# AZZ Inc: Form 10-Q for the period ended May 31, 2024

- Company: [AZZ Inc](/companies/azz.md) (CIK 8947)
- Form: 10-Q
- Filed: 2024-07-10
- Accepted by EDGAR: Jul 10, 2024, 16:16 ET
- Period: 2024-05-31
- Accession: 0000008947-24-000153
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/8947/000000894724000153/azz-20240531.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/8947/000000894724000153/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-05-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-03-01 to 2024-05-31 | $413.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-03-01 to 2024-05-31 | $310.5m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-03-01 to 2024-05-31 | $102.7m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-03-01 to 2024-05-31 | $32.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-03-01 to 2024-05-31 | $69.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-03-01 to 2024-05-31 | $22.8m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-03-01 to 2024-05-31 | $11.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-03-01 to 2024-05-31 | $39.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-03-01 to 2024-05-31 | −$1.38 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-03-01 to 2024-05-31 | −$1.38 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-03-01 to 2024-05-31 | 26,751,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-03-01 to 2024-05-31 | $71.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-03-01 to 2024-05-31 | $27.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-03-01 to 2024-05-31 | $7.9m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2024-05-31 | $10.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-05-31 | $396.3m | us-gaap:AssetsCurrent |
| Total assets | at 2024-05-31 | $2.24bn | us-gaap:Assets |
| Current liabilities | at 2024-05-31 | $223.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-05-31 | $1.27bn | us-gaap:Liabilities |
| Long-term debt | at 2024-05-31 | $929.8m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-05-31 | $967.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 27,913 characters.

### Forward Looking Statements

Certain statements herein about our expectations of future events or results constitute forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by terminology such as "may," "could," "should," "expects," "plans," "will," "might," "would," "projects," "currently," "intends," "outlook," "forecasts," "targets," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. Such forward-looking statements are based on currently available competitive, financial, and economic data and management’s views and assumptions regarding future events. Such forward-looking statements are inherently uncertain, and investors must recognize that actual results may differ from those expressed or implied in the forward-looking statements. Forward-looking statements speak only as of the date they are made and are subject to risks that could cause them to differ materially from actual results. Certain factors could affect the outcome of the matters described herein. This Quarterly Report may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand for our manufactured solutions, including demand by the construction markets, the industrial markets, and the metal coatings markets. We could also experience additional increases in labor costs, components and raw materials including zinc and natural gas, which are used in our hot-dip galvanizing process; supply-chain vendor delays; customer requested delays of our manufactured solutions; delays in additional acquisition opportunities; an increase in our debt leverage and/or interest rates on our debt, of which a significant portion is tied to variable interest rates; availability of experienced management and employees to implement AZZ’s growth strategy; a downturn in market conditions in any industry relating to the manufactured solutions that we provide; economic volatility, including a prolonged economic downturn or macroeconomic conditions such as inflation or changes in the political stability in the United States and other foreign markets in which we operate; acts of war or terrorism inside the United States or abroad; and other changes in economic and financial conditions. AZZ has provided additional information regarding risks associated with the business, including in Part I, Item 1A. Risk Factors, in AZZ's Annual Report on Form 10-K for the fiscal year ended February 29, 2024 and other filings with the SEC, available for viewing on AZZ's website at www.azz.com and on the SEC's website at www.sec.gov.

You are urged to consider these factors carefully when evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. These statements are based on information as of the date hereof and AZZ assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

The following discussion should be read in conjunction with management’s discussion and analysis contained in our Annual Report on Form 10-K for the fiscal year ended February 29, 2024, and with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

### Business Operations Update

Our results for the three months ended May 31, 2024 (the "current quarter"), were favorably impacted by the growth in demand for our manufactured solutions in the construction, industrial and transportation industries, coupled with our value driven pricing strategy.

The demand for our manufactured solutions was the primary contributor to net income of $39.6 million for the three months ended May 31, 2024. However, net income attributable to common shareholders was a loss of $36.8 million, after deducting preferred dividends and the redemption premium on our Series A Preferred Stock. Our operating results for the three months ended May 31, 2024, including operating results by segment, are described in the summary on the following page, and detailed descriptions can be found below under “Results of Operations.”

