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What changed in AZZ INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AZZ INC's 2022 and 2023 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 2023 report.

+263 added−281 removedSource: 10-K (2023-04-25) vs 10-K (2022-04-22)

Top changes in AZZ INC's 2023 10-K

263 paragraphs added · 281 removed · 139 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

36 edited+20 added−25 removed17 unchanged
Biggest changeMackey 52 Chief Legal Officer and Secretary 2014 Matt Emery 55 Chief Information and Human Resource Officer 2013 Chris Bacius 61 Vice President, Corporate Development 2014 Gary Hill 57 Chief Operating Officer – Infrastructure Solutions President and General Manager - AZZ Industrial Platform Vice President and General Manager - AZZ WSI LLC 2020 2017 2013-2017 Ken Lavelle 65 President and General Manager - Electrical Platform 2017 Bryan Stovall 57 Chief Operating Officer – Metal Coatings President - AZZ Galvanizing Solutions Senior Vice President - Metal Coatings Vice President, Galvanizing - Central Operations 2020 2019 2018-2019 2013-2018 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 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.
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 Paid Time off and Holiday Pay Flexible Work Arrangements 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% Paid Sick and Safe Leave 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: 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.
Competition The markets for our 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.
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.
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.
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.
Corporate Governance and Sustainability Our Company’s Board of Directors (the “Board”), with the assistance of its Nominating and Corporate Governance Committee, has adopted Corporate Governance Guidelines that set forth the Board’s policies regarding corporate governance and its oversight of the Company's sustainability efforts.
Corporate Governance and Sustainability Our Company’s Board of Directors (the "Board"), with the assistance of its Nominating and Corporate Governance Committee, has adopted Corporate Governance Guidelines that set forth the Board’s policies regarding corporate governance and its oversight of the Company's sustainability efforts.
We also provide a variety of resources to help our employees grow professionally and personally and build new skills, including (i) online development courses 7 Table of Contents containing unlimited access to more than 4,500 learning modules, (ii) continuing education credits, and (iii) learning preferences such as in-person seminars, videos and webinars.
We also provide a variety of resources to help our employees grow professionally and personally and build new skills, including (i) online development courses containing unlimited access to more than 4,500 learning modules, (ii) continuing education credits, and (iii) learning preferences such as in-person seminars, videos and webinars.
The Company reviews and monitors safety performance closely. 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.
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.
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.
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.
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.
("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.
While some of our competitors are much larger than us, we believe our 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 Company's Infrastructure Solutions segment to be well positioned to meet the most challenging application-specific demands.
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.
Our product offerings include custom switchgear, electrical enclosures, medium and high voltage bus ducts, explosion proof and hazardous duty lighting and tubular products. In addition to our product offerings, the Company's 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.
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.
Lagging indicators include the Occupational Safety & Health Administration: (i) Total Recordable Incident Rate (“TRIR”); (ii) Lost Time (or Lost Workday) Incident Rate (“LTIR”) based upon the number of incidents per 100 employees. (or per 200,000 work hours); and (iii) Days Away, Restricted or Transferred rate (“DART”).
Lagging indicators include the Occupational Safety & Health Administration: (i) Total Recordable Incident Rate ("TRIR"); (ii) Lost Time (or Lost Workday) Incident Rate ("LTIR") based upon the number of incidents per 100 employees. (or per 200,000 work hours); and (iii) Days Away, Restricted or Transferred rate ("DART").
No executive officer has any family relationships with any other executive officer of the Company. 9 Table of Contents 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, or the SEC.
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, 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: 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.
The Company's 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. 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.
Our galvanizing markets are generally limited to areas within relatively close proximity to our metal coating plants due to the freight cost associated with our customer material being galvanized. Zinc, the principal raw material used in the galvanizing process, is currently readily available, but can be subject to volatile pricing.
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.
Hot-dip galvanizing is a metallurgical process in which molten zinc reacts to steel. The zinc alloying provides corrosion protection and extends the life-cycle of fabricated steel for several decades. As of February 28, 2022, we operated 41 galvanizing plants and six surface technologies plants, which are located in various locations throughout the United States and Canada.
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.
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 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.
Ferguson 65 President and Chief Executive Officer 2013 Philip Schlom 57 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 Vice President, Global Compliance and Internal Audit, Parker Drilling Company 2020 2019 2017-2019 2014-2017 Tara D.
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.
Attracting, developing and retaining the best talent in our industry is important to all aspects of AZZ’s long-term strategy and continued success. We recognize that an engaged workforce directly contributes to our efforts to improve AZZ’s sustainability performance, and we believe employees are inspired to go the extra mile, if they identify with and align with their organization’s business.
Attracting, developing and retaining the best talent in our industry is important to all aspects of AZZ’s long-term strategy and continued success. We recognize that an engaged workforce directly contributes to our efforts to improve AZZ’s sustainability and performance.
This principle is incorporated into each of the Company's policies and procedures relating to recruitment, hiring, promotions, compensation, benefits, discipline, termination and all of AZZ’s other terms and conditions of employment.
This principle is incorporated into each of the Company's policies and procedures relating to recruitment, hiring, promotions, compensation, benefits, discipline, termination and all of AZZ’s other terms and conditions of employment. We seek to continuously improve our hiring, development, advancement and retention of diverse talent and our overall diversity representation.
During fiscal year 2022, 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 its review.
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.
For additional financial information by segment, see Note 12 to the Consolidated Financial Statements. Human Capital Management At AZZ, our culture is defined by our corporate values of trust, respect, accountability, integrity, teamwork and sustainability (T.R.A.I.T.S.).
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.).
The Company's Infrastructure Solutions segment 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 energy and waste management markets worldwide. Strategy We have a developed strategy and periodically review our performance, opportunities, market conditions and competitive threats.
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.
The 795 variable workforce employees work under collective bargaining agreements with various labor unions. 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.
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.
We seek to continuously improve our hiring, development, advancement and retention of diverse talent and our overall diversity representation. 6 Table of Contents As of February 28, 2022, our U.S. employees had the following race and ethnicity demographics: White 53.30 % Hispanic 31.60 % African American 10.60 % Asian 1.60 % Multi-Racial 1.90 % American Indian or Alaska Native 0.90 % Native Hawaiian or Other Pacific Islander 0.10 % Approximately 47% of our employees are diverse, as reported to the Equal Employment Opportunity Commission on an annual basis.
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.
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.
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.
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.
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.
As of February 28, 2022, our employees had the following gender demographics: Women Men U.S. Employees 16.0% 84.0% Global Employees 15.1% 84.9% Additionally, 12.5% of the executive team and 20.0% of our independent directors are female.
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.
We received net proceeds of $8.3 million and recognized a loss on the sale of $1.2 million. While Galvabar would normally be considered a core business for AZZ, we have determined that this technology is better suited for a company with both rebar manufacturing and established rebar distribution capabilities.
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.
In accordance with the sale agreement, we will receive royalties associated with future sales for a three-year period following the sale. In fiscal 2021, we closed or disposed of certain Metal Coatings locations that were in under-performing and lower growth geographies or had previously been idle through the consolidation of operations.
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.
We believe the strategic actions we continue to execute on will accelerate our strategy to become a predominantly metal coatings focused company, which we believe will more rapidly enhance shareholder value. 3 Table of Contents Metal Coatings Segment The Metal Coatings segment provides hot-dip 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.
