# AZZ Inc: Form 10-Q for the period ended Nov 30, 2024

- Company: [AZZ Inc](/companies/azz.md) (CIK 8947)
- Form: 10-Q
- Filed: 2025-01-07
- Accepted by EDGAR: Jan 7, 2025, 16:23 ET
- Period: 2024-11-30
- Accession: 0000008947-25-000008
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/8947/000000894725000008/azz-20241130.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/8947/000000894725000008/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-11-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-09-01 to 2024-11-30 | $403.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-03-01 to 2024-11-30 | $1.23bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-09-01 to 2024-11-30 | $305.9m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-03-01 to 2024-11-30 | $921.9m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-09-01 to 2024-11-30 | $97.8m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-03-01 to 2024-11-30 | $304.0m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-09-01 to 2024-11-30 | $39.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-03-01 to 2024-11-30 | $108.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-09-01 to 2024-11-30 | $58.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-03-01 to 2024-11-30 | $195.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-09-01 to 2024-11-30 | $19.2m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2024-03-01 to 2024-11-30 | $63.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-09-01 to 2024-11-30 | $12.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-03-01 to 2024-11-30 | $35.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-09-01 to 2024-11-30 | $33.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-03-01 to 2024-11-30 | $108.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-09-01 to 2024-11-30 | $1.12 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-03-01 to 2024-11-30 | $1.11 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-09-01 to 2024-11-30 | $1.12 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-03-01 to 2024-11-30 | $1.12 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-09-01 to 2024-11-30 | 30,118,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-03-01 to 2024-11-30 | 29,076,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-03-01 to 2024-11-30 | $185.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-03-01 to 2024-11-30 | $85.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-03-01 to 2024-11-30 | $18.0m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2024-11-30 | $1.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-11-30 | $394.4m | us-gaap:AssetsCurrent |
| Total assets | at 2024-11-30 | $2.24bn | us-gaap:Assets |
| Current liabilities | at 2024-11-30 | $222.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-11-30 | $1.21bn | us-gaap:Liabilities |
| Long-term debt | at 2024-11-30 | $879.5m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-11-30 | $1.03bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 46,626 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, paint used in our coil coating 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 "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" 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 nine months ended November 30, 2024 (the "current nine-month period") were favorably impacted by the growth in demand for our manufactured solutions in the construction and utilities industries.

The demand for our manufactured solutions was the primary contributor to net income of $108.6 million for the nine months ended November 30, 2024. Our operating results for the three and nine months ended November 30, 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 $185.6 million of cash for the current nine-month period. 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, several factors are outlined below that may impact our results of operations during the fourth quarter of fiscal 2025.

- Sales prices in our AZZ Metal Coatings segment are expected to remain consistent with current levels. Fluctuations in product mix, along with competitive market pressures, may impact selling price.
- Sales prices in our AZZ Precoat Metals segment are expected to remain consistent with current levels, although fluctuations in mix 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 normal seasonal 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 "Item I. Financial Statements—Note 6". 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 NOVEMBER 30, 2024 COMPARED TO THE QUARTER ENDED NOVEMBER 30, 2023

#### Segment Sales and Operating Income

The following tables contain operating segment data by segment, for the Company's corporate operations and on a consolidated basis (in thousands):

|  | Three Months Ended November 30, 2024 Metal Coatings | Precoat Metals | Infrastructure Solutions(1) | Corporate(2) | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Sales | $168,599 | $235,055 | $— | $— | $403,654 |
| Cost of sales | 116,542 | 189,334 | — | — | 305,876 |
| Gross margin | 52,057 | 45,721 | — | — | 97,778 |
| Selling, general and administrative | 5,684 | 8,641 | 29 | 24,889 | 39,243 |
| Operating income (loss) | 46,373 | 37,080 | (29) | (24,889) | 58,535 |
| Interest expense | — | — | — | (19,223) | (19,223) |
| Equity in earnings of unconsolidated subsidiaries | — | — | 7,168 | — | 7,168 |
| Other income (expense) | 116 | — | — | (879) | (763) |
| Income (loss) before income tax | $46,489 | $37,080 | $7,139 | (44,991) | 45,717 |
| Income tax expense |  |  |  | 12,114 | 12,114 |
| Net income (loss) |  |  |  | $(57,105) | $33,603 |