Our operations generated $71.9 million of cash in the current three-month period, which includes $7.6 million generated from reduction in working capital. Our operating cash flows were used to make $27.4 million of capital investments in our business and return $7.9 million to our common and preferred shareholders through dividend payments. Financing activities included the issuance of common shares, generating $308.7 million in cash flows, which we used to fund the redemption of our Series A Preferred Stock of $308.9 million. In addition, we reduced our outstanding debt through $25.0 million in net payments on our Term Loan B and Revolving Credit Facility. As a result of this and other activity, our cash and cash equivalents were $10.5 million as of May 31, 2024, an increase of $6.7 million from May 31, 2023. As of May 31, 2024, we had $350.7 million available under the Revolving Credit Facility. The components of our liquidity and descriptions of our cash flows, capital investments, and other matters impacting our liquidity and capital resources can be found below under “Liquidity and Capital Resources.”

### Outlook

While it is difficult to predict future North American economic activity and its impact on the demand for our galvanizing and coil coating solutions, as well the impact that political or regulatory developments may have on us, we have noted several factors below that have impacted or may impact our results of operations during the first quarter of fiscal 2025.

- Sales prices in our AZZ Metal Coatings segment are expected to remain consistent with current levels, although fluctuations in mix and some competitive pressures may impact selling price.
- Sales prices in our AZZ Precoat Metals segment are expected to remain consistent with current levels, with expected seasonal fluctuations in mix due to an increase in construction business, which may impact the average selling price.
- Demand in our AZZ Metal Coatings and AZZ Precoat Metals segments is expected to follow our typical seasonal patterns.
- Customer inventories for our AZZ Metal Coatings segment remain consistent, which should support the continued demand for our metal coatings solutions.
- Customer inventories for our AZZ Precoat Metals segment remain at historical levels, which should support the continued demand for our coil coating solutions.

### RESULTS OF OPERATIONS

#### Overview

We are a provider of hot-dip galvanizing and coil coating solutions to a broad range of end-markets, predominantly in North America. We operate three distinct business segments, the AZZ Metal Coatings segment, the AZZ Precoat Metals segment, and the AZZ Infrastructure Solutions segment. 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 6 to the consolidated financial statements. Management believes that the most meaningful analysis of our results of operations is to analyze our performance by segment. We use sales and operating income by segment to evaluate the performance of our segments. Segment operating income consists of sales less cost of sales and selling, general and administrative expenses that are specifically identifiable to a segment.

### QUARTER ENDED MAY 31, 2024 COMPARED TO THE QUARTER ENDED MAY 31, 2023

#### Segment Sales and Operating Income

The following table reflects the breakdown of net income by segment (in thousands):

|  | Three Months Ended May 31, 2024 Metal Coatings | Precoat Metals | Infrastructure Solutions(1) | Corporate(2) | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Sales | $176,651 | $236,557 | $— | $— | $413,208 |
| Cost of sales | 122,735 | 187,803 | — | — | 310,538 |
| Gross margin | 53,916 | 48,754 | — | — | 102,670 |
| Selling, general and administrative | 5,984 | 8,660 | 29 | 18,248 | 32,921 |
| Operating income (loss) | 47,932 | 40,094 | (29) | (18,248) | 69,749 |
| Interest expense | — | — | — | (22,774) | (22,774) |
| Equity in earnings of unconsolidated subsidiaries | — | — | 3,824 | — | 3,824 |
| Other income | 56 | — | — | 148 | 204 |
| Income (loss) before income tax | $47,988 | $40,094 | $3,795 | (40,874) | 51,003 |
| Income tax expense |  |  |  | 11,401 | 11,401 |
| Net income (loss) |  |  |  | $(52,275) | $39,602 |

See notes below.

