earnings and adjusted earnings per share, to assess operating performance and that such measures may highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. Management also provides Adjusted EBITDA, which is a non-GAAP measure.
Management also believes that investors regularly rely on non-GAAP financial measures, such as adjusted net income, adjusted earnings per share and adjusted EBITDA to assess operating performance and that such measures may highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP.
Convertible Subordinated Notes On May 13, 2022, the Company completed the issuance of $240.0 million aggregate principal amount of 6.00% convertible subordinated notes due June 30, 2030 (the "Convertible Notes") pursuant to the Securities Purchase Agreement (the "Securities Purchase Agreement") with BTO Pegasus Holdings DE L.P., a Delaware limited partnership (together with its assignees, "Blackstone"), an investment vehicle of funds affiliated with Blackstone Inc.
Series A Convertible Preferred Stock In connection with the Precoat Acquisition, on May 13, 2022, we completed the issuance of $240.0 million aggregate principal amount of 6.00% convertible subordinated notes due June 30, 2030 (the "Convertible Notes") pursuant to the Securities Purchase Agreement (the "Securities Purchase Agreement") with BTO Pegasus Holdings DE L.P., a Delaware limited partnership (together with its assignees, "Blackstone"), an investment vehicle of funds affiliated with Blackstone Inc.
Non-GAAP Disclosure In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"), we provided adjusted earnings and adjusted earnings per share, (collectively, the "Adjusted Earnings Measures"), which are non-GAAP measures.
Non-GAAP Disclosures In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"), we provide adjusted net income, adjusted earnings per share and adjusted EBITDA (collectively, the "Adjusted Earnings Measures"), which are non-GAAP measures.
Income from Discontinued Operations, net of tax Following the AIS JV agreement with Fernweh, the results of our AZZ Infrastructure Solutions segment were classified as discontinued operations in our condensed consolidated statements of operations and excluded from continuing operations for all periods presented.
Income from Discontinued Operations, net of tax The results of our AZZ Infrastructure Solutions segment are classified as discontinued operations in our condensed consolidated statements of operations and excluded from continuing operations for all periods presented.
Other (Income) Expense, Net For fiscal 2023, other income, net increased $1.0 million, to $1.2 million for fiscal 2023 compared to $0.2 million for fiscal 2022.
Other (Income) Expense, Net For fiscal 2024, other income, net decreased $1.1 million, to $0.2 million for fiscal 2024 compared to $1.2 million for fiscal 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements regarding our business and operations.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion together with "Item 8. Financial Statements and Supplementary Data." This discussion contains forward-looking statements regarding our business and operations; see "Forward-Looking Statements" at the beginning of this Annual Report on Form 10-K.
Variables impacting future cash flows include, but are not limited to, the level of customer demand for and response to products and services we offer to the power generation market, the electrical transmission and distribution markets, the general industrial market and the hot-dip galvanizing market, changes in economic conditions of these various markets, changes in costs of raw material and natural gas, and the availability of experienced labor and management to implement our growth strategies.
Variables impacting future cash flows include, but are not limited to, the level of customer demand for and response to manufactured solutions we offer to the construction, industrial, consumer, transportation, electrical, and utility markets, changes in economic conditions of these various markets, changes in costs of raw material and natural gas, and the availability of experienced labor and management to implement our growth strategies.
Interest on the Convertible Notes was payable on June 30 and December 31. The Convertible Notes were exchanged for 240,000 shares of the Company's 6.0% Series A Convertible Preferred Stock on August 5, 2022, following the receipt of shareholder approval for the issuance of preferred shares. See Note 10 for a description of the Series A Convertible Preferred Stock.
Interest on the Convertible Notes was payable on June 30 and December 31. On August 5, 2022, we exchanged our $240.0 million 6.00% convertible subordinated notes due June 30, 2030 for 240,000 shares of 6.0% Series A Convertible Preferred Stock ("Series A Preferred Stock"), following the receipt of shareholder approval for the issuance of preferred stock.
Our discussion and analysis of financial condition and results of operations is divided by each of our segments, along with corporate costs and other costs not specifically identifiable to a segment. For a reconciliation of segment operating income to consolidated operating income, see Note 14 to the consolidated financial statements.
Our discussion and analysis of financial condition and results of operations is presented for each of our segments, along with corporate costs and other costs not specifically identifiable to a segment. For a reconciliation of segment operating income (loss) from continuing operations to consolidated operating income, see "Item 8. Financial Statements and Supplementary Data—Note 18".
The 2022 Credit Agreement includes the following significant terms; i. provides for a senior secured initial term loan in the aggregate principal amount of $1.3 billion (the "Term Loan B"), due May 13, 2029, which is secured by substantially all of the assets of the Company; ii. provides for a maximum senior secured revolving credit facility in the aggregate principal amount of $400.0 million (the "Revolving Credit Facility"), due May 13, 2027; iii. includes a letter of credit sub-facility of up to $100.0 million, which is part of, and not in addition to, the Revolving Credit Facility; iv. borrowings under the Term Loan B and the Revolving Credit Facility each bear an interest rate of Secured Overnight Financing Rate ("SOFR") plus 4.25%; v. includes customary affirmative and negative covenants, and events of default; including restrictions on the incurrence of non-ordinary course debt, investment and dividends, subject to various exceptions, and; vi. includes a maximum quarterly leverage ratio financial covenant with reporting requirements at each quarter-end; The Company utilizes proceeds from the Revolving Credit Facility primarily to finance working capital needs, capital improvements, dividends, acquisitions and for general corporate purposes.