See notes below.

|  | Three Months Ended November 30, 2023 Metal Coatings | Precoat Metals | Infrastructure Solutions(1) | Corporate(2) | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Sales | $163,186 | $218,419 | $— | $— | $381,605 |
| Cost of sales | 115,952 | 177,504 | — | — | 293,456 |
| Gross margin | 47,234 | 40,915 | — | — | 88,149 |
| Selling, general and administrative | 9,392 | 8,163 | 290 | 17,480 | 35,325 |
| Operating income (loss) | 37,842 | 32,752 | (290) | (17,480) | 52,824 |
| Interest expense | — | — | — | (25,855) | (25,855) |
| Equity in earnings of unconsolidated subsidiaries | — | — | 8,742 | — | 8,742 |
| Other expense | (29) | — | — | (12) | (41) |
| Income (loss) before income tax | $37,813 | $32,752 | $8,452 | (43,347) | 35,670 |
| Income tax expense |  |  |  | 8,780 | 8,780 |
| Net income (loss) |  |  |  | $(52,127) | $26,890 |

(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 three months ended November 30, 2024 (the "current quarter"), consolidated sales increased $22.0 million, or 5.8%, compared to the three months ended November 30, 2023 (the "prior year quarter").

Sales for the AZZ Metal Coatings segment increased $5.4 million, or 3.3%, for the current quarter, compared to the prior year quarter. The increase was primarily due to $9.9 million resulting from a higher volume of steel processed, partially offset by a decrease in selling price of $2.5 million, due to product mix. Other sales decreased $2.0 million.

Sales for the AZZ Precoat Metals segment increased $16.6 million, or 7.6% for the current quarter. The increase is due to a higher volume of coil coated in the current quarter, compared to the prior year quarter, and an increase in the average price due to product mix.

#### Operating Income

For the current quarter, consolidated operating income was $58.5 million, an increase of $5.7 million, or 10.8%, compared to the prior year quarter.

Operating income for the AZZ Metal Coatings segment increased $8.5 million, or 22.5%, for the current quarter, compared to the prior year quarter. The increase was due to increased sales as described above, partially offset by an increase in cost of sales. The increase in cost of sales of $0.6 million was primarily due to a $3.1 million increase in overhead costs and a $0.8 million increase in labor costs, partially offset by a $3.4 million decrease in zinc cost. Selling, general and administrative expense decreased $3.7 million, due to a legal reserve in the prior year, partially offset by an increase in compensation costs.

Operating income for the AZZ Precoat Metals segment increased $4.3 million, or 13.2% for the current quarter. The increase is primarily due to increased sales as described above, offset by higher cost of sales. Cost of sales increased $11.8 million, primarily due to variable costs related to the increased volume of coil coated and an increase in fixed costs. Selling, general and administrative expense increased $0.5 million.

#### Corporate Expenses

Corporate selling, general and administrative expenses increased $7.4 million, or 42.4%, for the current quarter, compared to the prior year quarter. The increase was primarily due to: an increase in salaries and wages, due to retirement and other severance expense for certain executive management employees; increased incentive expense, due to improved performance of the Company; an increase in stock-based compensation related to the Company's employee stock purchase plan, due to the increase in AZZ's common stock price; a legal settlement and other legal expenses related to a non-operating entity of $3.5 million; and transition services agreement fees associated with the AVAIL JV, which were received in the prior year quarter, with no comparable receipt in the current quarter.