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.
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 10 Table of Contents
Investor Relations One Museum Place, Suite 500 3100 West 7th Street Fort Worth, TX 76107
Our Employees As of February 28, 2022, we employed approximately 3,885 people worldwide (which excludes 795 variable workforce employees), of which 3,314 were employed in the U.S. and 571 were employed outside the U.S. (Brazil, Canada, China, Poland and the Netherlands). This workforce consisted of approximately 75% hourly employees and 25% salaried employees.
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.
We sell Infrastructure Solutions segment products through our internal sales force, manufacturers’ representatives, distributors and agents. We are not dependent on any single customer for this segment, and we do not believe that the loss of any single customer would have a material adverse effect on our consolidated sales or net income.
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.
For additional information on the Metal Coatings segment's operating results, see Results of Operations within Item 7. For additional financial information by segment, see Note 12 to the consolidated financial statements. 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.
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.
Removed
We are a global provider of galvanizing and a variety of metal coating solutions, welding solutions, specialty electrical equipment and highly engineered services to a broad range of markets, including, but not limited to, the power generation, transmission, distribution, refining and industrial markets. We have two distinct operating segments: the Metal Coatings segment and the Infrastructure Solutions segment.
Added
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.
Removed
We acquired two galvanizing businesses in the current year fourth quarter, and on March 7, 2022, we announced that we have entered into a Securities Purchase Agreement by and between the Company and Sequa Corporation, a Delaware corporation (the "Seller").
Added
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").
Removed
Pursuant to this agreement, the Company will acquire all of Seller's right, title and interest in and to the membership interests of Sequa Mezzanine Holdings L.L.C., a Delaware limited liability company ("Sequa") for approximately $1.3 billion (the "Precoat Acquisition").
Added
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.
Removed
As part of the Precoat Acquisition, the Company is acquiring the Precoat Metals division from the Seller, which engages in the business of applying protective and decorative coatings and films for continuous steel and aluminum coil and performing ancillary services related thereto. The transaction is further described in "Metal Coatings Segment — Recent Acquisitions" below.
Added
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.
Removed
Recent Acquisitions On March 7, 2022, the Company and Sequa jointly announced an agreement whereby the Company will acquire Sequa's Precoat Metals business division ("Precoat") for a net purchase price of approximately $1.3 billion. Precoat, headquartered in St. Louis, Missouri, is North America's largest independent provider of metal coil coating solutions.
Added
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.
Removed
The transaction, which is subject to certain closing conditions, is expected to close during the first quarter of the Company's fiscal year 2023. 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.
Added
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.
Removed
The acquisition expanded our geographical reach in metal coating solutions and broadened our offerings in strategic markets. In September 2019, we completed the acquisition of all the assets of Preferred Industries, Ltd. ("Preferred"), a privately held company based in the Dallas-Fort Worth area. Preferred provided powder and e-coating solutions to the automotive, HVAC, marine, transportation, medical, industrial, and plastics industries.
Added
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.
Removed
The acquisition broadened our offerings and expanded our network of surface technology plants. In August 2019, we completed the acquisition of the assets of NuZinc, LLC, a privately held plating company in the Dallas-Fort Worth area. The acquisition increased our capability and capacity in electroplating solutions.
Added
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.
Removed
In April 2019, we completed the acquisition of all the outstanding shares of K2 Partners, Inc. ("K2") and Tennessee Galvanizing, Inc. ("Tennessee Galvanizing"), two privately held companies. K2 provided powder coating and electroplating solutions to customers in the Midwest and Southeast from locations in Texas and Florida. Tennessee Galvanizing provides galvanizing solutions to customers throughout the United States.
Added
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.
Removed
These acquisitions expanded our geographical reach in metal coating solutions and broadened our offerings in strategic markets. In February 2018, we completed the acquisition of all the assets and outstanding shares of Rogers Brothers Company ("Rogers Brothers"), a privately held company, based in Rockford, Illinois.
Added
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.
Removed
Rogers Brothers provided galvanizing solutions to a 4 Table of Contents multi-state area within the Midwest. The acquisition supported our goal of continued geographic expansion as well as portfolio expansion of our metal coatings solutions. Recent Divestitures In July 2020, we completed the sale of our Galvabar business, which is included in the Metal Coatings segment.
Added
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.
Removed
Recent Acquisitions In March 2018, we purchased certain assets through a bankruptcy sales process from Lectrus Corporation, a privately-held corporation based in Chattanooga, Tennessee. Lectrus designs and manufactures custom electrical metal enclosures and provides electrical and mechanical integration.
Added
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.
Removed
This acquisition expanded our market reach to the Southwest states, brought us additional capability to process large, multi-segment enclosures in Lectrus' large manufacturing facility and complemented our current metal enclosure facilities in Kansas and Maryland. In September 2017, we completed the acquisition of all the assets and outstanding shares of Powergrid Solutions, Inc.
Added
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.
Removed
("PSI"), a privately held company, based in Oshkosh, Wisconsin. PSI designs, engineers and manufactures customized low and medium-voltage power quality, power generation and distribution equipment. PSI’s product portfolio includes metal-enclosed, metal-clad and padmount switchgear, serving the utility, commercial, industrial and renewable energy markets. The acquisition of PSI was a key addition to the Company's electrical switchgear portfolio.
Added
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.
Removed
The addition of PSI’s low-voltage and padmount switchgear allowed AZZ to offer a comprehensive portfolio of customized switchgear solutions to both existing and new customers in a diverse set of industries. 5 Table of Contents Recent Divestitures In October 2020, we completed the sale of our AZZ SMS LLC ("SMS") operating business reported within our Infrastructure Solutions segment.
Added
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.
Removed
We recognized a loss on disposal of $1.9 million and recorded impairment charges of $0.9 million related to the divestiture of SMS during the second quarter of fiscal year 2021, which ended on August 31, 2020. The strategic decision to divest of the business reflects our strategic plan to restructure our portfolio to focus on growth within our core businesses.
Added
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.
Removed
In February 2020, we completed the sale of our nuclear logistics business reported within our Infrastructure Solutions segment. We received net cash proceeds of $23.6 million and recognized a loss on disposal of $18.6 million. The strategic decision to divest the nuclear logistics business reflects our long-term strategy to focus on core businesses and markets.
Added
Leading indicators include reporting of all near miss events as well as Environmental, Health and Safety ("EHS") coaching and engagement.
Removed
In addition, for fiscal year 2020, we recorded impairment charges of $9.2 million related to the exit from the nuclear certified portion of our industrial welding solutions business. For additional information regarding the Infrastructure Solutions segment's backlog and operating results, see Results of Operations within Item 7.
Added
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.
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Everyone is valued and appreciated for their distinct contributions to the growth and sustainability of our business.
Added
No executive officer has any family relationships with any other executive officer of the Company.
Removed
Leading indicators include reporting of all near miss events as well as Environmental, Health and Safety (“EHS”) coaching and engagement. In fiscal year 2022, we continued to demonstrate excellence in safety across our 68 locations worldwide, and incident rates as indicated below: TRIR LTIR DART Metal Coatings Segment 3.40 0.90 2.20 Infrastructure Solutions Segment a.
Added
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.
Removed
Electrical Platform 0.90 0.11 0.45 b. Industrial Platform 0.16 0.16 0.16 During the COVID-19 pandemic, as a provider of “critical infrastructure”, we have the continuing obligation to keep employees working and operations moving forward in order to continue to serve our customers and sustain the world’s infrastructure.