The 2022 Credit Agreement includes the following significant terms: i. provides for a senior secured initial term loan in the aggregate principal amount of $1.3 billion (the "Term Loan B"), due May 13, 2029, which is secured by substantially all of the assets of the Company; ii. provides for a maximum senior secured Revolving Credit Facility in the aggregate principal amount of $400.0 million (the "Revolving Credit Facility"), due May 13, 2027; iii. includes a letter of credit sub-facility of up to $100.0 million, which is part of, and not in addition to, the Revolving Credit Facility; 29 Table of Contents iv. borrowings under the Term Loan B bear a rate of Secured Overnight Financing Rate ("SOFR") plus 3.75% (following the repricing on August 17, 2023 as described below) and the Revolving Credit Facility bears a leverage-based rate between 2.75% and 3.50%; as of February 29, 2024, the rate was SOFR plus 3.50% (following the repricing on December 20, 2023, as described below); v. includes customary affirmative and negative covenants, and events of default; including restrictions on the incurrence of non-ordinary course debt, investment and dividends, subject to various exceptions; and, vi. includes a maximum quarterly leverage ratio financial covenant, with reporting requirements to our banking group at each quarter-end.
The hedged risk is the interest rate risk exposure to changes in interest payments, attributable to changes in benchmark one-month SOFR interest rates over the interest rate swap term. The changes in cash flows of the interest rate swap are expected to exactly offset changes in cash flows of the variable-rate debt.
The objective of the 2022 Swap is to eliminate the variability of cash flows in interest payments attributable to changes in benchmark one-month SOFR interest rates. The hedged risk is the interest rate risk exposure to changes in interest payments, attributable to changes in benchmark one-month SOFR interest rates over the interest rate swap term.
An entity may first assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more-likely-than-not that goodwill's fair value is less than the carrying amount.
Further testing is only required if the entity determines, based on the qualitative assessment, that it is more-likely-than-not that the fair value is less than the carrying amount. If no impairment indicators are present, we may first perform a qualitative assessment of goodwill to determine whether a quantitative assessment is necessary.
Other Exposures We have exposure to commodity price increases in our operating segments, primarily zinc, natural gas in the AZZ Metal Coatings segment, and natural gas, steel and aluminum in the AZZ Precoat Metals segment. We attempt to minimize these increases through fixed cost contract purchases on zinc and natural gas.
Other Exposures We have exposure to commodity price increases in all three of our operating segments, primarily zinc and natural gas in the AZZ Metal Coatings segment, and natural gas, steel and aluminum in the AZZ Precoat Metals segment.
Determining fair value of identifiable assets, particularly intangibles, and liabilities acquired also requires management to utilize assumptions and estimates, which are based upon available information that may be subject to further refinement over the purchase accounting period of one year. 29 Table of Contents Interest Rate Swap The Company is exposed to interest rate risk on its floating-rate debt.
Determining fair value of identifiable assets, particularly intangibles, and liabilities acquired also requires management to utilize assumptions and estimates, which are based upon available information that may be subject to further refinement over the purchase accounting period of one year. Recent Accounting Pronouncements See Part II, "Item 8.
The results of operations from discontinued operations for fiscal 2023 and 2022 consist of the following (in thousands): Year Ended February 28, 2023 2022 Sales $ 256,224 $ 377,066 Cost of sales 202,707 297,996 Gross margin 53,517 79,070 Selling, general and administrative 26,186 46,747 Restructuring and impairment charges — (1,797) Loss on disposal of discontinued operations 159,910 — Operating income (loss) from discontinued operations (132,579) 34,120 Interest expense 8 32 Other (income) expense, net 6,270 774 Income (loss) from discontinued operations before income tax (138,857) 33,314 Income tax (benefit) expense (19,544) (891) Net income (loss) from discontinued operations $ (119,313) $ 34,205 Sales for the AZZ Infrastructure Solutions segment decreased $120.8 million, or 32.0%, to $256.2 million for fiscal 2023, compared to $377.1 million for fiscal 2022.
The results of operations from discontinued operations for fiscal 2023 consist of the following (in thousands): 27 Table of Contents Year Ended February 28, 2023 Sales $ 256,224 Cost of sales 202,707 Gross margin 53,517 Selling, general and administrative 26,186 Restructuring and impairment charges — Loss on disposal of discontinued operations 159,910 Operating loss from discontinued operations (132,579) Interest expense (8) Other expense, net (6,270) Loss from discontinued operations before income tax (138,857) Income tax benefit (19,544) Net loss from discontinued operations $ (119,313) See "Item 8.
The notional amount of the interest rate swap decreases by a pro-rata portion of any quarterly principal payments made on the Term Loan B.
The 2022 Swap had an initial notional amount of $550.0 million and a maturity date of September 30, 2025. The notional amount of the interest rate swap decreases by a pro-rata portion of any quarterly principal payments made on the Term Loan B.
Specifically, there were no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on the financial condition, changes in financial condition, sales or expenses, results of operations, liquidity, capital expenditures or capital resources of the Company.
Specifically, there were no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on the financial condition, changes in financial condition, sales or expenses, results of operations, liquidity, capital expenditures or capital resources of the Company. 32 Table of Contents As of February 29, 2024, the Company had non-cancelable forward contracts to purchase approximately $47.4 million of zinc at fixed premiums, and $8.2 million of natural gas.
We test goodwill and intangible assets with an indefinite life for potential impairment annually during the fourth quarter and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount, which would result in impairment.
We test goodwill for potential impairment annually as of December 31 and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of the reporting unit below its carrying amount. An entity may first assess qualitative factors to determine if a quantitative impairment test is necessary.