#### Interest Expense

Interest expense for the current quarter decreased $6.6 million, to $19.2 million, compared to $25.9 million for the prior year quarter. The decrease in interest expense is primarily attributable to a decrease in the weighted average debt outstanding of $111.2 million and a decrease in the weighted average interest rate of 1.3% in the current quarter compared to the prior year quarter, coupled with higher capitalized interest of $1.1 million associated with the construction of the new plant in Washington, Missouri.

#### Equity in Earnings of Unconsolidated Entities

Equity in earnings of unconsolidated subsidiaries for the current quarter decreased $1.6 million, to $7.2 million, compared to $8.7 million in the prior year quarter. The decrease is due to lower earnings from the AVAIL JV in the current quarter compared to the prior year quarter.

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 26.5% for the current quarter, compared to 24.6% for the prior year quarter. The increase in the effective tax rate is primarily attributable to higher non-deductible items such as compensation limited by IRC Sec. 162(m) and higher state income tax expense, net of federal benefit. The increase is also attributable to lower research and development tax credits related to our 40% investment in the AVAIL JV.

### NINE MONTHS ENDED NOVEMBER 30, 2024 COMPARED TO THE NINE MONTHS ENDED NOVEMBER 30, 2023

#### Segment Sales and Operating Income

The following tables contain operating segment data by segment, for the Company's corporate operations and on a consolidated basis (in thousands):

|  | Nine Months Ended November 30, 2024 Metal Coatings | Precoat Metals | Infrastructure Solutions(1) | Corporate(2) | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Sales | $516,750 | $709,119 | $— | $— | $1,225,869 |
| Cost of sales | 357,471 | 564,436 | — | — | 921,907 |
| Gross margin | 159,279 | 144,683 | — | — | 303,962 |
| Selling, general and administrative | 17,286 | 24,980 | 67 | 65,699 | 108,032 |
| Operating income (loss) | 141,993 | 119,703 | (67) | (65,699) | 195,930 |
| Interest expense | — | — | — | (63,906) | (63,906) |
| Equity in earnings of unconsolidated subsidiaries | — | — | 12,470 | — | 12,470 |
| Other income (expense) | 165 | — | — | (307) | (142) |
| Income (loss) before income tax | $142,158 | $119,703 | $12,403 | (129,912) | 144,352 |
| Income tax expense |  |  |  | 35,728 | 35,728 |
| Net income (loss) |  |  |  | $(165,640) | $108,624 |

See notes below.

|  | Nine Months Ended November 30, 2023 Metal Coatings | Precoat Metals(4) | Infrastructure Solutions(1) | Corporate(2) | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Sales | $501,816 | $669,204 | $— | $— | $1,171,020 |
| Cost of sales | 353,280 | 535,326 | — | — | 888,606 |
| Gross margin | 148,536 | 133,878 | — | — | 282,414 |
| Selling, general and administrative | 20,143 | 24,429 | 6,244 | 52,271 | 103,087 |
| Operating income (loss) | 128,393 | 109,449 | (6,244) | (52,271) | 179,327 |
| Interest expense | — | — | — | (82,331) | (82,331) |
| Equity in earnings of unconsolidated subsidiaries | — | — | 11,136 | — | 11,136 |
| Other income (expense) | (40) | — | — | 49 | 9 |
| Income (loss) before income tax | $128,353 | $109,449 | $4,892 | (134,553) | 108,141 |
| Income tax expense |  |  |  | 24,397 | 24,397 |
| Net income (loss) |  |  |  | $(158,950) | $83,744 |

(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 nine-month period, consolidated sales increased $54.8 million, or 4.7%, compared to the nine months ended November 30, 2023 (the "prior year nine-month period").

Sales for the AZZ Metal Coatings segment increased $14.9 million, or 3.0%, for the current nine-month period, compared to the prior year nine-month period. The increase in sales was primarily due to an increase of $23.0 million resulting from a higher volume of steel processed during the period, partially offset by a decrease of $4.4 million in selling price, due to product mix. Other sales decreased $3.7 million.