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During this period, we have remained highly focused on protecting the health and safety of our team members while working to maintain the continuity of our business operations.
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In response to the global COVID-19 pandemic, and each of the variants thereto, we have implemented heightened safety measures and protocols in all of our facilities to continue to minimize the risk to the health and safety of our employees.
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The Company closely monitors government updates in regards to currently applicable protocols to be followed in each of the jurisdictions in which we operate. As conditions change, the Company has continued to effectively communicate with our employees.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

48 edited+28 added−55 removed65 unchanged
Biggest changeChanges in environmental laws and regulations and heightened focus on corporate sustainability initiatives and practices are under increased scrutiny by both governmental and non-governmental bodies, which could cause a change in our business practices by increasing capital, compliance, operating and maintenance costs, which could impact our future operating results. 16 Table of Contents 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.
Biggest changeOver 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.
We cannot be certain that we will be able to maintain an adequately skilled labor force necessary to operate efficiently and to support our growth strategy or that our labor costs will not increase as a result of shortage in the supply of skilled personnel.
We cannot be certain that we will be able to maintain an adequately skilled labor force necessary to operate efficiently and to support our growth strategy or that our labor costs will not increase as a result of a shortage in the supply of skilled personnel.
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; • 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; • 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.
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 products, we are subject to certain annual disclosures and audit requirements.
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 such as COVID-19, could potentially cause future disruption in our business.
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.
Gains and losses from the remeasurement of assets and liabilities that are receivable or payable in currencies other than our subsidiaries’ functional currency are included in our consolidated statements of income. In addition, currency fluctuations cause the U.S. dollar value of our international results of operations and net assets to vary with exchange rate fluctuations.
Gains and losses from the remeasurement of assets and liabilities that are receivable or payable in currencies other than our subsidiaries’ functional currency are included in our consolidated statements of income. In addition, currency fluctuations cause the U.S. dollar value of our Canadian results of operations and net assets to vary with exchange rate fluctuations.
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 design, manufacturing or transportation costs; 11 Table of Contents • 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; and • ability or willingness of customers to timely pay their invoices when owed to us.
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.
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 products in the future or adversely modified, or what effect such actions would have on our costs of operations.
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.
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.
However, the markets in which we operate could restrict the removal or conversion of the local or foreign currency, resulting in our inability to hedge against some or all of these risks or increase our cost of conversion of local currency to U.S. dollar. Our operations entail inherent risks that may result in substantial liability.
However, the markets in which we operate could restrict the removal or conversion of the local or foreign currency, resulting in our inability to hedge against some or all of these risks or increase our cost of conversion of local currency to U.S. dollar. 16 Table of Contents Our operations entail inherent risks that may result in substantial liability.
In addition, we cannot predict the full impact trade policy changes that have been asserted by the U.S. presidential administration and Congress, including anticipated changes to current trade policies will be maintained or modified or whether 15 Table of Contents the entry into new bilateral or multilateral trade agreements will occur, nor can we accurately predict the effects that any changes will have on our future business.
In addition, we cannot predict the full impact trade policy changes that have been asserted by the U.S. presidential administration and Congress, including anticipated changes to current trade policies will be maintained or modified or whether the entry into new bilateral or multilateral trade agreements will occur, nor can we accurately predict the effects that any changes will have on our future business.
If we incur additional 19 Table of Contents 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 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.
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.
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.
Future acquisitions may require us to obtain additional equity or debt financing, which may not be available to us, and may increase our leverage ratios. 14 Table of Contents We may be unsuccessful at implementing and generating internal growth from our Strategic Growth Initiatives.
Future acquisitions may require us to obtain additional equity or debt financing, which may not be available to us, and may increase our leverage ratios. We may be unsuccessful at implementing and generating internal growth from our Strategic Growth Initiatives.
We are exposed to exchange rate fluctuations in the international markets in which we operate. We operate in international countries and anticipate that there will be instances in which sales and costs will not be exactly matched with respect to foreign currency denomination.
We are exposed to exchange rate fluctuations in the international markets in which we operate. We operate in the United States and Canada and anticipate that there will be instances in which sales and costs will not be exactly matched with respect to foreign currency denomination.
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 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, limiting travel to install equipment or perform services for our customers.
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.
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 or COVID-19 benefits, 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. 13 Table of Contents Changes in labor or employment laws, including minimum wage rules, could increase our costs and may adversely affect our business.
The Company’s debt instruments, consisting of senior notes and a revolving credit facility, contain covenants which restrict or prohibit certain actions (“negative covenants”), including, but not limited to, the Company's ability to incur debt, restrict or limit certain liens, capital spending limits, engage in certain merger, acquisition, or divestiture actions, or increase dividends beyond a specific level.
The Company’s debt instruments, consisting of a term loan and a revolving credit facility, contain covenants which restrict or prohibit certain actions ("negative covenants"), including, but not limited to, the Company's ability to incur debt, restrict or limit certain liens, capital spending limits, engage in certain merger, acquisition, or divestiture actions, or increase dividends beyond a specific level.
The Company’s debt instruments also contain covenants requiring the Company to, among other things, maintain specified financial ratios (“affirmative covenants”).
The Company’s debt instruments also contain covenants requiring the Company to, among other things, maintain specified financial ratios ("affirmative covenants").
If significant financial, operational, or other data processing systems fail, are attacked by intruders or have other 13 Table of Contents significant shortcomings, our financial results could be adversely affected.
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 there is a reduction in demand for our products or services, as a result of a downturn in the general economies in which we operate, there could be a material adverse effect on price levels and the quantity of goods and services purchased by our customers, which could adversely impact our sales, consolidated results from operations and cash flows.
If there is a downturn in the general economies in which we operate, there could be a material adverse effect on price levels and the quantity of goods and services purchased by our customers, which could adversely impact our sales, consolidated results from operations and cash flows.
We operate in locations throughout the U.S. and internationally and, as a result, we are subject to the tax laws and regulations of U.S. federal, state, local and foreign governments. 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, 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.
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, 2022, approximately 795 of our variable workforce employees and 278 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 28, 2023, approximately 668 of our full-time employees were represented by unions.
In addition, the COVID-19 pandemic, or the spread of any other 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 products and services.
Other various factors impact demand for our products and services, including the price of commodities (such as oil, electricity or other commodities), economic forecasts and financial markets.
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.
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.
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.
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.
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.
Unanticipated increases in raw material requirements or commodity price increases could significantly increase production costs and potentially adversely affect profitability. The following factors, which are beyond our control, affect the price of raw materials and natural gas for our business segments: • supply and demand; • freight costs and transportation availability; • trade duties and taxes; and • labor disputes.
Unanticipated commodity price increases could significantly increase production costs and potentially adversely affect profitability. The following factors, which are beyond our control, affect the price of natural gas for the AZZ Metal Coatings segment: • supply and demand; • freight costs and transportation availability; • trade duties and taxes; and • labor disputes.
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 specialty welding business, is subjected to refinery turnaround or utility outages which cause cyclicality 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, 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.
All of these factors combined together could materially impact our business, financial condition, cash flows and results of operations and potentially impact the trading price of our common stock.
