UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ý☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February ~~28, 2019~~29, 2020

¨☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-12777

AZZ Inc.

(Exact name of registrant as specified in its charter)



~~TEXAS~~Texas			75-0948250
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

One Museum Place, Suite 500
3100 West 7th Street ~~Fort Worth, Texas 76107~~ ~~(817) 810-0095~~
Fort Worth	,	Texas	76107
(Address ~~including zip code, and telephone number, including area code,~~ of principal executive offices)			(Zip Code)

(817)810-0095

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock ~~$1.00 par value per share~~	AZZ	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨☐Noý☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.Yes ¨☐Noý☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesý☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesý☒ No ¨☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange ~~Act~~.Act.



Large accelerated filer x	☒	Accelerated filer o	☐	Non-accelerated filer o	☐	Smaller Reporting company o	☐	Emerging growth company ¨	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No ý☒

As of August 31, ~~2018,~~2019, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was ~~$1,381,529,854~~$1,066,597,439 based on the closing sale price as reported on the New York Stock Exchange. As of April ~~30, 2019,~~16, 2020, there were ~~26,115,389~~26,147,964 shares of the registrant’s common stock ($1.00 par value) outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement for its ~~2019~~2020 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K are incorporated by reference into Part III, Items 10-14 of this Annual Report on Form 10-K.

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AZZ INC.

FORM 10-K

For the Fiscal Year Ended February ~~28, 2019~~29, 2020

INDEX



PART I		3
Item 1.	Business	3
Item 1A.	Risk Factors	78
Item 1B.	Unresolved Staff Comments	1213
Item 2.	Properties	1213
Item 3.	Legal Proceedings	1213
Item 4.	Mine Safety Disclosures	1213

PART II		1314
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1314
Item 6.	Selected Financial Data	1516
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	1516
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 8.	Financial Statements and Supplementary Data	27
Item 8.	~~Financial Statements and Supplementary Data~~	28
~~Item~~ 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	61
~~Item 9A.~~	~~Controls and Procedures~~	61
~~Item 9B.~~	~~Other Information~~	62

~~PART III~~		63
~~Item 10.~~	~~Directors, Executive Officers and Corporate Governance~~	63
Item ~~11.~~9A.	~~Executive Compensation~~Controls and Procedures	63
Item ~~12.~~9B.	~~Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters~~	63
~~Item 13.~~	~~Certain Relationships and Related Transactions, and Director Independence~~	64
~~Item 14.~~	~~Principal Accounting Fees and Services~~Other Information	64

PART IVIII		65
Item ~~15.~~10.	~~Exhibits~~Directors, Executive Officers and ~~Financial Statement Schedules~~Corporate Governance	65
Item ~~16.~~11.	~~Form 10-K Summary~~Executive Compensation	65
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	65
Item 13.	Certain Relationships and Related Transactions, and Director Independence	66
Item 14.	Principal Accounting Fees and Services	66

~~SIGNATURES~~PART IV		67
Item 15.	Exhibits and Financial Statement Schedules	67
Item 16.	Form 10-K Summary	68

SIGNATURES		69

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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,” “should,” “expects,” “plans,” “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. In addition, certain factors could affect the outcome of the matters described herein. This Annual Report on Form 10-K may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand ~~and response~~for the to products and services offered by AZZ, including demand by the metal coatings market, power generation markets, electrical transmission and distribution markets, and the industrial markets, each of which may be impacted by the ongoing COVID-19 pandemic where our ability to assess the future and full impact on the ~~hot dip galvanizing markets;~~Company, our customers and our suppliers is limited. We could also experience fluctuations in prices and raw material cost, including zinc and natural gas, which are used in ~~the~~our hot dip galvanizing ~~process;~~process or other potential supply-chain disruptions or customer requested delays of our products or services; changes in the political stability and economic conditions ofimpacting our business in the ~~various~~domestic and foreign markets that ~~AZZ serves, foreign and domestic;~~we serve; customer requested delays of shipments; additional acquisition opportunities; currency exchange rates; adequacy of financing; availability of experienced management and employees to implement AZZ’s growth strategy; a downturn in market conditions in any industry relating to the products we inventory or sell or the services that we provide; ~~the continuing economic volatility in the U.S.~~ and ~~other markets in which we operate;~~ acts of war or terrorism inside the United States or ~~abroad; and other changes in economic and financial conditions.~~abroad. You are urged to consider these factors carefully in 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.

PART I

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 global provider of galvanizing and a variety of metal coating ~~services,~~solutions, welding solutions, specialty electrical equipment and highly engineered services to the power generation, transmission, distribution, refining and industrial markets. We have two distinct operating segments: the ~~Energy~~Metal Coatings segment and the Energy segment. The Company's Metal Coatings ~~segment. AZZ~~segment is a leading provider of metal finishing solutions for corrosion protection, including hot dip galvanizing, powder coating, anodizing and plating to the North American steel fabrication and other industries. The Company's Energy 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 the energy markets worldwide. ~~AZZ~~

Metal Coatings ~~is a leading provider of metal finishing solutions for corrosion protection, including~~Segment

The Metal Coatings segment provides hot dip galvanizing, powder coating, anodizing and plating, and other metal coating applications to the ~~North American~~ steel fabrication ~~industry.~~and other industries through facilities located throughout the United States and Canada. Hot dip galvanizing is a metallurgical process in which molten zinc is applied to steel. The zinc alloying renders corrosion protection to fabricated steel for extended periods of up to 50 years. As of February 29, 2020, we operated forty galvanizing plants, one galvabar plant, and seven surface technologies plants, which are located in various locations throughout the United States and Canada.