|  | Three Months Ended May 31, 2023 Metal Coatings | Precoat Metals | Infrastructure Solutions(1) | Corporate(2) | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Sales | $168,794 | $222,079 | $— | $— | $390,873 |
| Cost of sales | 117,858 | 175,996 | — | — | 293,854 |
| Gross margin | 50,936 | 46,083 | — | — | 97,019 |
| Selling, general and administrative | 5,466 | 8,392 | 22 | 17,643 | 31,523 |
| Operating income (loss) | 45,470 | 37,691 | (22) | (17,643) | 65,496 |
| Interest expense | — | — | — | (28,706) | (28,706) |
| Equity in earnings of unconsolidated subsidiaries | — | — | 1,420 | — | 1,420 |
| Other expense | (24) | — | — | (14) | (38) |
| Income (loss) before income tax | $45,446 | $37,691 | $1,398 | (46,363) | 38,172 |
| Income tax expense |  |  |  | 9,650 | 9,650 |
| Net income (loss) |  |  |  | $(56,013) | $28,522 |

(1) Infrastructure Solutions segment includes our equity in earnings from our investment in the AVAIL JV as well as other expenses related to

receivables and liabilities that were retained following the sale of the AIS business.

(2) Interest expense and Income tax expense are included in the Corporate segment as these items are not allocated to the segments.

#### Sales

For the current quarter, consolidated sales increased $22.3 million, or 5.7%, compared to the three months ended May 31, 2023 (the "prior year quarter"). Sales for the AZZ Metal Coatings segment increased $7.9 million, or 4.7%, for the current quarter, compared to the prior year quarter. The increase was primarily due to a higher volume of steel processed $11.7 million, partially offset by a lower average selling price due to product mix $3.0 million, and a decrease in other sales $0.9 million.

Sales for the AZZ Precoat Metals segment increased $14.4 million, or 6.5% for the current quarter. The increase is due to a higher volume of coil coated in the current quarter, while the average price remained flat.

#### Operating Income

For the current quarter, consolidated operating income increased $4.3 million, or 6.5%, compared to the prior year quarter.

Operating income for the AZZ Metal Coatings segment increased $2.5 million, or 5.4% for the current quarter, compared to the prior year quarter. The current quarter increase was due to increased sales as described above, partially offset by higher cost of sales. The increase in cost of sales of $4.9 million was primarily due to an increase in labor costs $1.9 million and overhead costs $5.3 million, offset by lower zinc costs $2.3 million.

Operating income for the AZZ Precoat Metals segment increased $2.4 million, or 6.4% for the current quarter. The increase is primarily due to increased sales as described above, offset by higher cost of sales and selling, general and administrative expense. Cost of sales increased $11.8 million, primarily due to variable costs related to the increased volume of steel processed, coupled with an increase in depreciation expense.

#### Corporate Expenses

Corporate selling, general and administrative expenses increased $0.6 million, or 3.4%, for the current quarter, compared to the prior year quarter.

#### Interest Expense

Interest expense for the current quarter decreased $5.9 million, to $22.8 million, compared to $28.7 million for the prior year quarter. The decrease in interest expense is primarily attributable to a decrease in the weighted average debt outstanding of $120.0 million and a decrease in the weighted average interest rate on our outstanding debt of 0.98% in the current quarter compared to the prior quarter, coupled with higher capitalized interest of $1.2 million.

#### Equity in Earnings of Unconsolidated Entities

Equity in earnings of unconsolidated subsidiaries for the current quarter increased $2.4 million, to $3.8 million, compared to $1.4 million in the prior year quarter. The increase is primarily due to higher earnings from the AVAIL JV, primarily driven by AVAIL's enclosure, high-voltage and medium-voltage bus businesses.

See Note 7 of our consolidated financial statements for more information about the AVAIL JV.

#### Income Taxes

The provision for income taxes reflects an effective tax rate of 22.4% for the three months ended May 31, 2024, compared to 25.3% for the three months ended May 31, 2023. The decrease in the effective tax rate is attributable to higher discrete items driven by tax deductions for stock compensation.