All of these factors combined together could materially impact our business, financial condition, cash flows and results of operations and potentially impact the trading price of our common stock. International events and political issues may adversely affect our AZZ Metal Coatings segments.
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.
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 response to competitor pricing actions is not timely, we could be impacted by loss of market share. 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 services or products that are superior in price, delivery time or quality in the future.
Risks Related to Strategy Our acquisition strategy involves a number of risks. 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.
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.
Competition is based on a number of factors, including price. 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.
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.
Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations. Indefinite-lived intangibles are comprised of certain tradenames, customer relationships, and other intangible assets.
As of February 28, 2023, we had goodwill totaling $702.5 million and indefinite-lived intangible assets totaling $1.5 million on our consolidated balance sheet. Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations. Indefinite-lived intangibles are comprised of certain tradenames.
As we continue to expand 18 Table of Contents geographically, we could experience economic loss and a negative impact on earnings or net assets solely as a result of foreign currency exchange rate fluctuations.
A decrease in the value of the Canadian currency relative to the U.S. dollar could have a negative impact on our business, financial condition, results of operations or cash flows. As we continue to expand geographically, we could experience economic loss and a negative impact on earnings or net assets solely as a result of foreign currency exchange rate fluctuations.
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. We have experienced a constrained labor market during the COVID-19 pandemic and we could experience additional shortages of qualified or trained personnel.
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.
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. 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.
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.
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. Our business segments operate in highly competitive markets. Many of our competitors, primarily in our Infrastructure Solutions segment, are much larger and have substantially more resources than AZZ.
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.
A change in a customer’s creditworthiness could result in significant accounts receivable write-offs. As a normal course of business, we extend credit to certain of our customers. The amount of credit extended to customers is based upon the due diligence performed, including, but not limited to, the review of the potential customer’s financial statements and banking information.
The amount of credit extended to customers is based upon the due diligence performed, including, but not limited to, the review of the potential customer’s financial statements and banking information. The Company may perform various credit checks and evaluate the customer's previous payment history.
If any of the following risks actually occur, our business, financial condition and results of operations and future growth could be negatively or materially impacted. Risks Related to Operations The duration of the COVID-19 pandemic remains uncertain and may have a material adverse impact on the demand for our products and services or with our supply chain.
If any of the following risks actually occur, our business, financial condition and results of operations and future growth could be negatively or materially impacted. Risks Related to Operations Our business segments operate in highly competitive markets. Competition is based on a number of factors, including price.
The prices of zinc and natural gas are subject to volatility and we have experienced commodity price escalation over the past year. We purchase a wide variety of raw materials for our Infrastructure Solutions segment to manufacture our products, including copper, aluminum, steel and nickel.
Within our AZZ Metal Coatings segment, zinc and natural gas represent a large portion of our cost of sales. In our AZZ Precoat Metals segment, natural gas represents a large portion of our cost of sales. The prices of zinc and natural gas are subject to volatility and we have experienced commodity price escalation over the past year.
Any of these occurrences could materially and adversely affect our borrowing costs, business and results of operations. We may increase our debt or raise additional capital in the future, which could affect our financial condition, may decrease our profitability or could dilute our shareholders.
An increase in interest rates could also affect our ability to make new investments on favorable terms or at all. We may increase our debt or raise additional capital in the future, which could affect our financial condition, may decrease our profitability or could dilute our shareholders.
A reduction in demand for our products, solutions and services could force us to reduce our pricing substantially, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The covenant restrictions related to our indebtedness could impact our ability to expand our business, which could have a material adverse effect on our business, financial condition and results of operations.
These disruptions could include the temporary closures of our facilities or the facilities of our customers or suppliers and their contract manufacturers, which could restrict our ability to complete projects on schedule. 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 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.
Such a drop in demand could have a material adverse effect on our business, financial condition, results of operations and cash flows. International events and political issues may adversely affect our Infrastructure Solutions and Metal Coatings segments. A portion of the sales from our Infrastructure Solutions and Metal Coatings segments are from markets outside the U.S.
A portion of the sales from our AZZ Metal Coatings and AZZ Infrastructure Solutions segments are from markets outside the U.S.
The Company cannot assure that any of these remedies can be effected on commercially reasonable terms or at all. We could face significant liabilities for withdrawal from Multiemployer Pension Plans. The Company is a participating employer in a number of trustee-managed multiemployer defined benefit pension plans for employees who are covered by collective bargaining agreements.
The Company cannot assure that any of these remedies can be effected on commercially reasonable terms or at all.
In addition to being unable to recover certain direct costs, we could also incur additional costs resulting from underutilized facilities if orders are cancelled. 17 Table of Contents The Company’s flexibility to operate its business could be impacted by provisions in its debt obligations.
Risks Related to Financial Matters The Company’s flexibility to operate its business could be impacted by provisions in its debt obligations.
Removed
The continued uncertainty associated with COVID-19, and any of the ongoing variants, did not have a material adverse effect on our results of operations for the year ended February 28, 2022.
Added
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.
Removed
While we continue to support our customers, there remains uncertainties regarding the duration and, to what extent, if any, that the COVID-19 pandemic, or newly identified variants, or additional regulatory requirements, will ultimately have on the demand for our products and services or with our supply chain or our employees.
Added
Changes in environmental laws and regulations and heightened focus on corporate sustainability initiatives and practices are under increased scrutiny by both governmental and non-governmental bodies, which could cause a change in our business practices by increasing capital, compliance, operating and maintenance costs, which could impact our future operating results.
Removed
The impact of COVID-19 to the Company's personnel and operations has been limited. During fiscal 2022, the Company continued to see improvement in sales and operating income in both of its operating segments.
Added
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.
Removed
We cannot reasonably estimate the severity of this pandemic or the government's mandates regarding the same, or the extent to which the disruption may materially impact our consolidated balance sheets, statements of income or statements of cash flows for fiscal year 2023 or beyond.
Added
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.
Removed
At this time, the ongoing war between Russia and Ukraine has not materially impacted our operations, especially in Poland, which borders Ukraine. The Company continues to closely monitor the situation with our Poland-based employees and operations.
Added
In addition, our Credit Agreement requires that we meet certain financial tests, including a leverage ratio test.
Removed
Volatility in crude oil and natural gas prices could impact demand or pricing for products or services in segments of our Infrastructure Solutions segment and, as a result, adversely affect our business. Our results of operations depend upon the level of activity in the global energy market, including oil and natural gas development, and production.
Added
Our increased indebtedness and these restrictive covenants could adversely affect our ability to: • finance our operations; • make needed capital expenditures; • make strategic acquisitions or investments or enter into joint ventures; • withstand a future downturn in our business, the industry or the economy in general; • engage in business activities, including future opportunities, that may be in our best interest; and • plan for or react to market conditions or otherwise execute our business strategies.
Removed
Oil and natural gas exploration and development activity and the number of well completions typically decline when there is a sustained reduction in oil or natural gas prices or significant instability in energy markets.
Added
As a result of these restrictions, we could be limited as to how we conduct our business and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants.
Removed
Even the perception of longer-term lower oil or natural gas prices by oil and natural gas exploration, development and production companies can result in their decision to cancel, reduce or postpone major expenditures or to reduce or shut in well production, which can impact our businesses that provide equipment into these markets, or service downstream refineries and energy plants.
Added
We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.
Removed
Oil and natural gas prices and the level of drilling and exploration activity can be volatile. In periods of volatile commodity prices, the timing of any change in activity levels by our customers is difficult to predict.