Metal coating is a highly competitive business, and we compete with other galvanizing companies, captive galvanizing facilities operated by manufacturers, and alternate forms of corrosion protection such as material selection (stainless steel or aluminum) or barrier protections such as powder coating, paint, and weathering steel. Our galvanizing markets are generally limited to areas within relatively close proximity to our metal coating plants due to the freight cost.

Zinc, the principal raw material used in the galvanizing process, is currently readily available, but can be subject to volatile pricing. We manage our exposure to commodity pricing of zinc by utilizing agreements with zinc suppliers that include fixed cost contracts to guard against escalating commodity prices. When possible, we also secure firm pricing for natural gas supplies with individual utilities. We may or may not continue to use these or other strategies to manage commodity risk in the future.

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We typically serve fabricators or manufacturers that provide solutions to the electrical and telecommunications, bridge and highway, petrochemical and general industrial markets, and numerous original equipment manufacturers. We do not depend on any single customer for a significant amount of our sales, and the loss of any single customer would not have a material adverse effect on our consolidated sales or net income.

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 provides 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. These acquisitions expanded our geographical reach in metal coating solutions and broadened our offerings in strategic markets.

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.

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 provides powder and e-coating solutions to the automotive, HVAC, marine, transportation, medical, industrial, and plastics industries. The acquisition broadened our offerings and expanded our network of surface technology plants.

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. Rogers Brothers provides galvanizing solutions to a 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.

In June 2017, we completed the acquisition of the assets of Enhanced Powder Coating Ltd., (“EPC”), a privately held, high specification, National Aerospace and Defense Contractors Accreditation Program, ("NADCAP"), certified provider of powder coating, plating and anodizing services based in Gainesville, Texas. EPC, founded in 2003, offers a full spectrum of finish technology including powder coating, abrasive blasting and plating for heavy industrial, transportation, aerospace and light commercial industries. The acquisition of EPC is consistent with our strategic initiative to grow our Metal Coatings segment with products and services that complement our industry-leading galvanizing business.

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.

Energy Segment

AZZ's Energy segment is a leading provider of specialized products and services designed to support primarily industrial ~~nuclear~~ and electrical applications. Our product offerings include custom switchgear, electrical enclosures, medium and high voltage bus ducts, explosion proof and hazardous duty lighting, nuclear safety-related equipment and tubular products. In addition to our product offerings, AZZ's Energy segment focuses on extension of life cycle for the power generation, refining and industrial infrastructure, through automated weld overlay solutions for corrosion and erosion mitigation. The markets for our Energy segment 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. While some of our competitors are much larger than us, our Energy segment offers some of the most technologically advanced solutions and engineering resources developed from a legacy of proven, reliable product options, allowing AZZ Energy to be ideally positioned to meet the most challenging application-specific demands.

Copper, aluminum, steel and nickel based alloys are the primary raw materials used by this segment. We do not foresee any availability issues for these materials. We do not contractually commit to minimum purchase volumes and increases in price for these items are normally managed through escalation clauses ~~to the~~in our customer’s contracts, which the customers may not always accept. In addition, we ~~seek~~work to ~~get~~obtain firm pricing contracts from our vendors on these materials at the time we receive orders from our customers in order to minimize price volatility risk.

We sell Energy segment products through our internal sales force, manufacturers’ representatives, distributors ~~agents~~ and ~~our internal sales force.~~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 ~~not~~ have a material adverse effect on our consolidated revenues or net income.

In February 2020, we completed the sale of our nuclear logistics business reported within our Energy 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 of the business reflects our longer term strategy to focus on core businesses and markets. 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.

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OnIn March ~~22,~~ 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. ~~The~~This acquisition ~~will complement~~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 ~~switchgear businesses.~~Maryland.

OnIn September 6, 2017, we completed the acquisition of all the assets and outstanding shares of Powergrid Solutions, Inc. ("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 since 1982. The acquisition of PSI is a key addition to the Company's electrical switchgear portfolio. The addition of PSI’s low-voltage and padmount switchgear ~~allows~~allowed AZZ to offer a comprehensive portfolio of customized switchgear solutions to both existing and new customers in a diverse set of industries.

On March 1, 2016, we completed an acquisition of the equity securities of Power Electronics, Inc. (“PEI”), a Millington, Maryland-based manufacturer and integrator of electrical enclosure systems. The acquisition of PEI will enhance our capacity to serve existing and new customers in a diverse set of industries along the Eastern seaboard of the United States.

For additional information regarding the Energy ~~Segment's~~segment's backlog and ~~operating results, see Results of Operations within Item 7. For additional financial information by segment, see Note 12 to the Consolidated Financial Statements.~~

~~Metal Coatings Segment~~

The Metal Coatings segment provides hot dip galvanizing and other metal coating applications to the steel fabrication industry through facilities located throughout the United States and Canada. Hot dip galvanizing is a metallurgical process in which molten zinc is applied to steel. The zinc alloying renders corrosion protection to fabricated steel for extended periods of up to 50 years. As of February 28, 2019, we operated forty-two metal coating plants, which are located in various locations throughout the United States and Canada.

Zinc, the principal raw material used in the galvanizing process, is currently readily available, but is subject to volatile pricing. We manage our exposure to commodity pricing of zinc by utilizing agreements with zinc suppliers that include fixed costs contracts to guard against escalating commodity prices. We also secure firm pricing for natural gas supplies with individual utilities when possible. We may or may not continue to use these or other strategies to manage risk in the future.