Sales for the AZZ Precoat Metals segment increased $39.9 million, or 6.0% for the current nine-month period, primarily due to a higher volume of coil coated, partially offset by a decrease in selling price due to product mix.

#### Operating Income

For the current nine-month period, consolidated operating income increased $16.6 million, or 9.3%, to $195.9 million, compared to the prior year nine-month period.

Operating income for the AZZ Metal Coatings segment increased $13.6 million, or 10.6% for the current nine-month period, compared to the prior year nine-month period. The increase was due to improved sales as described above, and lower selling, general and administrative expenses, partially offset by higher cost of sales. Cost of sales increased $4.2 million, primarily due to higher labor and overhead costs of $13.8 million, partially offset by a decrease in zinc costs of $9.6 million. Selling, general and administrative expense decreased $2.9 million primarily due to a legal reserve in the prior year, partially offset by an increase in compensation costs.

Operating income for the AZZ Precoat Metals segment increased $10.3 million, or 9.4%. The increase is primarily due to the increase in sales as described above, offset by higher cost of sales. Cost of sales increased $29.0 million, primarily due to variable costs related to the increased volume of coil coated.

Operating income for the AZZ Infrastructure Solutions segment increased $6.2 million, primarily due to a legal settlement of $5.75 million and legal expenses associated with the settlement in the prior year nine-month period.

#### Corporate Expenses

Corporate selling, general and administrative expenses increased $13.4 million, or 25.7%, for the current nine-month period, compared to the prior year nine-month period. The increase was primarily due to: an increase in salaries and wages, due to the retirement and other severance expense for certain executive management employees; increased incentive expense due to improved performance of the Company; an increase in stock-based compensation related to our employee stock purchase plan, due to the increase in AZZ's common stock price; a legal settlement and other legal expenses related to a non-operating entity of $3.5 million; and transition services agreement fees associated with the AVAIL JV, which were received in the prior year nine-month period, with no comparable receipt in the current nine-month period.

#### Interest Expense

Interest expense for the current nine-month period decreased $18.4 million, to $63.9 million, compared to $82.3 million for the prior year nine-month period. The decrease in interest expense is primarily attributable to a decrease in the weighted average debt outstanding of $109.4 million and a decrease in the weighted average interest rate of 1.05% in the current nine-month period compared to the prior year nine-month period, coupled with higher capitalized interest of $3.5 million associated with the construction of the new plant in Washington, MO.

#### Equity in Earnings of Unconsolidated Entities

Equity in earnings of unconsolidated subsidiaries for the current nine-month period increased $1.3 million, to $12.5 million, compared to $11.1 million in the prior year nine-month period. The increase is due to higher earnings from the AVAIL JV, primarily driven by AVAIL's enclosure business.

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 24.8% for the current nine-month period compared to 22.6% for the prior year nine-month period. The increase in the effective tax rate is primarily attributable to favorable adjustments for the prior year nine-month period related to uncertain tax positions, partially offset by higher discrete items driven by tax deductions for stock compensation in fiscal year 2025. The increase is also attributable to the increase in state tax expense, net of federal benefit.

### 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 November 30, 2024, our total liquidity of $347.2 million consisted of available capacity on our Revolving Credit Facility of $345.7 million and cash and cash equivalents of $1.5 million.

### Cash Flows

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

|  | Nine Months Ended November 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $185,597 | $180,928 |
| Net cash used in investing activities | (85,100) | (66,853) |
| Net cash used in financing activities | (103,912) | (109,444) |