Added
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.
Removed
As a result, our ability to 12 Table of Contents project the anticipated activity level for our business, and particularly our Infrastructure Solutions welding-service sales may be limited. During periods of lower oil or natural gas prices, our customers typically decrease their capital expenditures, which generally results in lower activity levels.
Added
If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our results of operations and financial condition could be adversely affected. The Credit Agreement contains cross-default provisions that could result in the acceleration of all of our indebtedness.
Removed
During periods of higher oil or natural gas prices, our customers may increase their capital expenditures, or they may determine pricing and utilization is critical and reduce the typical turnaround activities to keep their facilities running during periods with higher prices, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Added
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.
Removed
In addition, customer cash flows and returns on capital drive customer investment priorities. Industry observers believe shareholders are encouraging management teams of energy companies to focus operational and compensation strategies on returns and free cash flow generation rather than solely on growth.
Added
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. 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.
Removed
To accomplish these strategies, energy companies may need to better prioritize or reduce capital spending, which could impact resource allocation and production, ultimately constraining the number of new projects by our customers.
Added
In the event our lenders accelerate the repayment of our borrowings, we and our guarantors may not have sufficient assets to repay that indebtedness. Additionally, we may not be able to borrow money from other lenders to enable us to refinance our indebtedness.
Removed
If our customers seek to preserve capital by canceling contracts, canceling or delaying scheduled maintenance of their existing equipment, or canceling or delaying orders with us, the demand for our products, solutions and services could be materially and adversely affected.
Added
Increased levels of indebtedness could also create competitive disadvantages for us relative to other companies with lower debt levels.
Removed
Fluctuations in the price and supply of raw materials and natural gas for our business segments may adversely affect our operations. Primarily in our Metal Coatings segment, zinc and natural gas represent a large portion of our cost of sales.
Added
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.
Removed
Many of our products and solutions can be complex and include sophisticated and potentially sensitive electronic components. We have increasingly manufactured certain of those components and products in our own facilities.
Added
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur office and manufacturing operations facilities were as follows as of February 28, 2022: Square Footage Segment Location Facilities Total Owned Leased Metal Coatings United States 42 2,629,045 2,272,569 356,476 Canada 5 219,071 219,071 — Infrastructure Solutions United States 13 997,040 260,381 736,659 Canada 2 22,058 — 22,058 Europe 2 53,983 — 53,983 Brazil 1 18,478 — 18,478 China 3 2,620 — 2,620 Total 68 3,942,295 2,752,021 1,190,274 The Company believes that its current facilities are adequate to meet the requirements of its present and foreseeable future operations.
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.
Item 2. Properties The Company's global 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 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.
See Note 5 to the consolidated financial statements included in Item 8 of this Form 10-K for additional information regarding the Company's lease obligations.
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures Not applicable. 22 Table of Contents PART II
Biggest changeMine Safety Disclosures Not applicable. 19 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 22 PART II 23 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 23 Item 6. Selected Financial Data 24 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation 25 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 34 Item 8.
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny future dividends payments will be reviewed each quarter and declared by the Board of Directors at its discretion. 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”).
Biggest changeEquity 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").
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities General Our common stock, $1.00 par value, is traded on the New York Stock Exchange under the symbol “AZZ”.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities General Our common stock, $1.00 par value, is traded on the New York Stock Exchange under the symbol "AZZ".
Total return, as shown, assumes $100 invested on February 29, 2017, in shares of AZZ common stock and each index, all with cash dividends reinvested. The calculations exclude trading commissions and taxes.
Total 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.
As of April 18, 2022, we had approximately 347 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 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.
See Note 11 to the consolidated financial statements included in Item 8 of this Form 10-K for additional information regarding our equity incentive plans. 23 Table of Contents Stock Performance Graph The following graph illustrates the five-year cumulative total return on investments in our common stock, the Index for NYSE Stock Market (U.S.
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.
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.
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.
The index level for all series was set to $100 on February 29, 2017.
The index level for all series was set to $100 on February 28, 2018.
Dividend Policy The payment of dividends 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 a quarterly basis. Dividends paid totaled $16.9 million, $17.6 million, and $17.8 million during fiscal 2022, 2021, and 2020, respectively.
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.
Companies) and the Index for NYSE Stocks (SIC 5000-5099 US Companies). These indices are prepared by Proxy Advisory Group, LLC. 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.
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.
Comparison of Five Year-Cumulative Total Returns Value of $100 Invested on February 29, 2017 For Fiscal Year Ended on the Last Day of February February 28/29, 2017 2018 2019 2020 2021 2022 AZZ Inc. 100.00 68.66 77.34 62.00 85.87 82.74 NYSE Composite Index 100.00 110.09 110.02 107.73 130.61 141.95 Russell 2000 Index 100.00 109.13 113.68 106.53 158.82 147.78 Notes: A.
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.
Removed
Dividend payments may be restricted to total payments of $20.0 million per fiscal year based on covenants with the Company's lenders in the event that the Company's leverage ratio (defined as net debt to earnings before interest, taxes, depreciation and amortization, or "EBITDA") exceeds 3.0 to 1.0. Currently, there are no restrictions on dividend payments.
Added
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.
Removed
Share repurchases may be restricted to total repurchases of $50.0 million per fiscal year based on covenants with the Company's lenders in the event that the Company's leverage ratio exceeds 3.0 to 1.0. Currently, there are no restrictions on share repurchases.
Added
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.
Removed
The following table provides information with respect to purchases of common stock of the Company made under the 2020 Authorization during the fiscal year ended February 28, 2022, by the Company or any "affiliated purchaser" as defined in Rule 10b-18(a)(3) under the Exchange act: Period Total Number of Share Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value that May Yet Be Used Under the Plans or Programs Beginning balance, February 28, 2021 $ 84,002,349 March 1 through March 31 60,649 $ 49.47 60,649 81,002,123 April 1 through April 30 56,043 49.82 56,043 78,209,907 May 1 through May 31 9,078 51.92 9,078 77,738,544 June 1 through June 30 102,227 51.49 102,227 72,475,385 July 1 through July 31 148,452 51.56 148,452 64,821,609 August 1 through August 31 39,830 51.52 39,830 62,769,454 September 1 through September 30 125,966 51.56 125,966 56,275,170 October 1 through October 31 22,055 51.78 22,055 55,133,081 November 1 through November 30 — — — 55,133,081 December 1 through December 31 16,190 51.80 16,190 54,294,485 January 1 through January 31 21,332 51.90 21,332 53,187,452 February 1 through February 28 — — — 53,187,452 Total 601,822 $ 51.20 601,822 $ 53,187,452 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.
Added
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.
Added
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.

Item 7. Management's Discussion & Analysis

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

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Biggest changeResults of Operations For the fiscal year ended February 28, 2022, we recorded sales of $902.7 million, compared to prior year’s sales of $838.9 million. Of total sales for fiscal 2022, approximately 57.5% were generated from the Metal Coatings segment and approximately 42.5% of sales were generated from the Infrastructure Solutions segment.
Biggest changeFor 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.
A discussion regarding our financial condition and results of operations as well as our liquidity and capital resources for fiscal year 2021 compared to fiscal year 2020 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended February 28, 2021, 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 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.
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 12 to the consolidated financial statements.
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.