Our cash requirements are generally for operating activities, cash dividend payments, capital improvements, debt repayment and acquisitions. We believe that our cash position, cash flows from operating activities and our expectation of continuing availability to draw upon our credit facilities are sufficient to meet our cash flow needs for the foreseeable future .
Based on our current financial condition and current operations, we believe that our cash position, cash flows from operating activities and our expectation of continuing availability to draw upon our credit facilities are sufficient to meet our cash flow needs for the next twelve months and beyond .
As of February 28, 2023, the Company was in compliance with all covenants or other requirements set forth in the debt agreements. Share Repurchase Program On November 10, 2020, our Board of Directors authorized a $100 million share repurchase program pursuant to which the Company may repurchase our common stock (the "2020 Authorization").
Share Repurchase Program On November 10, 2020, our Board of Directors authorized a $100 million share repurchase program pursuant to which we may repurchase our common stock (the "2020 Authorization").
If no impairment indicators are present, we may first perform a qualitative assessment of goodwill to determine whether a quantitative assessment is necessary. If we perform a quantitative assessment for our annual goodwill impairment test, then we use the income approach.
If we perform a quantitative assessment for our annual goodwill impairment test, we use the income approach.
Management provides non-GAAP financial measures for informational purposes and to enhance understanding of the Company’s GAAP consolidated financial statements. Readers should consider these measures in addition to, but not instead of or superior to, the Company's financial statements prepared in accordance with GAAP.
Readers should consider these measures in addition to, but not instead of or superior to, the Company's financial statements prepared in accordance with GAAP, and undue reliance should not be placed on these non-GAAP financial measures. Additionally, these non-GAAP financial measures may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.
Cash Flows The following table summarizes our cash flows by category for the periods presented (in thousands): Year Ended February 28, 2023 2022 Net cash provided by operating activities of continuing operations $ 91,430 $ 60,598 Net cash used in investing activities of continuing operations (1,228,921) (82,143) Net cash provided by financing activities of continuing operations 1,027,335 912 Net cash provided by (used in) operating activities from discontinued operations (21,275) 25,412 Net cash used in investing activities from discontinued operations (1,336) (4,692) Net cash provided by financing activities from discontinued operations 120,000 — Working Capital 230,176 236,002 Net cash provided by operating activities of continuing operations for fiscal 2023 was $91.4 million, compared to $60.6 million for fiscal 2022.
Cash Flows The following table summarizes our cash flows by category for the periods presented (in thousands): Year Ended February 29/28, 2024 2023 Net cash provided by operating activities of continuing operations $ 244,468 $ 91,430 Net cash used in investing activities of continuing operations (95,064) (1,228,921) Net cash provided by (used in) financing activities of continuing operations (147,888) 1,027,335 Net cash used in operating activities from discontinued operations — (21,275) Net cash used in investing activities from discontinued operations — (1,336) Net cash provided by financing activities from discontinued operations — 120,000 Net cash provided by operating activities of continuing operations for fiscal 2024 was $244.5 million, driven primarily by net income from continuing operations of $101.6 million, adjusted to exclude non-cash charges, net of non-cash income of $90.4 million, an increase in cash resulting from a reduction in working capital of $54.0 million, and a cash distribution on the investment in the AVAIL JV of $3.1 million.
During fiscal 2023, to prioritize repayments of debt, including debt incurred to finance the Precoat Acquisition, the Company did not repurchase shares of common stock under the 2020 Share Authorization. During fiscal 2022, the Company repurchased 601,822 shares of common stock for $30.8 million, or $51.20 per share.
During fiscal 2024 and 2023, to prioritize repayments of debt, including debt incurred to finance the Precoat Acquisition, we did not repurchase shares of common stock under the 2020 Share Authorization. As of February 29, 2024, there was $53.2 million remaining to repurchase shares under the 2020 Authorization.
Operating margins remained flat at 24.5% for fiscal 2023, as compared to fiscal 2022. Operating income for the AZZ Precoat Metals segment, which was acquired on May 13, 2022, was $79.5 million for fiscal 2023. Corporate expenses increased $12.3 million, to $61.8 million for fiscal 2023, compared to $49.5 million for fiscal 2022.
Operating income for the AZZ Precoat Metals segment, which was acquired on May 13, 2022, increased $60.1 million, or 75.6%, for fiscal 2024, to $139.6 million, as compared to $79.5 million for the prior year.
A discussion regarding our financial condition and results of operations as well as our liquidity and capital resources for fiscal year 2022 compared to fiscal year 2021 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended February 28, 2022, which is available on the SEC’s website at www.sec.gov and our Investor Relations website at www.azz.com/investor-relations.
A discussion regarding our financial condition and results of operations as well as our liquidity and capital resources for fiscal year 2023 compared to fiscal year 2022 can be found under " Item 7 .
These letters of credit are issued for a number of reasons, but are most commonly issued in lieu of customer retention withholding payments covering warranty, performance periods and insurance collateral. Interest Rate Swap We manage our exposure to fluctuations in interest rates using a mix of fixed and variable-rate debt.
Letters of Credit As of February 29, 2024, we had total outstanding letters of credit in the amount of $14.5 million. These letters of credit are issued for a number of reasons but are most commonly issued in lieu of customer retention withholding payments covering warranty, performance periods and insurance collateral.
Management defines Adjusted EBITDA as earnings excluding depreciation, amortization, interest, provision for income taxes and acquisition and transaction related expenses. Management believes Adjusted EBITDA is used by investors to analyze operating performance and evaluate the Company's ability to incur and service debt and its capacity for making capital expenditures in the future.