On February 1, 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. Rogers Brothers provides galvanizing solutions to a multi-state area within the Midwest. The acquisition supports our goal of continued geographic expansion as well as portfolio expansion of our metal coatings solutions.

On June 30, 2017, we completed the acquisition of the assets of Enhanced Powder Coating Ltd., (“EPC”), a privately held, high specification, National Aerospace and Defense Contractors Accreditation Program, ("NADCAP"), certified provider of powder coating, plating and anodizing services based in Gainesville, Texas. EPC, founded in 2003, offers a full spectrum of finish technology including powder coating, abrasive blasting and plating for heavy industrial, transportation, aerospace and light commercial industries. The acquisition of EPC is consistent with our strategic initiative to grow our Metal Coatings segment with products and services that complement our industry-leading galvanizing business.

~~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.

Employees

As of February ~~28, 2019,~~29, 2020, the Company employed approximately ~~3,884~~4,343 persons consisting of approximately ~~3,427~~3,833 in the United States, ~~approximately 200~~214 in Canada, ~~216~~234 in Europe, and 4162 in other countries.

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Information About Our Executive Officers ~~of the Registrant~~



Name	Age	Business Experience of Executive Officers for Past Five Years Position or Office with Registrant or Prior Employer	Held Since
Thomas E. Ferguson	6263	President and Chief Executive Officer Chief Executive Officer, FlexSteel Pipeline Technologies, Inc. President, Flow Solutions Group, Flowserve Corporation President, Pump Division, Flowserve Corporation	2013 2013-2013 2009-2012 2003-2009
Paul W. Fehlman	5556	Senior Vice President of Finance, Chief Financial Officer Vice President, Finance, Engineered Products Division, Flowserve Corp. Vice President, Investor Relations and FP&A, Flowserve Corporation Vice President, Treasurer, Flowserve Corporation	2014 2011-2013 2009-2011 2004-2009
Tara D. Mackey	4950	Chief Legal Officer and Secretary Chief Legal Counsel and Corporate Secretary, First Parts, Inc. General Counsel and Corporate Secretary, Silverleaf Resorts Inc. VP, Assistant General Counsel and Corporate Secretary, SuperMedia LLC	2014 2013-2014 2011-2013 2008-2011
Matt Emery	5253	Chief Information and Human Resource Officer Senior Director of Information Technologies, Hewlett-Packard	2013 2004-2013
~~James Drew Byelick~~Philip Schlom	6155	Vice President and Chief Accounting Officer ~~Director of~~Vice President - Finance, Audit, Controls and Continuous Improvement, Exterran Corporation Vice President, Global Compliance and Internal Audit, Parker Drilling Company Vice President - ~~Electrical~~Finance, Parker Drilling Company ~~Controller - Nuclear Logistics LLC~~Chief Accounting Officer, Parker Drilling Company ~~Independent Consultant~~	~~2017~~2019 ~~2016-2017~~2017-2019 ~~2015-2016~~ ~~2000-2015~~2014-2017 2013-2014 2009-2013
Chris Bacius	5859	Vice President, Corporate Development Vice President Mergers & Acquisition, Flowserve Corporation Vice President Business Development, Flowserve Corporation	2014 2012-2014 2009-2012
Michael Doucet	47	Senior Vice President - Surface Technologies & Galvabar Vice President and General Manager - Galvabar President & Chief Operating Officer - L&M Steel Co., Inc. Director of Sales, Central Region Mills & Rebar Fabrication - Commercial Metal Company Vice President & General Manager, PC Wholesale	2018 2017-2018 2013-2018 2002-2013 1998-2001
Gary Hill	55	President and General Manager - AZZ Industrial Group Vice President and General Manager - AZZ WSI LLC Managing Director, Aquilex WSI-Europe Vice President, Marketing, Aquilex Vice President and General Manager - Crane Co.	2017 2013-2017 2011-2013 2008-2011 2004-2008
Ken Lavelle	6263	President and General Manager - Electrical Platform President, Lavelle Management Consultant President, Global Seals & Systems Operation - Flowserve Corporation Vice President, General Manager, FSG North America - Flowserve Corporation	2017 2016-2017 2012-2016 2009-2012
~~Michael Doucet~~	46	~~Senior Vice President - Alternative Coatings~~ ~~Vice President and General Manager - Galvabar~~ ~~President & Chief Operating Officer - L & M Steel Co., Inc.~~ ~~Director of Sales, Central Region Mills & Rebar Fabrication - Commercial Metals Company~~ ~~Vice President & General Manager, PC Wholesale~~	~~2018~~ ~~2017-2018~~ ~~2013-2018~~ ~~2002-2013~~ ~~1998-2001~~
Bryan Stovall	5455	President - AZZ Galvanizing Solutions Senior Vice President - Metal Coatings Vice President, Galvanizing - Central Operations Vice President, Galvanizing - Southern Operations	~~2018~~2019 2018-2019 2013-2018 2009-2012

Each executive officer was elected by the Board of Directors to hold office until the next Annual Meeting or until their successor is elected. No executive officer has any family relationships with any other executive officer of the Company.

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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, http://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. The SEC’s website, http://www.sec.gov, contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our web site and the information on it or connected to it are not a part of this Annual Report on Form 10-K.