Net cash provided by operating activities for the current nine-month period was $185.6 million, driven primarily by net income from continuing operations of $108.6 million, adjusted to exclude non-cash charges, net of non-cash income of $69.1 million, an increase in cash resulting from a reduction in working capital of $2.9 million, a decrease in cash resulting from changes in other long-term assets and liabilities, including deferred taxes, of $1.8 million and a cash distribution received on the investment in the AVAIL JV of $6.8 million. The reduction in working capital is due primarily to increases in accounts payable, other accrued liabilities and income taxes payable, as well as a reduction in inventories and accounts receivable; partially offset by increases in other receivables, prepaid expenses and contract assets due to higher sales. Net cash provided by operating activities was used to fund $85.9 million of capital expenditures, make net payments on long-term debt and finance leases liabilities of $82.2 million, make dividend payments of $18.0 million and make payments for taxes related to net share settlement of equity awards of $5.0 million. We also completed a secondary public offering of 4.6 million shares of our common stock, which provided cash, net of offering costs, of $310.2 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 nine-month period was $180.9 million, driven primarily by net income of $83.7 million, adjusted to exclude non-cash charges, net of non-cash income of $63.3 million and an increase in cash resulting from an decrease in working capital of $38.8 million, partially offset by a decrease in cash resulting from other long-term assets and liabilities, including deferred taxes, of $4.9 million. Net cash provided by operating activities was used to fund $66.9 million of capital expenditures, make net payments on long-term debt and finance leases liabilities of $86.6 million, make dividend payments of $23.6 million and make payments for taxes related to net share settlement of equity awards of $0.8 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, March 20, 2024 and September 24, 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 November 30, 2024, the outstanding balance of the Term Loan B was $890.3 million;

ii. provides for a maximum senior secured Revolving Credit Facility in the aggregate principal amount of $400.0 million (the "Revolving Credit Facility"), which matures on 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 an interest rate of Secured Overnight Financing Rate ("SOFR") plus 2.50%, which is part of, and not in addition to, the Revolving Credit Facility;

v. borrowings under the Term Loan B bear an interest rate of Secured Overnight Financing Rate ("SOFR") plus 2.50% (following the repricings on March 20, 2024 and September 24, 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 November 30, 2024, the interest rate was SOFR plus 2.75%;

vi. 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,

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

On March 20, 2024, we entered the term loan market and repriced our existing Term Loan B. The repricing reduced the Term Loan B spread from a rate of SOFR plus 3.75% to SOFR plus 3.25%.

On September 24, 2024, we completed our third repricing of the Term Loan B. The repricing reduced the margin from SOFR plus 3.25% to SOFR plus 2.50%, for a total reduction of 75 basis points.

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 no longer required.

The weighted average interest rate for our outstanding debt, including the Revolving Credit Facility and the Term Loan B, was 7.77% and 8.54% for the nine months ended November 30, 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 November 30, 2024, we were in compliance with all covenants and other requirements set forth in the 2022 Credit Agreement.

As of November 30, 2024, we had $930.3 million of debt outstanding on the Revolving Credit Facility and the Term Loan B, with varying maturities through fiscal 2029. We had approximately $345.7 million of additional credit available as of November 30, 2024.

#### Letters of Credit

As of November 30, 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 September 24, 2024, we repriced our Term Loan B to SOFR plus 2.50%, resulting in a total fixed rate of 6.777%. See "2022 Credit Agreement and Term Loan B" section above for information related to the repricing of the Company's Term Loan B on September 24, 2024. 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 $537.6 million as of November 30, 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 Public 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 Public 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 was 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 Public 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 had 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, as noted above, was fully redeemed on May 9, 2024.

### Capital Commitments—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's 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 $46.8 million was paid during the nine months ended November 30, 2024. The remaining balance of $16.4 million is on schedule to occur by the first quarter of fiscal 2026, of which we have capital commitments of $9.7 million. The remaining payments through fiscal 2026 are expected to be funded through cash flows from operations.

### Share Repurchase Program

During the nine months ended November 30, 2024 and 2023, we did not repurchase shares of common stock under the 2020 Share Authorization. As of November 30, 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 November 30, 2024, we had non-cancelable forward contracts to purchase approximately $4.7 million of zinc at various volumes and delivery prices for December 2024. We also had non-cancelable forward contracts to purchase approximately $8.6 million of natural gas at various volumes and commodity plus delivery prices between December 2024 and

November 2025. All such contracts expire by the third 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 November 30, 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.