Management believes Adjusted EBITDA is used by investors to analyze operating performance and evaluate the Company's ability to incur and service debt and its capacity for making capital expenditures in the future. 34 Table of Contents Management provides non-GAAP financial measures for informational purposes and to enhance understanding of the Company’s GAAP consolidated financial statements.
Additional prepayments made against the Term Loan B contribute to these required quarterly payments. On September 30, 2022, $240.0 million was applied to the Term Loan B in connection with the sale of AIS.
Additional prepayments made against the Term Loan B contribute to these required quarterly payments.
We utilize fixed-rate interest rate swap agreements to change the variable interest rate to a fixed rate on a portion of our variable-rate debt. On September 27, 2022, the Company entered into a fixed-rate interest rate swap agreement with banks that are parties to the 2022 Credit Agreement.
Interest Rate Swap We manage our exposure to fluctuations in interest rates by utilizing interest rate swaps to convert the variable interest rate to a fixed rate on approximately one-half of our variable-rate debt. 31 Table of Contents On September 27, 2022, we entered into a fixed-rate interest rate swap agreement with banks that are parties to the 2022 Credit Agreement, which was subsequently amended on October 7, 2022, to change the SOFR-based component of the interest rate.
We designated the 2022 Swap as a cash flow hedge at inception. Cash settlements, in the form of cash payments or cash receipts, of the 2022 Swap are recognized in interest expense. AZZ Infrastructure Solutions (AIS) Joint Venture On September 30, 2022, the Company completed the joint venture between the Company and Fernweh Group LLC ("Fernweh").
The changes in cash flows of the interest rate swap are expected to exactly offset changes in cash flows of the variable-rate debt. We designated the 2022 Swap as a cash flow hedge at inception. Cash settlements, in the form of cash payments or cash receipts, of the 2022 Swap are recognized in interest expense.
(2) Includes Corporate expenses related to the Precoat Metals acquisition, as well as the divestiture of AZZ Infrastructure Solutions business into the AIS JV. (3) The non-GAAP effective tax rates for fiscal 2023 and 2022 were 24.0% and 22.9%, respectively.
(3) Includes Corporate expenses related to the Precoat Acquisition and the divestiture of AZZ Infrastructure Solutions business into the AVAIL JV.
The activity for fiscal 2023 consisted primarily of sublease income earned through the Company's sublease agreements in the Precoat Metals segment, as well as foreign currency losses resulting from unfavorable movements in exchange rates. 23 Table of Contents Income Taxes The provision for income taxes from continuing operations was 25.2% for fiscal 2023 compared to 31.8% for fiscal 2022.
The decrease is primarily due to the reclassification in the current year of sublease income earned through the Company's sublease agreements in the Precoat Metals segment, which is netted against lease expense in the current year, as well as foreign currency losses resulting from unfavorable movements in exchange rates.
These non-GAAP financial measures may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes. 30 Table of Contents The following tables provides a reconciliation for the years ended February 28, 2023 and February 28, 2022 between the various measures calculated in accordance with GAAP to the Adjusted Earnings Measures (dollars in thousands, except per share data): Adjusted Earnings and Adjusted Earnings Per Share from Continuing Operations Year Ended February 28, 2023 2022 Amount Per Diluted Share (1) Amount Per Diluted Share (1) Net income from continuing operations $ 66,339 49,817 Less: Series A Preferred Stock dividends (8,240) — Net income (loss) from continuing operations available to common shareholders 58,099 $ 2.33 49,817 $ 1.99 Net income available to common shareholders and diluted earnings per share from continuing operations $ 58,099 $ 49,817 Adjustments: Acquisition and transaction-related expenditures (2) 15,320 0.61 1,554 0.06 Amortization of intangible assets 22,613 0.91 6,658 0.27 Subtotal 37,933 1.52 8,212 0.33 Tax impact (3) (9,104) (0.36) (1,881) (0.08) Total adjustments 28,829 1.15 6,331 0.25 Adjusted earnings and adjusted earnings per share from continuing operations $ 86,928 $ 3.48 $ 56,148 $ 2.24 (1) Earnings per share amounts included in the table above may not sum due to rounding differences.
The following tables provides a reconciliation for the years ended February 29, 2024 and February 28, 2023 between the non-GAAP Adjusted Earnings Measures to the most comparable measures calculated in accordance with GAAP (dollars in thousands, except per share data): 35 Table of Contents Adjusted Net Income and Adjusted Earnings Per Share from Continuing Operations Year Ended February 29/28, 2024 2023 Amount Per Diluted Share (1) Amount Per Diluted Share (1) Net income from continuing operations $ 101,607 $ 66,339 Less: preferred stock dividends (14,400) (8,240) Net income from continuing operations available to common shareholders 87,207 58,099 Impact of preferred stock dividends 14,400 8,240 Net income and diluted earnings per share from continuing operations for Adjusted net income calculation (2) 101,607 $ 3.46 66,339 $ 2.35 Adjustments: Acquisition and transaction-related expenditures (3) — — 15,320 0.54 Amortization of intangible assets 23,960 0.83 22,613 0.79 Legal settlement and accrual (4) 17,043 0.58 — — Subtotal 41,003 1.41 37,933 1.33 Tax impact (5) (9,841) (0.34) (9,104) (0.32) Total adjustments 31,162 1.07 28,829 1.01 Adjusted net income and adjusted earnings per share from continuing operations (non-GAAP) $ 132,769 $ 4.53 $ 95,168 $ 3.36 Weighted average shares outstanding - Diluted 29,326 28,283 See notes on page 37 .