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.~~governance and sustainability. 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: a Code of Conduct, which applies to the Company’s officers, directors and ~~employees.~~employees; a 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 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, ~~our Code~~Codes of Conduct or any of our sustainability or corporate social responsibility policies, and our Committee charters under the Heading “Investor Relations,” ~~subheading~~subheadings “Corporate Governance,” or "Corporate Social Compliance" on our website at:http://www.azz.com

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

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Item 1A. Risk Factors

Our business is subject to a variety of risks, including but not limited to the risks described below, which we believe are the most significant risks and uncertainties facing our business. Additional risks and uncertainties not known to us or not described below may also impair our business operations in the future. 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.

Our business segments operate in highly competitive markets.

Many of our competitors, primarily in our Energy Segment, are significantly larger and have substantially more resources than AZZ. Competition is based on a number of factors, including price. Certain of our competitors may have lower cost structures and may, therefore, be able to provide their products and services at lower prices than we are able to provide. We cannot be certain that our competitors will not develop the expertise, experience and resources to provide services or products that are superior in ~~both~~ price, ~~and~~delivery time or quality in the future. Similarly, we cannot be certain that we will be able to maintain or enhance our competitive position within our industries, maintain our customer base at current levels or increase our customer base.

Our operating results may vary significantly from quarter to quarter.

Our quarterly results may be materially and adversely affected by:

the timing and volume of work under new or existing agreements;

general economic conditions;

fluctuations in the budgetary spending of customers, including seasonality;

variations in the margins 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;

changes in customer delivery schedules;

unstable political economic conditions and public health issues delaying customer operations;

increases in design, manufacturing or transportation costs; and

the ability of customers to pay their invoices when owed to us.

Accordingly, our operating results in any particular quarter may not be indicative of the results expected for any other quarter or for the entire year.

We may be unsuccessful at implementing and generating internal growth from our Strategic Growth Initiatives.

Our ability to generate internal growth will be affected by, among other factors, our ability to:

attract new customers, internationally and domestically;

integrate regulatory changes;

increase the number or size of projects performed for existing customers;

hire and retain employees; and

increase volume utilizing our existing facilities.

Many of the factors affecting our ability to generate internal growth through our initiatives may be beyond our control, and we cannot be certain that our strategies will be successful or that we will be able to generate cash flow sufficient to fund our operations and to support internal growth. If we are unsuccessful, we may not be able to achieve internal growth, expand our operations or grow our business.

The departure of key personnel could disrupt our business.

We depend on the continued efforts of our executive officers and senior management team. We cannot be certain that any individual will continue in such capacity for any particular period of time. The future loss of key personnel, or the inability to hire and retain qualified employees, could negatively impact our ability to manage our business.

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Our business requires skilled labor, and we may be unable to attract and retain qualified employees.

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 experience shortages of qualified 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 expense will not increase as a result of shortage in the supply of skilled personnel. Labor shortages or increased labor costs could impair our ability to maintain our profit margins or sustain and grow our revenues.

Actual and potential claims, lawsuits, and proceedings could ultimately reduce our profitability and liquidity and negatively impact our financial condition.

In the future, the Company could be named as a defendant in legal proceedings claiming damages from us in connection with the operation of our business. Most of the actions against us arise out of the normal course of business related to commercial disputes regarding the equipment we manufacture or the services we provide. We could potentially be a plaintiff in legal proceedings against customers, in which we seek to recover payments of contractual amounts due to us, and indemnity claims for increased costs or damages incurred by our Company. When appropriate, we establish provisions against certain legal exposures, and we adjust such provisions from time to time according to ongoing developments related to each case. If in the future 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.

Technological innovations by competitors may make existing products and production methods obsolete.

All of the manufactured products and services sold by the Company depend upon the best available technology for success in the marketplace. The competitive environment is highly sensitive to technological innovation in both segments of our business. It is possible for our competitors, both foreign and domestic, to develop new products, production methods or technology which would make our current products, services or methods obsolete or at least hasten their obsolescence or materially reduce our competitive advantage in the markets that we serve.

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 the recent novel coronavirus, could potentially cause disruptions in our business. 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 to our ability to complete projects on schedule. Any disruption of our customers or suppliers and their contract manufacturers could likely impact our sales and operating results. In addition, continued 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. 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 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.

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. Such changes in the laws, governmental regulations could negatively impact our business or the demand for our products and services by customers and other industry related participants, and could result in a negative impact to our operations, or profitability, or our ability to perform projects in any respective regions.

Federal, state and local governments have a major impact on the framework and economics of the US nuclear power industry. Changes in laws or regulations regarding the operations of current nuclear facilities could have an impact on the demand for our products and services, which would have a negative impact on our operations. These same risks are also associated with foreign nuclear power industries.

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New regulations related to conflict minerals could adversely impact our business.

In August 2012, the SEC adopted a rule pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection 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. There are costs associated with complying with these disclosure requirements, including costs for due diligence to determine the source of any conflict minerals used in our products and other potential changes to products, processes, or sources of supply. Despite our continued due diligence efforts, in the future we may be unable to verify the origin of all conflict minerals used in our component products. As a result, we could potentially face reputational and other challenges with customers that require that all of the components incorporated in our products be certified as conflict-free.