### Non-GAAP Disclosures

In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"), we provide adjusted net income, adjusted earnings per share and Adjusted EBITDA (collectively, the "Adjusted Earnings Measures"), which are non-GAAP measures. 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. Management also believes that investors regularly rely on non-GAAP financial measures, such as adjusted net income, adjusted earnings per share and Adjusted EBITDA to assess operating performance and that such measures may highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP.

Management defines adjusted net income and adjusted earnings per share to exclude intangible asset amortization, acquisition expenses, transaction related expenses, certain legal settlements and accruals, and certain expenses related to non-recurring events from the reported GAAP measure. Management defines Adjusted EBITDA as adjusted earnings excluding depreciation, amortization, interest and provision for income taxes. Management believes Adjusted EBITDA is used by investors to analyze operating performance and evaluate the Company's ability to incur and service debt and its capacity for making capital expenditures in the future.

Management provides non-GAAP financial measures for informational purposes and to enhance understanding of the Company’s GAAP consolidated financial statements. Readers should consider these measures in addition to, but not instead of or superior to, the Company's financial statements prepared in accordance with GAAP, and undue reliance should not be placed on these non-GAAP financial measures. Additionally, these non-GAAP financial measures may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

The following tables provide a reconciliation for the three and nine months ended November 30, 2024 and 2023 between the non-GAAP Adjusted Earnings Measures to the most comparable measures, calculated in accordance with GAAP (dollars in thousands, except per share data):

### Adjusted Net Income and Adjusted Earnings Per Share

|  | Three Months Ended November 30, 2024 Amount | Per Diluted Share(1) | 2023 Amount | Per Diluted Share(1) | Nine Months Ended November 30, 2024 Amount | Per Diluted Share(1) | 2023 Amount | Per Diluted Share(1) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net income | $33,603 |  | $26,890 |  | $108,624 |  | $83,744 |  |
| Less: Series A Preferred Stock dividends | — |  | (3,600) |  | (1,200) |  | (10,800) |  |
| Less: Redemption premium on Series A Preferred Stock | — |  | — |  | (75,198) |  | — |  |
| Net income available to common shareholders(2) | 33,603 |  | 23,290 |  | 32,226 |  | 72,944 |  |
| Impact of Series A Preferred Stock dividends(2) | — |  | 3,600 |  | 1,200 |  | 10,800 |  |
| Net income and diluted earnings per share for Adjusted net income calculation(2) | 33,603 | 1.12 | 26,890 | 0.92 | 33,426 | 1.11 | 83,744 | 2.86 |
| Adjustments: |  |  |  |  |  |  |  |  |
| Amortization of intangible assets | 5,773 | 0.19 | 5,872 | 0.20 | 17,353 | 0.58 | 18,108 | 0.62 |
| Legal settlement and accrual(3) | 3,483 | 0.12 | 4,500 | 0.15 | 3,483 | 0.12 | 10,250 | 0.35 |
| Retirement and other severance expense(4) | 1,666 | 0.06 | — | — | 3,554 | 0.12 | — | — |
| Redemption premium on Series A Preferred Stock(5) | — | — | — | — | 75,198 | 2.50 | — | — |
| Subtotal | 10,922 | 0.37 | 10,372 | 0.35 | 99,588 | 3.31 | 28,358 | 0.97 |
| Tax impact(6) | (2,621) | (0.09) | (2,489) | (0.08) | (5,854) | (0.19) | (6,806) | (0.23) |
| Total adjustments | 8,301 | 0.28 | 7,883 | 0.27 | 93,734 | 3.11 | 21,552 | 0.74 |
| Adjusted net income and adjusted earnings per share (non-GAAP) | $41,904 | $1.39 | $34,773 | $1.19 | $127,160 | $4.22 | $105,296 | $3.60 |
| Weighted average shares outstanding - Diluted for Adjusted earnings per share(2) |  | 30,118 |  | 29,330 |  | 30,123 |  | 29,278 |

See notes on page 43.