Off Balance Sheet Arrangements and Contractual Commitments As of February 28, 2023, the Company did not have any off-balance sheet arrangements as defined under SEC rules.
We have indirect exposure to copper, aluminum, steel and nickel-based alloys in the AZZ Infrastructure Solutions segment through our 40% investment in the AVAIL JV. Off Balance Sheet Arrangements and Contractual Commitments As of February 29, 2024, the Company did not have any off-balance sheet arrangements as defined under SEC rules.
The Company's credit agreement requires the Company to maintain a maximum Total Net Leverage Ratio (as defined in the loan agreement) no greater than 6.25 through November 2022. For each subsequent quarter, the maximum ratio decreases by 25 basis points through May 31, 2024, when the maximum Total Net Leverage Ratio reaches 4.5.
For each subsequent quarter, the maximum ratio decreases by 25 basis points through May 31, 2024, when the maximum Total Net Leverage Ratio reaches 4.50. As of February 29, 2024, we were in compliance with all covenants and other requirements set forth in the debt agreement.
Net income (loss) as a percentage of sales was (4.6)% for fiscal 2023 as compared to 16.0% for fiscal 2022. Diluted earnings (loss) per share from continuing operations increased by 17.1%, to $2.33 per share for fiscal 2023, compared to $1.99 per share for fiscal 2022. During fiscal 2023, we completed the acquisition of Precoat Metals (the "Precoat Acquisition").
Diluted earnings per common share from continuing operations increased by 48.5%, to $3.46 per share for fiscal 2024, compared to $2.33 per share for fiscal 2023. On May 13, 2022, we completed the Precoat Acquisition. Sales Sales for the AZZ Metal Coatings segment increased $19.2 million, or 3.0%, to $656.2 million, from the prior year’s sales of $637.0 million.
The current year effective tax rate also includes the impact of recognizing deferred taxes on the outside basis difference of foreign subsidiaries involved in the divestiture. 24 Table of Contents Liquidity and Capital Resources We have historically met our cash needs through a combination of cash flows from operating activities along with bank and bond market debt.
Financial Statements and Supplementary Data—Note 9" for more information. 28 Table of Contents Liquidity and Capital Resources We have historically met our cash needs through a combination of cash flows from operating activities along with bank and bond market debt. Our cash requirements generally include cash dividend payments, capital improvements, debt repayment and acquisitions.
Of total sales for fiscal 2023, approximately 48.1% were generated from the AZZ Metal Coatings segment and approximately 51.9% of sales were generated from the AZZ Precoat Metals segment. Net income (loss) for fiscal 2023 was $(61.2) million, compared to $84.0 million for fiscal 2022.
For the fiscal year ended February 29, 2024, we recorded sales of $1,537.6 million, compared to prior year’s sales of $1,323.6 million. Of total sales for fiscal 2024, 42.7% were generated from the AZZ Metal Coatings segment and 57.3% of sales were generated from the AZZ Precoat Metals segment.
In addition to these measures, we attempt to recover other cost increases through improvements to our manufacturing process, supply chain management, and through increases in prices where competitively feasible. We have indirect exposure to copper, aluminum, steel and nickel-based alloys in the AZZ Infrastructure Solutions segment through our 40% investment in the AIS JV.
We attempt to minimize these increases by entering into agreements with our zinc suppliers and such agreements generally include fixed premiums, and through fixed cost contract purchases on natural gas. In addition to these measures, we attempt to recover other cost increases through improvements to our manufacturing process, supply chain management, and through increases in prices where competitively feasible.
As a result of this 26 Table of Contents prepayment, the quarterly mandatory principal payment requirement has been met, and the quarterly payments of $3.25 million are no longer required. The effective interest rate for the Revolving Credit Facility and the Term Loan B was 8.81% at February 28, 2023.
Due to a prepayment of $210.0 million that we made on the Term Loan B during fiscal year 2023 in connection with the sale of the AIS business, the quarterly mandatory principal payment requirement has been met, and the quarterly payments of $3.25 million are not required at this time.
Overview We are a provider of hot-dip galvanizing and coil coating solutions to a broad range of end-markets, predominantly in North America.
Manage ment's Discussion and Analysis" in our Annual Report on Form 10-K for the fiscal year ended February 28, 2023, filed with the SEC on April 25, 2023, which such discussion is hereby incorporated by reference. Overview We are a provider of hot-dip galvanizing and coil coating solutions to a broad range of end-markets in North America.
Net cash provided by financing activities of continuing operations for fiscal 2023 was $1,027.3 million, compared to $0.9 million for fiscal 2022.
Net income from continuing operations for fiscal 2024 was $101.6 million, compared to $66.3 million for fiscal 2023. Net income from continuing operations as a percentage of sales was 6.6% for fiscal 2024 as compared to 5.0% for fiscal 2023.
The Company had no other contracted commitments for any other commodities including steel, aluminum, natural gas, copper, zinc, nickel based alloys, except for those entered into under the normal course of business. Critical Accounting Policies and Estimates The preparation of the consolidated financial statements requires us to make estimates that affect the reported value of assets, liabilities, sales and expenses.
All such contracts expire in fiscal 2025. The Company had no other contracted commitments for any other commodities including steel, aluminum, copper, zinc, nickel based alloys, except for those entered into under the normal course of business. As of February 29, 2024, w e had outstanding letters of credit in the amount of $14.5 million.