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. However, we may be unable to implement this growth strategy if we are not able to reach agreement on mutually acceptable terms. Moreover, our acquisition strategy involves certain risks, including:

risks and liabilities from our acquisitions that may not be discovered during the preacquisition due diligence process;

difficulties in the post acquisition integration of operations and systems;

the termination of relationships with key personnel and customers of the acquired company;

the potential failure to add additional employees to manage the increased volume of business;

additional post acquisition challenges and complexities in areas such as tax planning, treasury management, financial reporting and legal compliance;

a disruption of our ongoing business or an inability of our ongoing business to receive sufficient management attention; and

a failure to realize the cost savings or other financial benefits we anticipated or modeled prior to acquisition.

Future acquisitions may require us to obtain additional equity or debt financing, which may not be available to us.

Our business segments are sensitive to economic downturns.

If the general level of economic activity deteriorates from current levels, our customers may delay or cancel new projects. If there is a reduction in demand for our products or services, as a result of a downturn in the general economy, there could be a material adverse effect on price levels and the quantity of goods and services purchased, therefore adversely impacting our revenues, consolidated results from operations and cash flows. A number of factors, including financing conditions and potential bankruptcies in the industries we serve, could adversely affect our customers and their ability or willingness to fund capital expenditures in the future and pay for services or equipment. Certain economic conditions may also impact the financial condition of one or more of our key suppliers, which could affect our ability to secure raw materials and components to meet our customers’ demand for our products in the future. Other various factors drive demand for our products and services, including the price of oil, economic forecasts and financial markets. Uncertainty in the global economy and financial markets could impact our customers and could in turn severely impact the demand for corporate infrastructure projects that would result in a reduction in orders for our products and services. 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 Energy and Metal Coatings segments.

A portion of the revenues from our Energy and Metal Coatings segments are from international markets. 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;

currency fluctuation, devaluations and conversion restrictions;

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

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Fluctuations in the price and supply of raw materials and natural gas for our business segments may adversely affect our operations.

In our Metal Coatings segment, zinc and natural gas represent a large portion of our cost of sales. The prices of zinc and natural gas are subject to volatility. We purchase a wide variety of raw materials for our Energy segment to manufacture our products, including copper, aluminum, steel and nickel. Unanticipated increases in raw material requirements or price increases could increase production costs and 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. We seek to maintain operating margins by attempting to increase the price of our products and services in response to increased costs, but may not be successful in passing these price increases through to our customers

Climate change could impact our business.

Climate changes could result in an adverse impact on ~~AZZ's~~our operations, particularly in hurricane prone or low lying areas near the ocean. At this time, the Company is not able to speculate as to the potential timing or impact from potential global warming and other natural disasters, however the Company believes that it currently has adequate insurance coverage and disaster recovery plans related to any potential natural disasters that might occur at any of the Company’s sites.

Changes in greenhouse gas regulations could impact our operating results.

International agreements and national or regional legislation and regulatory measures to limit greenhouse emissions are currently in various stages of discussion or implementation. These and other greenhouse gas emissions-related laws, policies and regulations may result in substantial capital, compliance, operating and maintenance costs. The level of expenditure required to comply with these laws and regulations is uncertain and is expected to vary depending on the laws enacted in each jurisdiction, our activities in the particular jurisdiction, and market conditions.

The effect of regulation on our financial performance will depend on a number of factors including, not limited to, the sectors covered, the greenhouse gas emissions reductions required by law, the extent to which we would be entitled to receive emission allowance allocations or would need to purchase compliance instruments on the open market or through auctions, the price and availability of emission allowances and credits and the impact of legislation or other regulation on our ability to recover the costs incurred through the pricing of our products and services.

~~Our business segments are sensitive to economic downturns.~~

If the general level of economic activity deteriorates from current levels, our customers may delay or cancel new projects. If there is a reduction in demand for our products or services, as a result of a downturn in the general economy, there could be a material adverse effect on price levels and the quantity of goods and services purchased, therefore adversely impacting revenues and results from operations. A number of factors, including financing conditions and potential bankruptcies in the industries we serve, could adversely affect our customers and their ability or willingness to fund capital expenditures in the future and pay for past services. Certain economic conditions may also impact the financial condition of one or more of our key suppliers, which could affect our ability to secure raw materials and components to meet our customers’ demand for our products in the future. Other various factors drive demand for our products and services, including the price of oil, economic forecasts and financial markets. Uncertainty in the global economy and financial markets could continue to impact our customers and could in turn severely impact the demand for spending projects that would result in a reduction in orders for our products and services. 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 and political events may adversely affect our Energy and Metal Coatings Segments.~~

A portion of the revenues from our Energy and Metal Coatings Segments are from international markets. 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, such as is occurring in Northern Africa, Europe and the Middle East;~~

~~social unrest, acts of terrorism, force majeure, war or other armed conflict;~~

~~inflation;~~

~~currency fluctuation, devaluations and conversion restrictions;~~

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~~governmental activities that limit or disrupt markets, restrict payments or limit the movement of funds; and~~

~~trade restrictions and economic embargoes by the United States or other countries.~~

~~Fluctuations in the price and supply of raw materials and natural gas for our business segments may adversely affect our operations.~~

We purchase a wide variety of raw materials for our Energy Segment to manufacture our products, including copper, aluminum, steel and nickel. Unanticipated increases in raw material requirements or price increases could increase production costs and adversely affect profitability. In our Metal Coatings Segment, zinc and natural gas represent a large portion of our cost of sales. The prices of zinc and natural gas are subject to volatility. 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. We seek to maintain operating margins by attempting to increase the price of our products and services in response to increased costs, but may not be successful in passing these price increases through to our customers.

Our volume of fixed-price contracts for our Energy ~~Segment~~segment could adversely affect our business.