### Adjusted EBITDA

|  | Three Months Ended November 30, 2024 | 2023 | Nine Months Ended November 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income | $33,603 | $26,890 | $108,624 | $83,744 |
| Interest expense | 19,223 | 25,855 | 63,906 | 82,331 |
| Income tax expense | 12,114 | 8,780 | 35,728 | 24,397 |
| Depreciation and amortization | 20,633 | 20,357 | 61,383 | 59,034 |
| Adjustments: |  |  |  |  |
| Legal settlement and accrual(3) | 3,483 | 4,500 | 3,483 | 10,250 |
| Retirement and other severance expense(4) | 1,666 | — | 3,554 | — |
| Adjusted EBITDA (non-GAAP) | $90,722 | $86,382 | $276,678 | $259,756 |

See notes on page 43.

### Adjusted EBITDA by Segment

A reconciliation of Adjusted EBITDA by segment to net income is as follows (in thousands):

|  | Three Months Ended November 30, 2024 Metal Coatings | Precoat Metals | Infra- structure Solutions | Corporate | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net income (loss) | $46,489 | $37,080 | $7,139 | $(57,105) | $33,603 |
| Interest expense | — | — | — | 19,223 | 19,223 |
| Income tax expense | — | — | — | 12,114 | 12,114 |
| Depreciation and amortization | 6,614 | 7,903 | — | 6,116 | 20,633 |
| Adjustments: |  |  |  |  |  |
| Legal settlement and accrual(3) | — | — | — | 3,483 | 3,483 |
| Retirement and other severance expense(4) | — | — | — | 1,666 | 1,666 |
| Adjusted EBITDA (non-GAAP) | $53,103 | $44,983 | $7,139 | $(14,503) | $90,722 |

See notes on page 43.

|  | Three Months Ended November 30, 2023 Metal Coatings | Precoat Metals | Infra- structure Solutions | Corporate | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net income (loss) | $37,813 | $32,752 | $8,452 | $(52,127) | $26,890 |
| Interest expense | — | — | — | 25,855 | 25,855 |
| Income tax expense | — | — | — | 8,780 | 8,780 |
| Depreciation and amortization | 6,678 | 7,501 | — | 6,178 | 20,357 |
| Adjustments: |  |  |  |  |  |
| Legal settlement and accrual(3) | 4,500 | — | — | — | 4,500 |
| Adjusted EBITDA (non-GAAP) | $48,991 | $40,253 | $8,452 | $(11,314) | $86,382 |

See notes on page 43.

|  | Nine Months Ended November 30, 2024 Metal Coatings | Precoat Metals | Infra- structure Solutions | Corporate | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net income (loss) | $142,158 | $119,703 | $12,403 | $(165,640) | $108,624 |
| Interest expense | — | — | — | 63,906 | 63,906 |
| Income tax expense | — | — | — | 35,728 | 35,728 |
| Depreciation and amortization | 19,955 | 23,134 | — | 18,294 | 61,383 |
| Adjustments: |  |  |  |  |  |
| Legal settlement and accrual(3) | — | — | — | 3,483 | 3,483 |
| Retirement and other severance expense(4) | — | — | — | 3,554 | 3,554 |
| Adjusted EBITDA (non-GAAP) | $162,113 | $142,837 | $12,403 | $(40,675) | $276,678 |

See notes on page 43.

|  | Nine Months Ended November 30, 2023 Metal Coatings | Precoat Metals | Infra- structure Solutions | Corporate | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net income (loss) | $128,353 | $109,449 | $4,892 | $(158,950) | $83,744 |
| Interest expense | — | — | — | 82,331 | 82,331 |
| Income tax expense | — | — | — | 24,397 | 24,397 |
| Depreciation and amortization | 19,647 | 20,407 | — | 18,980 | 59,034 |
| Adjustments: |  |  |  |  |  |
| Legal settlement and accrual(3) | 4,500 | — | 5,750 | — | 10,250 |
| Adjusted EBITDA (non-GAAP) | $152,500 | $129,856 | $10,642 | $(33,242) | $259,756 |

See notes on page 43.