Adjusted EBITDA from Continuing Operations Year Ended February 28, 2023 2022 Net income from continuing operations $ 66,339 $ 49,817 Interest expense 88,800 6,363 Income tax expense 22,336 23,214 Depreciation and amortization 74,590 32,081 Acquisition and transaction-related expenditures 15,320 1,554 Adjusted EBITDA from continuing operations $ 267,385 $ 113,029 31 Table of Contents Adjusted EBITDA by Segment Year Ended February 28, 2023 2022 Metal Coatings Operating income $ 155,954 $ 128,758 Depreciation and amortization expense 32,955 30,453 Adjusted EBITDA $ 188,909 $ 159,211 Precoat Metals Operating income $ 79,509 $ — Depreciation and amortization expense 40,199 — Adjusted EBITDA $ 119,708 $ — Corporate Operating income $ (61,825) $ (49,539) Consolidated operating income $ 173,638 $ 79,219 32 Table of Contents
Year Ended February 28, 2023 Metal Coatings Precoat Metals Infra- structure Solutions Corporate Total Net income (loss) from continuing operations $ 156,054 $ 80,274 $ 2,597 $ (172,586) $ 66,339 Interest expense — — — 88,800 88,800 Income tax expense — — — 22,336 22,336 Depreciation and amortization (6) 32,955 40,199 — 1,436 74,590 Adjustments: Acquisition and transaction-related expenditures (3) — — — 15,320 15,320 Adjusted EBITDA from continuing operations (non-GAAP) $ 189,009 $ 120,473 $ 2,597 $ (44,694) $ 267,385 (1) Earnings per share amounts included in the table above may not sum due to rounding differences.
The increase in cash provided by operating activities for fiscal 2023 is primarily attributable to increases in net income from continuing operations and non-cash expenses, including depreciation and amortization and amortization of debt financing costs, partially offset by the impact of decreases in working capital, primarily due to changes in accounts payable, accounts receivable, prepaid expenses, contract assets and liabilities and other accrued liabilities.
Net cash provided by operating activities of continuing operations for fiscal 2023 was $91.4 million, driven primarily by net income from continuing operations of $66.3 million, adjusted to exclude non-cash charges, net of non-cash income, of $97.7 million, and a decrease in cash resulting from an increase in working capital of $67.1 million and a decrease in cash from changes in other long-term assets and liabilities of $5.5 million.
For example, the twelve-month period ended February 28, 2023 is referred to as "fiscal 2023," "fiscal year 2023", "current year" or "current period", and the period ended February 28, 2022 is referred to as "fiscal 2022," "fiscal year 2022," "prior year" or "prior period." Results of Operations For the fiscal year ended February 28, 2023, we recorded sales of $1,323.6 million, compared to prior year’s sales of $525.6 million.
For example, the twelve-month period ended February 29, 2024 is referred to as "fiscal 2024," "fiscal year 2024", "current year" or "current period", and the twelve-month period ended February 28, 2023 is referred to as "fiscal 2023," "fiscal year 2023," "prior year" or "prior period." Business Operations Update Our results for the year ended February 29, 2024 were favorably impacted by the continued demand for our manufactured solutions in the construction, industrial, consumer and transportation industries, coupled with our value driven pricing strategy.
The following accounting policies involve critical accounting estimates because they are dependent on our judgement and assumptions about matters that are inherently uncertain. Allowance for Credit Losses The carrying value of our accounts receivable is periodically evaluated based on the likelihood of collection. An allowance is maintained for estimated credit losses resulting from our customers’ inability to make contracted payments.
We consider the following accounting estimates to meet this definition because they are dependent on our judgement and assumptions about matters that are inherently uncertain and represent our more critical estimates.
As of February 28, 2023, we had approximately $288.5 million of additional credit available for future draws or letters of credit.
As of February 29, 2024, we had $1.01 billion of floating-rate and fixed-rate debt outstanding on the Revolving Credit Facility and the Term Loan B, with varying maturities through fiscal 2029. We had approximately $355.5 million of additional credit available for future draws or letters of credit as of February 29, 2024.
On October 7, 2022, the agreement was amended to change the SOFR-based component of the interest rate on a portion of our variable-rate debt to a fixed rate of 4.277%, resulting in a total fixed rate of 8.627% (the "2022 Swap"). The 2022 Swap had an initial notional amount of $550.0 million and a maturity date of September 30, 2025.
The interest rate swap fixes the SOFR portion of our variable-rate debt to a fixed rate of 4.277% (the "2022 Swap"). On August 17, 2023, the Company repriced its Term Loan B to SOFR plus 3.75%, resulting in a total fixed rate of 8.027%.
We operate three distinct business segments, the AZZ Metal Coatings segment, the AZZ Precoat Metals segment, and the AZZ Infrastructure Solutions segment, which is now reported as discontinued operations, and financial data for this segment has been segregated and presented as discontinued operations for all periods presented.
We operate three distinct business segments, the AZZ Metal Coatings segment, the AZZ Precoat Metals segment, and the AZZ Infrastructure Solutions segment, which consists of the Company's 40% investment in a joint venture, AIS Investment Holdings LLC (the "AVAIL JV").
Removed
During fiscal 2022, we completed two acquisitions, both in our AZZ Metal Coatings segment. Sales Our total sales from continuing operations, for fiscal 2023 increased by $798.1 million, or 151.8%, as compared to fiscal 2022.
Added
On September 30, 2022, we contributed our AZZ Infrastructure Solutions business (the "AIS business"), excluding AZZ Crowley Tubing, to the AVAIL JV and sold a 60% interest to Fernweh AIS Acquisition LP.