We currently generate, and expect to continue to generate, a significant portion of our revenues under fixed price contracts. We must estimate the costs of completing a particular project to bid for fixed-price contracts. The actual cost of labor and materials, however, may vary from the costs we originally estimated. Depending on the size of a particular project, variations from estimated cost could have a significant impact on our operating results for any fiscal year.

Our ~~operations could be adversely impacted by the continuing effects from government regulations.~~

Various regulations have been implemented related to new safety and certification requirements applicable to oil and gas drilling and production activities. While certain new drilling plans and drilling permits have been approved, we cannot predict whether operators will be able to satisfy these requirements. Further, we cannot predict what the continuing effects of government regulations on offshore deepwater drilling projects may have on offshore oil and gas exploration and development activity, or what actions may be taken by our customers or other industry participants in response to these regulations. Changes in laws or regulations regarding offshore oil and gas exploration and development activities and decisions by customers and other industry participants could reduce demand for our services, which would have a negative impact on our operations. Similarly, we cannot accurately predict future regulations by the government in any country in which we operate and how those regulations may affect our ability to perform projects in those regions.

~~New regulations related to conflict minerals could adversely impact our business.~~

On August 22, 2012, the SEC adopted a rule pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection 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. There are costs associated with complying with these disclosure requirements, including costs for due diligence to determine the source of any conflict minerals used in our products and other potential changes to products, processes, or sources of supply. Despite our due diligence efforts, we may be unable to verify the origin of all conflict minerals used in our component products. As a result, we may face reputational and other challenges with customers that require that all of the components incorporated in our products be certified as conflict-free.

~~Our acquisition strategy involves a number of risks.~~

We intend to pursue continued growth through opportunities to acquire companies or assets that will enable us to expand our product and service offerings and to increase our geographic footprint. We routinely review potential acquisitions. However, we may be unable to implement this growth strategy if we cannot reach agreement on potential strategic acquisitions on acceptable terms or for other reasons. Moreover, our acquisition strategy involves certain risks, including:

~~difficulties in the post acquisition integration of operations and systems;~~

~~the termination of relationships with key personnel and customers of the acquired company;~~

~~a failure to add additional employees to manage the increased volume of business;~~

~~additional post acquisition challenges and complexities in areas such as tax planning, treasury management, financial reporting and legal compliance;~~

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~~risks and liabilities from our acquisitions, some of which may not be discovered during the preacquisition due diligence process;~~

~~a disruption of our ongoing business or an inability of our ongoing business to receive sufficient management attention; and~~

~~a failure to realize the cost savings or other financial benefits we anticipated prior to acquisition.~~

~~Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on current attractive market terms.~~

~~Our~~ use of over time revenue accounting in the Energy ~~Segment~~segment could result in a reduction or elimination of previously reported profits.

As discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates” and in the notes to our consolidated financial statements, a portion of our revenues is recognized over time. Over time revenue recognition causes us to recognize contract revenues and earnings ratably over the contract term in proportion to our incurrence of contract costs. The earnings or losses recognized on individual contracts are based on estimates of contract revenues, costs and profitability. Contract losses are recognized in full when determined, and contract profit estimates are adjusted based on ongoing reviews of contract profitability. Actual collection of contract amounts or change orders could differ from original estimated amounts and could result in a reduction or elimination of previously recognized earnings. In certain circumstances, it is possible that such adjustments could be significant.

We may not be able to fully realize the revenue value reported in our backlog for our Energy ~~Segment.~~segment.

We ~~have~~maintain a backlog of work in our Energy ~~Segment.~~segment due to the lead time required to design, procure and manufacture our Energy products or services. Orders included in our backlog are represented by customer purchase orders and contracts, which we believe to be firm. Backlog develops as a result of new business secured, which represents the ~~revenue~~contractual value of new project commitments received by us during a given period. Backlog consists of ~~projects~~orders which have either (1) not been started or (2) are in progress and are not yet complete. In the latter case, the revenue value reported in backlog is the remaining value associated with work that has not yet been completed. From time to time, ~~projects that were~~orders recorded as new business or new backlog are cancelled. In the event ~~of a project~~ cancellation, we ~~may be~~are often reimbursed for certain costs and the margin on those costs, but typically have no contractual right to the total revenue reflected in our backlog. In addition to being unable to recover certain direct costs, we may also incur additional costs resulting from underutilized assets if ~~projects~~orders are cancelled.

~~Our operating results may vary significantly from quarter to quarter.~~

~~Our quarterly results may be materially and adversely affected by:~~

~~the timing and volume of work under new agreements;~~

~~general economic conditions;~~

~~the budgetary spending patterns of customers;~~

~~variations in the margins of projects performed during any particular quarter;~~

~~losses experienced in our operations not otherwise covered by insurance;~~

~~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;~~

~~a change in customer delivery schedule;~~

~~increases in design and manufacturing costs; and~~

~~abilities of customers to pay their invoices owed to us.~~

~~Accordingly, our operating results in any particular quarter may not be indicative of the results expected for any other quarter or for the entire year.~~

~~We may be unsuccessful at generating internal growth.~~

~~Our ability to generate internal growth will be affected by, among other factors, our ability to:~~

~~attract new customers, internationally and domestically;~~

~~integrate regulatory changes;~~

~~increase the number or size of projects performed for existing customers;~~

~~hire and retain employees; and~~

~~increase volume utilizing our existing facilities.~~

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Many of the factors affecting our ability to generate internal growth may be beyond our control, and we cannot be certain that our strategies will be successful or that we will be able to generate cash flow sufficient to fund our operations and to support internal growth. If we are unsuccessful, we may not be able to achieve internal growth, expand our operations or grow our business.