Off Balance Sheet Arrangements and Contractual Commitments As of February 28, 2022, the Company did not have any off-balance sheet arrangements as defined under SEC rules.
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.
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 "Risk Factors" and elsewhere in this Annual Report on Form 10-K.
The $80.0 million tranche was funded on December 17, 2020. The $70.0 million tranche was funded in January 2021. The Company used the proceeds to repay the existing $125.0 million 5.42% Senior Notes maturing on January 20, 2021, as well as for general corporate purposes. Interest on the 2020 Senior Notes is paid semi-annually.
The $80.0 million tranche was funded on December 17, 2020. The $70.0 million tranche was funded in January 2021. The Company used the proceeds to repay the existing $125.0 million 5.42% Senior Notes that matured on January 20, 2021, as well as for general corporate purposes. Interest on the 2020 Senior Notes was paid semi-annually.
The 2021 Credit Agreement matures in July 2026 and includes the following significant terms; i. provides for a senior unsecured revolving credit facility with a principal amount of up to $400.0 million revolving loan commitments, and includes an additional $200.0 million uncommitted incremental accordion facility, ii. interest rate margin ranges from 87.5 bps to 175 bps for Eurodollar Rate loans, and from 0.0 bps to 75 bps for Base Rate loans, depending on leverage ratio of the Company and its consolidated subsidiaries as a group, iii. includes a letter of credit sub-facility up to $85.0 million for the issuance of standby and commercial letters of credit, iv. includes a $50.0 million sublimit for swing line loans, v. includes customary representations and warranties, affirmative covenants and negative covenants, and events of default, including restrictions on incurrence of non-ordinary course debt, investment and dividends, subject to various exceptions, carve-outs and baskets, and vi. includes a maximum leverage ratio financial covenant and an interest coverage ratio financial covenant, each to be tested at quarter end.
The 2021 Credit Agreement was scheduled to mature in July 2026 and included the following significant terms; i. provided for a senior unsecured revolving credit facility with a principal amount of up to $400.0 million revolving loan commitments, and included an additional $200.0 million uncommitted incremental accordion facility, ii. interest rate margin ranges from 87.5 bps to 175 bps for Eurodollar Rate loans, and from 0.0 bps to 75 bps for Base Rate loans, depending on leverage ratio of the Company and its consolidated subsidiaries as a group, 25 Table of Contents iii. included a letter of credit sub-facility up to $85.0 million for the issuance of standby and commercial letters of credit, iv. included a $50.0 million sublimit for swing line loans, v. included customary representations and warranties, affirmative covenants and negative covenants, and events of default, including restrictions on incurrence of non-ordinary course debt, investment and dividends, subject to various exceptions, carve-outs and baskets, and vi. included a maximum leverage ratio financial covenant and an interest coverage ratio financial covenant, each were tested at quarter end.
Management believes that the presentation of these measures provides investors with a greater transparency comparison of operating results across a broad spectrum of companies, which provides a more complete understanding of the Company’s financial performance, competitive position and prospects for the future.
Management believes that the presentation of these measures provides investors with greater transparency when comparing operating results across a broad spectrum of companies, which provides a more complete understanding of our financial performance, competitive position and prospects for future capital investment and debt reduction.
Repurchases under the 2020 Authorization will be made through open market and/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.
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.
Non-GAAP Disclosure In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”), the Company has provided adjusted operating income, adjusted earnings and adjusted earnings per share (collectively, the “Adjusted Earnings Measures”), which are non-GAAP measures.
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.
Management also believes that investors regularly rely on non-GAAP financial measures, such as adjusted operating income, adjusted earnings and adjusted earnings per share, to assess operating performance and that such 32 Table of Contents measures may highlight trends in the Company’s business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP.
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.
The decrease in cash used in financing activities during fiscal 2022 was primarily attributable to an increase in net proceeds from the revolver, as well as a decrease in repurchases of Company common stock, partially offset by a decrease in net proceeds for long term debt. See "Financing and Capital" and “Share Repurchases” sections below for additional information.
The increase in cash provided by financing activities during fiscal 2023 was primarily attributable to an increase in proceeds from long-term debt, as well as a decrease in repurchases of Company common stock, partially offset by an increase in net payments for long-term debt and payments of debt financing costs.
As of February 28, 2022, we had $77.0 million of outstanding debt against the 2021 Credit Agreement and letters of credit outstanding under the 2021 Credit Agreement in the amount of $9.7 million, which left approximately $313.3 million of additional credit available. 2020 Senior Notes On October 9, 2020, the Company completed a private placement transaction and entered into a Note Purchase Agreement, whereby the Company agreed to borrow $150.0 million of senior unsecured notes (the “2020 Senior Notes”), consisting of two separate tranches: • 7-year borrowing: $70.0 million priced at 2.77% coupon, and • 12-year borrowing: $80.0 million priced at 3.17% coupon.
On May 13, 2022, the 2021 Credit Agreement was repaid with proceeds from the 2022 Credit Agreement, which is described below. 2020 Senior Notes On October 9, 2020, the Company completed a private placement transaction and entered into a Note Purchase Agreement, whereby the Company agreed to borrow $150.0 million of senior unsecured notes (the "2020 Senior Notes"), consisting of two separate tranches: • 7-year borrowing: $70.0 million priced at 2.77% coupon; and • 12-year borrowing: $80.0 million priced at 3.17% coupon.
Net cash provided by financing activities for fiscal 2022 was $0.9 million, compared to net cash used in financing activities of $88.4 million for fiscal 2021.
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.
The decrease in cash provided by operating activities for fiscal 2022 is primarily attributable to the impact of decreases in working capital, primarily due to changes in accounts receivable and inventories, partially offset by accounts payable and other accrued liabilities.
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.
On July 8, 2021, the 2017 Credit Agreement was replaced with the 2021 Credit Agreement, which is described below. 2021 Credit Agreement On July 8, 2021, the Company refinanced the 2017 Credit Agreement, which was scheduled to mature in March 2022, with a new five-year unsecured revolving credit facility under a credit agreement, dated July 8, 2021 by and among the Company, borrower, Citibank, N.A., as administrative agent and the other agents and lender parties thereto (the “2021 Credit Agreement”).
Financing and Capital 2021 Credit Agreement On July 8, 2021, the Company entered into a five-year unsecured revolving credit facility under a credit agreement, by and among the Company, borrower, Citibank, N.A., as administrative agent and the other agents and lender parties thereto (the "2021 Credit Agreement").
We attempt to minimize these increases through escalation clauses in customer contracts for copper, aluminum, steel and nickel-based alloys, when market conditions allow and through fixed cost contract purchases on zinc. 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.
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.
If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances could be required. Revenue recognition - Infrastructure Solutions segment Our Infrastructure Solutions segment is a provider of specialized products and services designed to support industrial, electrical and other industrial applications.
If the financial condition of our 28 Table of Contents customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances could be required.
Other Exposures We have exposure to commodity price increases in both segments of our business, primarily copper, aluminum, steel and nickel-based alloys in the Infrastructure Solutions segment and zinc and natural gas in the Metal Coatings segment.
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.
The decrease is due primarily to certain nonrecurring state income tax items in the prior year. 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.
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.
As of February 28, 2022, we had gross outstanding debt of $227.0 million, compared to $179.0 million at the end of fiscal 2021.
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.