### LIQUIDITY AND CAPITAL RESOURCES

We have historically met our cash needs through a combination of cash flows from operating activities along with equity from capital markets and from bank and bond market debt. Our cash requirements generally include quarterly cash dividend payments, capital improvements and debt repayment. We believe that our cash position, cash flows from operating activities, access to capital markets and our expectation of continuing availability to draw upon our credit facilities are sufficient to meet our cash flow needs for the foreseeable future.

As of May 31, 2024, our total liquidity of $361.2 million consisted of available capacity on our Revolving Credit Facility of $350.7 million and cash and cash equivalents of $10.5 million.

### Cash Flows

The following table summarizes our cash flows by category for the periods presented (in thousands):

|  | Three Months Ended May 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash provided by operating activities | 71,944 | 46,893 |
| Net cash used in investing activities | (27,379) | (17,027) |
| Net cash used in financing activities | (38,542) | (29,545) |

Net cash provided by operating activities for the current three-month period was $71.9 million, driven primarily by net income from continuing operations of $39.6 million, adjusted to exclude non-cash charges, net of non-cash income of $22.5 million, an increase in cash resulting from a reduction in working capital of $7.6 million, an increase in cash resulting from other long-term assets and liabilities, including deferred taxes, of $1.7 million and a cash distribution on the investment in the AVAIL JV of $0.5 million. The reduction in working capital is due primarily to increases in accounts payable, accrued expenses and income taxes payable; offset by increases in prepaid expenses and contract assets due to insurance renewals and higher sales, respectively. Net cash provided by operating activities was used to fund $27.4 million of capital expenditures, make net payments on long-term debt and finance leases liabilities of $25.2 million, make dividend payments of $7.9 million and make payments for taxes related to net share settlement of equity awards of $4.6 million. We also completed a secondary public offering of 4.6 million shares of our common stock, which provided cash of $308.7 million, which was used to redeem our 240,000 shares of Series A Preferred Stock for $308.9 million.

Net cash provided by operating activities for the prior year three-month period was $46.9 million, driven primarily by net income of $28.5 million, adjusted to exclude non-cash charges, net of non-cash income of $22.1 million, offset by a decrease in cash resulting from an increase in working capital of $1.0 million and a decrease in cash resulting from other long-term assets and liabilities, including deferred taxes, of $2.7 million. Net cash provided by operating activities was used to fund $17.0 million of capital expenditures, make net payments on long-term debt and finance leases liabilities of $20.0 million, make dividend payments of $7.8 million and make payments for taxes related to net share settlement of equity awards of $1.7 million.

### Financing and Capital

#### 2022 Credit Agreement and Term Loan B

We have a credit agreement with a syndicate of financial institutions that was entered into on May 13, 2022, and was subsequently amended on August 17, 2023, December 20, 2023 and March 20, 2024 (collectively referred to herein as the "2022 Credit Agreement"). 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; as of May 31, 2024, the outstanding balance of the Term Loan B was $950.3 million;

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 bear a tiered interest rate of Secured Overnight Financing Rate ("SOFR") plus 3.25% (following the repricing on March 20, 2024 as described below) and the Revolving Credit Facility bears a leverage-based rate with various tiers between 2.75% and 3.50% as of May 31, 2024 the interest rate was SOFR plus 2.75%;

v. includes customary affirmative and negative covenants, and events of default; including restrictions on the incurrence of non-ordinary course debt, investment and dividends, subject to various exceptions; and,

vi. includes a maximum quarterly leverage ratio financial covenant, with reporting requirements to our banking group at each quarter-end.

On March 20, 2024, we repriced the Term Loan B. The repricing adjusted the Term Loan B spread from a rate of SOFR plus 3.75% to SOFR plus 3.25%.

We primarily utilize proceeds from the Revolving Credit Facility to finance working capital needs, capital improvements, quarterly cash dividends, acquisitions and other general corporate purposes.

As defined in the 2022 Credit Agreement, quarterly prepayments were due against the outstanding principal of the Term Loan B and were payable on the last business day of each May, August, November and February, beginning August 31, 2022, in a quarterly aggregate principal amount of $3.25 million, with the entire remaining principal amount due on May 13, 2029, the maturity date. Additional prepayments made against the Term Loan B contribute to these required quarterly payments. Due to prepayments made against the Term Loan B since August 31, 2022, the quarterly mandatory principal payment requirement has been met, and the quarterly payments of $3.25 million are not required at this time.