~~The departure of key personnel could disrupt our business.~~

We depend on the continued efforts of our executive officers and senior management. We cannot be certain that any individual will continue in such capacity for any particular period of time. The loss of key personnel, or the inability to hire and retain qualified employees, could negatively impact our ability to manage our business.

~~Our business requires skilled labor, and we may be unable to attract and retain qualified employees.~~

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 requirements. We may experience shortages of qualified 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 expense will not increase as a result of shortage in the supply of skilled personnel. Labor shortages or increased labor costs could impair our ability to maintain our business or grow our revenues.

~~Actual and potential claims, lawsuits, and proceedings could ultimately reduce our profitability and liquidity and weaken our financial condition.~~

In the future, the Company could be named as a defendant in legal proceedings claiming damages from us in connection with the operation of our business. Most of the actions against us arise out of the normal course of our performing services or with respect to the equipment we manufacture. We could potentially be a plaintiff in legal proceedings against customers, in which we seek to recover payments of contractual amounts due to us, and claims for increased costs incurred by us. When appropriate, we establish provisions against certain legal exposures, and we adjust such provisions from time to time according to ongoing developments related to each exposure. If in the future our assumptions and estimates related to such exposures prove to be inadequate or incorrect, our consolidated results of operations, cash flows and financial condition could be adversely affected. In addition, claims, lawsuits and proceedings may harm our reputation and possibly divert management resources away from operating our business.

~~Technological innovations by competitors may make existing products and production methods obsolete.~~

All of the products manufactured and sold by the Company depend upon the best available technology for success in the marketplace. The competitive environment is highly sensitive to technological innovation in both segments of our business. It is possible for our competitors, both foreign and domestic, to develop new products or production methods, which will make current products or methods obsolete or at least hasten their obsolescence.

~~Catastrophic events could disrupt our business.~~

The occurrence of catastrophic events ranging from natural disasters such as earthquakes, tsunamis or hurricanes to epidemics such as health epidemics to acts of war and terrorism could disrupt or delay our ability to complete projects and could potentially expose the Company to third-party liability claims. Such events may or may not be fully covered by our various insurance policies or may be subject to deductibles. In addition, such events could impact our customers and suppliers, resulting in temporary or long-term delays and/or cancellations of orders or raw materials used in normal business operations. These situations are outside the Company’s control and could have a significant adverse impact on the results of operations.

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.

Other than a nominal number of employees at four of our wholly-owned subsidiaries, none of our employees are currently represented by unions. However, our U.S. based employees have the right at any time under the National Labor Relations Act to form or affiliate with a union. If ~~some or~~a large portion of our ~~entire~~ workforce were to become unionized and the terms of the collective bargaining agreement were significantly different from our current compensation arrangements, it could increase our operating costs and adversely impact our profitability. 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.

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AZZ’s flexibility to operate its business could be impacted by provisions in its debt obligations.

AZZ’s debt instruments contain covenants which restrict or prohibit certain actions (“negative covenants”), including, but not limited to, ~~AZZ’s~~the Company's ability to incur debt, create or suffer to exist liens, capital spending limits, engage in certain merger, acquisition, or divestiture actions, or increase dividends beyond a specific level. AZZ’s debt instruments also contain covenants requiring AZZ to, among other things, maintain specified financial ratios (“affirmative covenants”). Failure to comply with these negative covenants and affirmative covenants could result in an event of default that, if not cured or waived, could restrict the Company’s access to liquidity and have a material adverse effect on the Company’s business or prospects. If the Company does not have enough cash to service its debt or fund other liquidity needs, AZZ 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. AZZ cannot assure that any of these remedies can be effected on commercially reasonable terms or at all.

A failure in our operational systems or cyber security attacks on any of our facilities, or those of third parties, may

affect adversely our financial results.

Our business is dependent upon our operational systems to process a large amount of data and complex transactions. If any of our financial, operational, or other data processing systems fail or have other significant shortcomings, our financial results could be adversely affected. Our financial results could also be adversely affected if an employee causes our operational systems to fail, either as a result of inadvertent error or by deliberately tampering with or manipulating our operational systems. Due to increased technology advances, we have become more reliant on technology to help increase efficiency in our business. We use computer programs to help run our financial and operations sectors, and this may subject our business to increased risks. Any future cyber security attacks that affect our facilities, our customers and any financial data could have a material adverse effect on our business. In addition, cyber attacks on our ~~customer~~customers, suppliers and employee data may result in a financial loss, including potential fines for failure to safeguard data, and may negatively impact our reputation. Third-party systems on which we rely could also suffer operational system failure. Any of these occurrences could disrupt our business, result in potential liability or reputational damage or otherwise have an adverse effect on our financial results.

We could face significant liabilities for withdrawal from Multiemployer Pension Plans.

We are a participating employer in a number of trustee-managed multiemployer defined benefit pension plans for employees who are covered by collective bargaining agreements. In the event of our withdrawal from a multiemployer pension plan, we may incur expenses associated with our obligations for unfunded vested benefits at the time of the withdrawal. Depending on various factors, a future withdrawal could have a material adverse effect on results of operations or cash flows for a particular reporting period.