AZZ's debt to equity ratio was 0.34 to 1 at the end of fiscal 2022, compared to 0.29 to 1 at the end of fiscal 2021, as we reduced 27 Table of Contents debt during the year and refinanced our existing senior notes. For additional information on outstanding debt, see Note 6 to the consolidated financial statements.
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.
The following table reflects the breakdown of revenue by segment (in thousands): Year Ended February 28, 2022 2021 Sales: Metal Coatings $ 519,000 $ 457,791 Infrastructure Solutions 383,664 381,126 Total sales $ 902,664 $ 838,917 Sales for the Metal Coatings segment increased $61.2 million, or 13.4%, to $519.0 million, from the prior year’s sales of $457.8 million.
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.
Net income for fiscal 2022 was $84.0 million, compared to $39.6 million for fiscal 2021. Net income as a percentage of sales was 9.3% for fiscal 2022 as compared to 4.7% for fiscal 2021. Diluted earnings per share increased by 120.4%, to $3.35 per share for fiscal 2022, compared to $1.52 per share for fiscal 2021.
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").
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. Our estimates are based on historical experience and various other factors that we believe are reasonable under the circumstances and form the basis for our conclusions.
Our estimates are based on historical experience and various other factors that we believe are reasonable under the circumstances and form the basis for our conclusions. We continually evaluate the information used to make these estimates. Actual results may differ from these estimates under different assumptions or conditions.
Cash Flows The following table summarizes our cash flows by category for the periods presented (in thousands): Year Ended February 28, 2022 February 28, 2021 Net cash provided by operating activities $ 86,010 $ 92,035 Net cash used in investing activities (86,835) (28,593) Net cash provided by (used in) financing activities 912 (88,425) Net cash provided by operating activities for fiscal 2022 was $86.0 million, compared to $92.0 million for fiscal 2021.
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.
Operating income for the Infrastructure Solutions segment increased $29.1 million for fiscal 2022, to $35.5 million, as compared to $6.5 million for the prior year. Operating margins for this segment were 9.3% for fiscal 2022, as compared to 1.7% for fiscal 2021.
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.
The Company's debt agreements require the Company to maintain certain financial ratios. As of February 28, 2022, the Company was in compliance with all covenants or other requirements set forth in the debt agreements.
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").
Letters of Credit As of February 28, 2022, w e had total outstanding letters of credit in the amount of $22.0 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 or performance periods.
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.
(2) See "Results of Operations-Restructuring and Impairment Charges" for further discussion on fiscal 2022 restructuring and impairment charges. (3) Acquisition related expenditures represents expenses related to the Precoat Acquisition. (4) The non-GAAP effective tax rates for fiscal 2022, 2021 and 2020 were 22.9%, 22.9% and 17.2%, respectively. 33 Table of Contents
(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.
The Company purchased 601,822 of its common shares in the amount of $30.8 million at an average purchase price of $51.20 under the 2020 Authorization during fiscal 2022.
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.
Sales for the Infrastructure Solutions segment increased $2.5 million, or 0.7%, to $383.7 million for fiscal 2022, compared to $381.1 million for fiscal 2021.
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.
The increase in sales was primarily due to improved price realization for our superior quality and service and to a lesser extent, the acquisition of a metal coatings business during the fourth quarter of fiscal 2021. The acquisition of a galvanizing plant in the fourth quarter of fiscal 2022 did not materially impact sales for fiscal 2022.
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.
Other (Income) Expense, Net For fiscal 2022, other expense, net decreased $0.4 million, to $0.6 million for fiscal 2022 compared to $1.0 million for fiscal 2021. The activity for both years consisted primarily of foreign currency losses resulting from unfavorable movements in exchange rates.
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.
Removed
Overview We are a global provider of galvanizing and a variety of metal coating solutions, welding solutions, specialty electrical equipment and highly engineered services to the power generation, transmission, distribution, refining and industrial markets. We operate two distinct business segments, the Metal Coatings segment and the Infrastructure Solutions segment.
Added
Overview We are a provider of hot-dip galvanizing and coil coating solutions to a broad range of end-markets, predominantly in North America.
Removed
For example, the twelve-month period ended February 28, 2022 is referred to as “fiscal 2022” or “fiscal year 2022.” Coronavirus (COVID-19) The continued uncertainty associated with COVID-19, and any of the ongoing variants, did not have a material adverse effect on our results of operations for the year ended February 28, 2022.
Added
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.
Removed
While we continue to support our customers, there remain uncertainties regarding the duration and, to what extent, if any, that the COVID-19 pandemic, or newly identified variants, or additional regulatory requirements, will ultimately have on the demand for our products and services or with our supply chain or our employees.
Added
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.
Removed
The impact of COVID-19 to the Company's personnel and operations has been limited. During fiscal 2022, the Company continued to see improvement in sales and operating income in both of its operating segments.
Added
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.
Removed
However, labor market and supply chain challenges increased during the third and fourth quarters, resulting in increased operating expenses as the constrained labor market and supply chain disruptions impacted the availability and cost of labor and materials.
Added
Sales 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.
Removed
During fiscal 2022, we completed two acquisitions, both in our Metal Coatings segment. Backlog Our backlog relates entirely to our Infrastructure Solutions segment, consisting of our Electrical platform and Industrial platform, and is inclusive of transaction taxes for certain foreign subsidiaries.
Added
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.
Removed
As of February 28, 2022, our backlog was $304.5 million, an increase of $118.4 million, or 63.6%, compared to fiscal 2021.
Added
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.
Removed
The increase in backlog is due to an increase in orders in the Electrical platform, partially offset by the continued reduction of international backlog, including China, related to several non-recurring contracts and cancelled contracts, and, to a lesser extent, divestitures that occurred in fiscal year 2021.
Added
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.
Removed
For the year ended February 28, 2022, net bookings increased $235.8 million, or 30.0%, to $1.02 billion, compared to same period of fiscal 2021, as a result of very strong bookings in our Electrical platform and continued strength within the Metal Coatings segment.
Added
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.
Removed
The book to sales ratio increased in fiscal 2022 as compared to fiscal 2021, to 1.13 to 1.00 for fiscal 2022, compared to 0.94 to 1.00 for fiscal 2021. 25 Table of Contents The following table reflects bookings and sales for fiscal 2022 and 2021 (in thousands, except ratios).
Added
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.
Removed
Period Ended Amount Period Ended Amount Backlog 2/28/2021 $ 186,119 2/28/2020 $ 243,799 Net bookings 1,021,067 785,263 Disposed backlog — (4,026) Sales recognized (902,664) (838,917) Backlog 2/28/2022 $ 304,522 2/28/2021 $ 186,119 Book to sales ratio 1.13 0.94 Sales Our total sales for fiscal 2022 increased by $63.7 million, or 7.6%, as compared to fiscal 2021.
Added
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.
Removed
The increase in sales for fiscal 2022 was primarily due to sales increases in both domestic and international operations (as the prior year was significantly impacted by COVID-19) in the Industrial platform, partially offset by the divestiture of the low-margin SMS business in the third quarter of fiscal year 2021.
Added
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.
Removed
The increase was partially offset by a decrease in the Electrical platform, which was primarily attributable to lower sales in China as several large projects were completed.
Added
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.
Removed
In addition, the decrease was, to a lesser extent, due to delays in material receipts due to supply chain disruptions within our customer-base and the constrained labor market at several of our enclosure plants in our domestic operations.