The weighted average interest rate for our outstanding debt, including the Revolving Credit Facility and the Term Loan B, was 8.09% and 9.07% as of May 31, 2024 and 2023, respectively.

#### Debt Compliance and Outstanding Borrowings

Our 2022 Credit Agreement requires us to maintain a maximum Total Net Leverage Ratio (as defined in the loan agreement) no greater than 4.5. As of May 31, 2024, we were in compliance with all covenants and other requirements set forth in the 2022 Credit Agreement.

As of May 31, 2024, we had $985.3 million of debt outstanding on the Revolving Credit Facility and the Term Loan B, with varying maturities through fiscal 2029. We had approximately $350.7 million of additional credit available as of May 31, 2024.

#### Letters of Credit

As of May 31, 2024, we had total outstanding letters of credit in the amount of $14.3 million. These letters of credit 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 on our floating-rate debt by entering into interest rate swap agreements to convert a portion of our variable-rate debt to a fixed rate. On September 27, 2022, we entered into a fixed-rate interest rate swap agreement, which was subsequently amended on October 7, 2022, (the "2022 Swap"), with banks that are parties to the 2022 Credit Agreement, to change the SOFR-based component of the interest rate. The 2022 Swap converts the SOFR portion to 4.277%. On March 20, 2024, we repriced our Term Loan B to SOFR plus 3.25%, resulting in a total fixed rate of 7.527%. The 2022 Swap had an initial notional amount of $550.0 million and a maturity date of September 30, 2025. The notional amount of the interest rate swap decreases by a pro-rata portion of any quarterly principal payments made on the Term Loan B, and the current notional amount is $540.4 million as of May 31, 2024. The objective of the 2022 Swap is to eliminate the variability of cash flows in interest payments attributable to changes in benchmark one-month SOFR interest rates, for a portion of our variable-rate debt. The hedged risk is the interest rate risk exposure to changes in interest payments, attributable to changes in benchmark one-month SOFR interest rates over the interest rate swap term. The changes in cash flows of the 2022 Swap exactly offset changes in cash flows of the variable-rate debt. We designated the 2022 Swap as a cash flow hedge at inception. Cash payments or receipts to settle the 2022 Swap are recognized in interest expense.

#### April 2024 Secondary Offering

On April 30, 2024, we completed a secondary public offering in which we sold 4.6 million shares of our common stock at $70.00 per share (the "April 2024 Secondary Offering"). We received gross proceeds of $322.0 million, and paid offering expenses of $13.3 million, for net proceeds of $308.7 million. The proceeds from the April 2024 Offering were used to redeem the Series A Preferred Stock.

#### Series A Convertible Preferred Stock

On May 9, 2024, we fully redeemed our 240,000 shares of 6.0% Series A Convertible Preferred Stock ("Series A Preferred Stock"), for $308.9 million. The payment was calculated as the face value of the Series A Preferred Stock of $240.0 million, multiplied by the Return Factor (as defined below) of 1.4, less dividends paid to date of $27.1 million. The redemption premium of $75.2 million, which is calculated as the difference between the redemption amount and the book value of $233.7 million, was recorded as a deemed dividend, and reduces net income available to common shareholders. The Series A Preferred Stock was redeemed using proceeds from the April 2024 Secondary Offering.

On August 5, 2022, we exchanged our $240.0 million 6.00% convertible subordinated notes due June 30, 2030 for 240,000 shares of 6.0% Series A Preferred Stock, following the receipt of shareholder approval for the issuance of Series A Preferred Stock. The Series A Preferred Stock has a $1.00 par value per share, and ranked senior to the common stock of the Company, including with respect to both income and capital, but junior to our indebtedness. The Series A Preferred Stock is classified as "Mezzanine equity" in the consolidated balance sheets and was fully redeemed on May 9, 2024.