Removed
The following table reflects the breakdown of revenue from continuing operations by segment (in thousands): Year Ended February 28, 2023 2022 Sales: Metal Coatings $ 636,982 $ 525,598 Precoat Metals 686,667 — Total sales $ 1,323,649 $ 525,598 Sales for the AZZ Metal Coatings segment increased $111.4 million, or 21.2%, to $637.0 million, from the prior year’s sales of $525.6 million.
Added
Following the transaction on September 30, 2022, we account for our retained investment in the AVAIL JV as an equity method investment, and our equity in the earnings of the AVAIL JV are included in continuing operations.
Removed
The increase in sales was primarily due to improved price realization for our superior quality and service. The volume of steel processed also increased in the current period, compared to the prior year period.
Added
Therefore, the results of operations for the AIS business for the period from March 1, 2022 through September 30, 2022 were reported as discontinued operations, and financial data was segregated and presented as discontinued operations for this period.
Removed
The increase is primarily due to increases in acquisition costs related to the Precoat Acquisition, costs related to the AIS joint venture, and increased payroll and employee-related compensation costs related to both of these transactions , partially offset by income earned from a transition services agreement related to the AIS joint venture. See also Note 5 in Item 8.
Added
The demand for our manufactured solutions and continued strength in pricing were the primary contributors to us reporting $87.2 million of net income attributable to common shareholders for the year ended February 29, 2024.
Removed
Interest Expense Interest expense for fiscal 2023 increased $82.4 million, to $88.8 million, as compared to $6.4 million in fiscal 2022. The significant increase in interest expense is primarily attributable to the additional debt that was obtained in conjunction with the Precoat Acquisition, including the Term Loan B of $1.3 billion and the Convertible Notes of $240.0 million.
Added
Our operating results for fiscal 2024, including operating results by segment, are described in the summary on the following page, and detailed descriptions can be found below under “Results of Operations.” Our operations generated $244.5 million of cash in fiscal 2024, which includes $54.0 million generated from reduction in working capital.
Removed
The Convertible Notes transitioned from subordinated debt (e.g., interest) to Preferred Equity (e.g., dividends) on August 5, 2022. As of February 28, 2023, we had gross outstanding debt of $1,125.3 million, compared to $227.0 million at the end of fiscal 2022.
Added
The cash flows were used to make $95.1 million of capital investments in our business and return $31.4 million to our common and preferred shareholders through dividend payments. In addition, we reduced our outstanding debt through $115.0 million in net payments on our Term Loan B and revolving credit facility.
Removed
AZZ's debt to equity ratio was 1.24 to 1 at the end of fiscal 2023, compared to 0.34 to 1 at the end of fiscal 2022. For additional information on outstanding debt, see Note 8 in Item 8.
Added
As a result of this and other activity, our cash and cash equivalents were $4.3 million as of February 29, 2024, an increase of $1.5 million from February 28, 2023. As of February 29, 2024, we had $355.5 million available under the revolving credit facility.
Removed
Equity in Earnings of Unconsolidated Entities Equity in earnings of unconsolidated subsidiaries of $2.6 million represents our proportionate share of net income or loss from our investment in the AIS JV. We have a 40% equity interest in the AIS JV.
Added
The components of our liquidity and descriptions of our cash flows, capital investments, and other matters impacting our liquidity and capital resources can be found below under “Liquidity and Capital Resources.” Outlook While it is difficult to predict future North American economic activity and its impact on the demand for our galvanizing and coil coating solutions, as well the impact that political or regulatory developments may have on us, we have noted several factors below that have impacted or may impact our results of operations during the first quarter of fiscal 2025. • Sales prices in our AZZ Metal Coatings segment are expected to remain consistent with current levels. • Sales prices in our AZZ Precoat Metals segment are expected to remain consistent with current levels, with expected seasonal fluctuations in mix due to an increase in construction business, which may impact the average selling price. 24 Table of Contents • Demand in our AZZ Metal Coatings and AZZ Precoat Metals segments is expected to follow our typical seasonal patterns. • Customer inventories for our AZZ Metal Coatings segment remain constant, which should support the continued demand for our metal coatings solutions. • Customer inventories for our AZZ Precoat Metals segment remain at historical levels, which should support the continued demand for our coil coating solutions.
Removed
The decrease in the effective tax rate is the result of higher unfavorable adjustments related to management fees, recorded as a result of continuing operations versus discontinued operations reporting, in the prior year comparable period.
Added
Results of Operations Net income (loss) from continuing operations by segment for fiscal 2024 and 2023 were as follows (in thousands): Year Ended February 29, 2024 Metal Coatings (1) Precoat Metals Infrastructure Solutions (2) Corporate (3)(4) Total Sales $ 656,189 $ 881,400 $ — $ — $ 1,537,589 Cost of sales 465,147 708,981 — — 1,174,128 Gross margin 191,042 172,419 — — 363,461 Selling, general and administrative 26,314 32,848 6,246 76,453 141,861 Operating income (loss) from continuing operations 164,728 139,571 (6,246) (76,453) 221,600 Interest expense — — — (107,065) (107,065) Equity in earnings of unconsolidated subsidiaries — — 15,407 — 15,407 Other income 128 — — 33 161 Income (loss) from continuing operations before income tax $ 164,856 $ 139,571 $ 9,161 (183,485) 130,103 Income tax expense 28,496 28,496 Net income (loss) from continuing operations $ (211,981) $ 101,607 (1) For fiscal 2024, AZZ Metal Costings included expenses related to a legal matter of $5.5 million in "Selling, general and administrative".