Added
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.
Removed
The decrease in our enclosure plants was partially offset by increases in our domestic high- and medium-bus duct, switchgear, lighting and tubing businesses.
Added
During the third quarter of fiscal 2023, the Company completed the sale of its 60% majority interest in AIS. The provision for income taxes from discontinued operations reflects an effective tax rate of 14.1% for fiscal year 2023, compared to (2.7)% for fiscal year 2022.
Removed
Operating Income The following table reflects the breakdown of operating income (loss) by segment (in thousands): Year Ended February 28, 2022 Year Ended February 28, 2021 Metal Coatings Infrastructure Solutions Corporate Total Metal Coatings Infrastructure Solutions Corporate Total Operating income (loss): Sales $ 519,000 $ 383,664 $ — $ 902,664 $ 457,791 $ 381,126 $ — $ 838,917 Cost of sales 374,900 302,541 — 677,441 334,894 315,276 — 650,170 Gross margin 144,100 81,123 — 225,223 122,897 65,850 — 188,747 Selling, general and administrative 16,765 47,377 49,538 113,680 16,155 50,160 40,819 107,134 Restructuring and impairment charges — (1,797) — (1,797) 10,796 9,203 — 19,999 Total operating income (loss) $ 127,335 $ 35,543 $ (49,538) $ 113,340 $ 95,946 $ 6,487 $ (40,819) $ 61,614 26 Table of Contents Operating income for the Metal Coatings segment increased $31.4 million, or 32.7%, for fiscal 2022, to $127.3 million, as compared to $95.9 million for the prior year.
Added
The increase is mainly attributable to a book loss with a tax benefit in the current year, compared to book income with a research and development credit in the prior year which more than offset the prior year tax expense.
Removed
Operating margins increased to 24.5% for fiscal 2022, as compared to 21.0% for fiscal 2021. The increase was primarily due to impairment and restructuring charges recognized in fiscal 2021 of $10.8 million, the increase in sales as described above and the achievement of operational efficiencies in our surface technologies platform.
Added
Net cash used in operating activities of discontinued operations for fiscal 2023 was $21.3 million, compared to cash provided by operating activities of $25.4 million for fiscal 2022. Net cash used in investing activities of continuing operations for fiscal 2023 was $1,228.9 million, compared to $82.1 million for fiscal 2022.
Removed
Gross margins improved on operating leverage within both the Industrial and Electrical platforms compared to prior year, as well as a divestiture of an under-performing business in the Industrial platform in the third quarter of fiscal year 2021. In addition, in fiscal 2021, operating income was impacted by impairment charges of $9.2 million, See "Restructuring and Impairment charges" below.
Added
The increase in cash used during fiscal 2023 was primarily attributable to the Precoat Acquisition completed in the first quarter of fiscal 2023. Net cash used in investing activities of discontinued operations for fiscal 2023 was $1.3 million, compared to $4.7 million for fiscal 2022.
Removed
Selling, general and administrative costs decreased due to cost containment measures that were implemented due to COVID-19. Corporate expenses increased $8.7 million, to $49.5 million for fiscal 2022, compared to $40.8 million for fiscal 2021. The increase is primarily due to increased payroll and benefits costs (see Note 10 in Item 8), acquisition costs and other administrative costs.
Added
Net cash provided by financing activities of discontinued operations for fiscal 2023 was $120.0 million, compared to zero for fiscal 2022. See "Financing and Capital" sections below for additional information.
Removed
Restructuring and Impairment Charges During fiscal 2022, the Company continued to execute on its plan to strategically review our business portfolio, continue to acquire metal coatings businesses, and divest certain non-core business. During the fourth quarter of fiscal 2022, the Company had a change to the plan of sale for one of its businesses in the Infrastructure Solutions segment.
Added
In connection with the 2020 Senior Notes, the Company incurred debt issuance costs of approximately $0.6 million. These costs were allocated between the two tranches and were amortized over periods of seven and 12 years.
Removed
The Company recognized $3.9 million of impairment charges during fiscal 2021, which is included in in "Restructuring and impairment charges" in the consolidated statements of income. During fiscal 2022, in accordance with applicable accounting guidance, the Company reclassified a business previously held for sale to assets held and used.
Added
On May 13, 2022, the 2020 Senior Notes were repaid with proceeds from the 2022 Credit Agreement, which is described below. 2022 Credit Agreement and Term Loan B On May 13, 2022, the Company replaced the 2021 Credit Agreement with a new Credit Agreement (the "2022 Credit Agreement") by and among the Company, borrower, Citibank, N.A., as administrative and collateral agent, and the other agents and lender parties thereto the 2022 Credit Agreement.
Removed
When there is a change to a plan of sale and the assets are reclassified from held for sale to held and used, the long-lived assets are reported at the lower of (i) the carrying amount before held for sale designation, adjusted for depreciation that would have been recognized if the assets had not been classified as held for sale, or (ii) the fair value at the date the assets no longer satisfy the criteria for classification as held for sale.
Added
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.
Removed
Following an analysis of the long-lived assets for the business, the Company reversed a portion of the previously recognized impairment charges, and recognized income of $1.8 million in fiscal 2022 as a result of the change to the plan of sale, which is included in "Restructuring and Impairment charges" in the consolidated statements of operations.
Added
The proceeds of the Term Loan B were used to finance a portion of the Precoat Acquisition, pay transaction-related costs owed under the Securities Purchase Agreement (defined below) and refinance certain prior indebtedness, including the repayment of outstanding borrowings under the 2021 Credit Agreement.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+4 added−2 removed1 unchanged
Biggest changeIn addition, we attempt to enter into firm pricing contracts with our vendors on material at the time we receive orders from our customers to minimize risk. In our Metal Coatings segment, we have exposure to commodity price changes for zinc and natural gas, which are the primary inputs in the metal coatings process.
Biggest changeWe do not enter into or hold derivative instruments for speculative or trading purposes. Commodity Prices In our AZZ Metal Coatings segment, we have exposure to commodity price changes for zinc and natural gas, which are the primary inputs in the metal coatings process. In our Precoat Metals segment, we have exposure to commodity price changes for natural gas.
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. 34 Table of Contents
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
Sensitivity Analysis We do not believe that a hypothetical change of 10% of the interest rate or 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, as long as we are able to pass along the increases in commodity prices to our customers.
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.
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.
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. As of February 28, 2022, we did not hold any derivative financial instruments.
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.
Interest Rates We had $77.0 million outstanding at February 28, 2022 under our revolving credit facility. Because 100% of this debt has variable interest rates, we are subject to future interest rate fluctuations in relation to these borrowings, which could potentially have a negative impact on our results of operations, financial position or cash flows.
We are subject to future interest rate fluctuations for the unhedged portion of our borrowings, which could potentially have a negative impact on our results of operations, financial position or cash flows.
Removed
Commodity Prices In our Infrastructure Solutions segment, we have exposure to commodity price changes for copper, aluminum, steel and nickel-based alloys. Increases in price for these items are normally managed through escalation clauses in our customers' contracts, although during difficult market conditions, customers may resist these escalation clauses.
Added
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.
Removed
As of February 28, 2022, the Company had exposure to foreign currency exchange rates related to our operations in Canada, China, Brazil, Poland, India, Singapore and the Netherlands.
Added
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
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.
Added
Sensitivity 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.

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