### Debt Leverage Ratio Reconciliation

|  | Trailing Twelve Months Ended November 30, 2024 | February 29, 2024 |
| --- | ---: | ---: |
| Gross debt | $930,250 | $1,010,250 |
| Less: Cash per bank statement | (10,233) | (24,807) |
| Add: Finance lease liability | 5,110 | 3,987 |
| Consolidated indebtedness | $925,127 | $989,430 |
| Net income | $126,487 | $108,624 |
| Depreciation and amortization | 81,771 | 61,383 |
| Interest expense | 88,641 | 63,907 |
| Income tax expense | 39,827 | 35,728 |
| EBITDA per Credit Agreement | 336,726 | 269,642 |
| Cash items(7) | 15,230 | 25,443 |
| Non-cash items(8) | 12,634 | 9,510 |
| Equity in earnings, net of distributions | (6,863) | (12,294) |
| Adjusted EBITDA per Credit Agreement | $357,727 | $292,301 |
| Net leverage ratio | 2.6x | 3.4x |

(1) Earnings per share amounts included in the "Adjusted net income and Adjusted Earnings Per Share" table above may not sum due to rounding differences.

(2) For the nine months ended November 30, 2024, diluted earnings per share is based on weighted average shares outstanding of 29,076, as the

Series A Preferred Stock that was redeemed May 9, 2024 is anti-dilutive. The calculation of adjusted diluted earnings per share is based on

weighted average shares outstanding of 30,123, as the Series A Preferred Stock is dilutive to adjusted diluted earnings per share. Adjusted net

income for adjusted earnings per share also includes the addback of Series A Preferred Stock dividends for the periods noted above. For further

information regarding the calculation of earnings per share, see "Item I. Financial Statements—Note 3."

(3) For the three and nine months ended November 30, 2024, represents a legal settlement and accrual related to a non-operating entity, and is

classified as “Corporate” in our operating segment disclosure. For the three months ended November 30, 2023 represents a legal accrual related to

the Metal Coatings segment of $4.5 million. For the nine months ended November 30, 2023, consists of the $4.5 million accrual for the Metal

Coatings segment and $5.75 million for the settlement of a litigation matter related to the AIS segment that was retained following the sale of the

AIS business. See "Item I. Financial Statements—Note 16."

(4) Related to retention and transition of certain executive management employees.

(5) On May 9, 2024, we redeemed the Series A Preferred Stock. The redemption premium represents the difference between the redemption amount

paid and the book value of the Series A Preferred Stock.

(6) The non-GAAP effective tax rate for each of the periods presented is estimated at 24.0%.

(7) Cash items includes certain legal settlements, accruals, and retirement and other severance expense, and costs associated with the AVAIL JV

transition services agreement.

(8) Non-cash items include stock-based compensation expense and other non-cash expenses.

## Market risk

As filed, 375 characters.

There have been no material changes to our market risk disclosures during the three and nine months ended November 30, 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, 741 characters.

### Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Company’s principal executive officer and principal financial officer have concluded that our Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934) are effective at the reasonable assurance level.

### Changes in Internal Control Over Financial Reporting

There have been no 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, the Company's internal control over financial reporting.

## Risk factors

As filed, 998 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 "Part I. Item 1A. Risk Factors" and "Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report for the fiscal year ended February 29, 2024, 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. Risk Factors" in the Company’s Annual Report on Form 10-K for the fiscal year ended February 29, 2024.

Filed Jan 7, 2025.
Source: SEC EDGAR, the filing index for accession 0000008947-25-000008. Last ingested by Listed: Oct 26, 2026, 16:17 ET. No prices; not investment advice.