Removed
The decrease is primarily due to the divestiture of our AZZ Infrastructure Solutions segment on September 30, 2022, resulting in the inclusion of seven months of sales for the current year period, compared to a full year for the prior year period.
Added
(2) Infrastructure Solutions segment includes the equity in earnings from our investment in the AVAIL JV, as well as other expenses related to receivables and liabilities that were retained following the sale of the AIS business, including $5.8 million related to a legal settlement.
Removed
Operating income (loss) for the AZZ Infrastructure Solutions segment decreased $166.7 million, or 488.6% to a loss of $132.6 million, as compared to income of $34.1 million for the prior year.
Added
(3) Interest expense and Income tax expense are included in the Corporate segment as these items are not allocated to the segments. (4) For fiscal year 2024, amortization expense for acquired intangible assets of $24.0 million is included in Corporate expenses in "Selling, general and administrative" expense as these expenses are not allocated to the segments.
Removed
During fiscal 2023, the Company recognized a pre-tax non-cash loss on disposal of approximately $159.9 million, which included the derecognition of the cumulative translation adjustment related to its investment in foreign entities within the AIS segment, and is included in "Loss on disposal of discontinued operations" above.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+1 added−1 removed2 unchanged
Biggest changeSensitivity Analysis The Company had $578.0 million of borrowings under a variable interest rate at the end of February 28, 2023. We estimate that a hypothetical increase of 1% in interest rates would have increased interest expense by $5.8 million during fiscal 2023.
Biggest changeWe estimate that a hypothetical 10% increase in interest rates from their current level would have increased interest expense by $4.2 million and $5.8 million during fiscal 2024 and 2023, respectively.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk from changes in commodity prices, interest rates and foreign currency exchange rates. We use derivative instruments principally to reduce our exposure to market risks from changes in foreign currency exchange rates and interest rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk from changes in commodity prices, interest rates and foreign currency exchange rates. We use derivative instruments principally to reduce our exposure to market risks from changes in commodity prices and interest rates.
However, there can be no assurance that either interest rates, exchange rates or commodity prices will not change in excess of the 10% hypothetical amount or that we would be able to pass along rising costs of commodity prices to our customers, and such hypothetical change, if it occurred, could have an adverse effect on our results of operations, financial position, and cash flows. 33 Table of Contents
However, there can be no assurance that either interest rates, foreign exchange rates or commodity prices will not change in excess of the 10% hypothetical amount or that we would be able to pass along rising costs of commodity prices to our customers, and such hypothetical change, if it occurred, could have an adverse effect on our results of operations, financial position, and cash flows. 38 Table of Contents
We do not believe that a hypothetical change of 10% of the currency exchange rate that are currently in effect or a change of 10% of commodity prices would have a significant adverse effect on our results of operations, financial position, or cash flows, as long as we are able to pass along the increases in commodity prices to our customers.
We do not believe that a hypothetical change of 10% of the currency exchange rate that are currently in effect or a change of 10% of commodity prices would have a significant adverse effect on our results of operations, financial position, or cash flows, if we are able to pass along the increases in commodity prices to our customers.
We manage our exposure to changes in the price of zinc by entering into agreements with our zinc suppliers and such agreements generally include protective caps or other fixed prices. We also secure firm pricing for natural gas supplies with individual utilities when possible. We believe these agreements ensure adequate supplies and partially offset exposure to commodity price escalation.
We manage our exposure to changes in the price of zinc by entering into agreements with our zinc suppliers and such agreements generally include fixed premiums. We also secure firm pricing for natural gas supplies with individual utilities when possible. We believe these agreements ensure adequate supplies and partially offset exposure to commodity price escalation.
Foreign Exchange Rates The Company’s foreign exchange exposures result primarily from intercompany balances, sale of products in foreign currencies, foreign currency denominated purchases, employee-related and other costs of running operations in foreign countries. As of February 28, 2023, the Company had exposure to foreign currency exchange rates related to our operations in Canada.
Foreign Exchange Rates The Company’s foreign exchange exposures result primarily from intercompany balances, sale of manufactured solutions in foreign currencies, foreign currency denominated purchases, employee-related and other costs of running operations in foreign countries. As of February 29, 2024, the Company had exposure to foreign currency exchange rates related to our operations in Canada.
We have entered into an interest rate swap to eliminate the variability of cash flows in interest payments attributable to changes in benchmark one-month SOFR interest rates, for approximately one-half of the total amount of our variable-rate debt. The interest rate swap is designated as a cash flow hedge.
Our interest rate swap eliminates the variability of cash flows in interest payments attributable to changes in benchmark one-month SOFR interest rates, and is designated as a cash flow hedge.
Interest Rates We had $1.125 billion of gross variable-rate debt outstanding at February 28, 2023 under our revolving credit facility and Term Loan B. We manage our exposure to fluctuations in interest rates using a mix of fixed and variable-rate debt.
Interest Rates We had $1.0 billion of gross variable-rate debt outstanding as of February 29, 2024 under our revolving credit facility and Term Loan B. We manage our exposure to fluctuations in interest rates by utilizing interest rate swaps to convert the variable interest rate to a fixed rate on approximately one-half of our variable-rate debt.
Removed
We utilize fixed-rate interest rate swap agreements to change the variable interest rate to a fixed rate on a portion of our variable-rate debt.
Added
Sensitivity Analysis The weighted average balance of variable interest debt outstanding, less the portion that is fixed through our interest rate swap agreement, was $483.3 million and $578.0 million as of February 29, 2024 and February 28, 2023, respectively.

Other AZZ 10-K year-over-year comparisons