### Greenfield Aluminum Coil Coating Facility

We are expanding our coatings capabilities by constructing a new 25-acre aluminum coil coating facility in Washington, Missouri that is expected to be operational in calendar year 2025 (the Company fiscal year 2026). The new greenfield facility will be included in the AZZ Precoat Metals segment and is supported by a take-or-pay contract for approximately 75% of the output from the new plant. We expect to spend approximately $124.0 million in capital payments over the life of the project, of which $60.8 million was paid prior to fiscal 2025 and $16.2 million was paid during the three months ended May 31, 2024. The remaining balance of $47.0 million is to occur prior to the end of fiscal 2025, of which we have capital commitments of $28.6 million. The remaining payments in fiscal 2025 are expected to be funded through cash flows from operations.

### Share Repurchase Program

During the three months ended May 31, 2024 and 2023, we did not repurchase shares of common stock under the 2020 Share Authorization. As of May 31, 2024, we had $53.2 million available under the 2020 Share Authorization that may be used to purchase shares in the future. See Part II, “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.”

### Other Exposures

We have exposure to commodity price increases in all three of our operating segments, primarily zinc and natural gas in the AZZ Metal Coatings segment, and natural gas, steel and aluminum in the AZZ Precoat Metals segment. We attempt to minimize these increases by entering into agreements with our zinc suppliers and such agreements generally include fixed premiums, and by entering into agreements with our natural gas suppliers to fix a portion of our purchase cost. 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 to match inflationary increases 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 AVAIL JV.

As of May 31, 2024, we had non-cancelable forward contracts to purchase approximately $37.9 million of zinc at various volumes and prices. We also had non-cancelable forward contracts to purchase approximately $9.2 million of natural gas at various volumes and prices. All such contracts expire by the first quarter of fiscal 2026. We had no other contracted commitments for any other commodities including steel, aluminum, copper, zinc, nickel-based alloys, natural gas, except for those entered into under the normal course of business.

### Off Balance Sheet Arrangements and Contractual Obligations

As of May 31, 2024, we did not have any off-balance sheet arrangements as defined under SEC rules. Specifically, there were no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on the financial condition, changes in financial condition, sales or expenses, results of operations, liquidity, capital expenditures or capital resources of the Company.

### Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes.

There were no significant changes to our critical accounting policies and estimates compared to the critical accounting policies and estimates disclosed in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended February 29, 2024.

### Recent Accounting Pronouncements

See Note 1 to the condensed consolidated financial statements, included herein, for a full description of recent accounting pronouncements, including the actual and expected dates of adoption and estimated effects on our consolidated results of operations and financial condition, which is incorporated herein by reference.

## Market risk

As filed, 359 characters.

There have been no material changes to our market risk disclosures during the three months ended May 31, 2024. For a discussion of our exposure to market risk, refer to our market risk disclosures set forth in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our Annual Report on Form 10-K for the year ended February 29, 2024.

## Controls and procedures

As filed, 1,457 characters.

### Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, management of the Company has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this Form 10-Q to provide reasonable assurance that information required to be disclosed in Company reports, filed or submitted, under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules; and (ii) accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely discussions regarding required disclosure.

### Changes in Internal Control Over Financial Reporting

There have been no significant changes in the Company's internal controls over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.

## Risk factors

As filed, 943 characters.

There are numerous factors that affect our business, financial condition, results of operations and cash flows, many of which are beyond our control. In addition to other information set forth in this Quarterly Report, careful consideration should be given to “Item 1A. Risk Factors” in Part I and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of our Annual Report, which contain descriptions of significant factors that might cause the actual results of operations in future periods to differ materially from those currently projected in the forward-looking statements contained therein.

There have been no material changes from risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K. See the discussion of the Company’s risk factors under Part I, Item 1A. in the Company’s Annual Report on Form 10-K for the fiscal year ended February 29, 2024.

Filed Jul 10, 2024.
Source: SEC EDGAR, the filing index for accession 0000008947-24-000153. Last ingested by Listed: Oct 26, 2026, 16:17 ET. No prices; not investment advice.