~~Uncertainties in the interpretation and application of the 2017 Tax Cuts and Jobs Act could materially affect our tax obligations and effective tax rate.~~

The U.S. Tax Cuts and Jobs Act of 2017 (the “U.S. Tax Act”) requires complex computations to be performed that were not previously required by U.S. tax law, significant judgments to be made in interpretation of the provisions of the U.S. Tax Act, significant estimates in calculations, and the preparation and analysis of information not previously relevant. The U.S. Treasury Department, the IRS, and other standard-setting bodies will continue to interpret or issue guidance on how provisions of the U.S. Tax Act will be applied or otherwise administered. As future guidance is issued, we may make adjustments to amounts that we have previously recorded that may materially impact our financial statements in the period in which the adjustments are made.

We have identified a material weakness in our internal control over financial reporting which could, if not remediated, adversely affect investor confidence in our company, the value of our common stock and our ability to report our financial condition and results of operations in a timely and accurate manner.

Pursuant to the Sarbanes-Oxley Act of 2002, we are required to document and test our internal controls over financial reporting and to provide a report of management’s assessment of the effectiveness of such controls. The Company had a material weakness in its internal control over financial reporting as of February ~~28, 2019~~29, 2020 related to ~~revenue~~the accounting ~~reconciliations.~~for income taxes. Although we are working to fully remediate this material weakness, ~~identified as of February 28, 2019,~~ there can be no assurance as to when the remediation plan will be fully implemented and executed. Any material weakness in our internal control over financial reporting that has not been remediated or that may occur in the future could result in misstatements of our consolidated financial statements, restatements of those financial statements, a decline in our stock price, or otherwise materially adversely affect our business, reputation, results of operations, financial condition, or liquidity.

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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The Company's global headquarters and executive offices are located in leased office space in Fort Worth, Texas. ~~The Company's~~Our major manufacturing facilities, ~~classified by reporting segment, are located in the following countries~~defined as those exceeding 20,000 square feet, were as follows as of February ~~28, 2019~~29, 2020:


			Square Footage					Square Footage
Segment	Location	Facilities	Total	Owned	Leased	Location	Facilities	Total	Owned	Leased
Metal Coatings						United States	45	2,621,188	2,223,463	397,725
						Canada	3	175,102	175,102	—
Energy	United States	18	1,308,567	379,178	929,389	United States	14	1,112,586	260,381	852,205
	Canada	2	94,456	—	94,456	Canada	1	21,297	—	21,297
	Europe	2	86,785	—	86,785	Europe	2	84,674	—	84,674
	Brazil	1	11,814	—	11,814
	China	2	13,393	—	13,393
Metal Coatings	United States	41	2,166,969	2,059,554	107,415
	Canada	3	175,102	175,102	—
Total		69	3,857,086	2,613,834	1,243,252		65	4,014,847	2,658,946	1,355,901

The Company believes that its ~~manufacturing and corporate~~current facilities are adequate to ~~carry on~~meet the requirements of its ~~business operations~~present and foreseeable future operations. See Note 13 to the consolidated financial statements included in Item 8 of this Form 10-K for additional information regarding the ~~next twelve months.~~Company's lease obligations.

Item 3. Legal Proceedings

On January 11, 2018, Logan Mullins, acting on behalf of himself and a putative class of persons who purchased or otherwise acquired the Company's securities between April 22, 2015 and January 8, 2018, filed a class action complaint in the U.S. District Court for the Northern District of Texas (the "Court") against the Company and two of its executive officers, Thomas E. Ferguson and Paul W. Fehlman. Logan Mullins v. AZZ, Inc., et al., Case No. 4:18-cv-00025-Y. The complaint alleged, among other things, that the Company's SEC filings contained statements that were rendered materially false and misleading by the Company's alleged failure to properly recognize revenue related to certain contracts in its Energy Segment in purported violation of (1) Section 10(b) of the Exchange Act and Rule 10b-5 and (2) Section 20(a) of the Exchange Act. After the Court appointed a Lead Plaintiff in the case, but before the Company was required to respond to the lawsuit, the Plaintiff voluntarily sought dismissal of the complaint without prejudice. On January 16, 2019, the Court dismissed the case without prejudice. No other parties have sought to reopen the case; therefore, the legal matter is no longer pending.

~~In addition, the~~ Company and its subsidiaries are named defendants and plaintiffs in various routine lawsuits incidental to our business. These proceedings include labor and employment claims, use of the Company’s intellectual property, worker’s compensation, environmental matters, and various ~~environmental matters,~~commercial disputes, all arising in the normal course of business. Although the outcome of these lawsuits or other proceedings cannot be predicted with certainty, and the amount of any potential liability that could arise with respect to such lawsuits or other matters cannot be predicted at this time, management, after consultation with legal counsel believes it has strong defenses to all of these matters and does not expect liabilities, if any, from these claims or proceedings, either individually or in the aggregate, to have a material effect on the Company’s financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock, $1.00 par value (“Common Stock”), is traded on the New York Stock Exchange under the symbol “AZZ”. As of ~~February 28, 2019,~~April 16, 2020, we had approximately ~~393~~386 holders of record of our Common Stock, not including those shares held in street or nominee name. Item 12 of this Annual Report on Form 10-K contains certain information related to our equity compensation plans.

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. AZZ has paid dividends quarterly over the last three fiscal years. Dividends paid totaled ~~$17.7~~$17.8 million, $17.7 million, and ~~$16.6~~$17.7 million during fiscal 2020, 2019, ~~2018,~~ and ~~2017,~~2018, respectively. 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 EBITDA) exceeds 3.0 to 1.0. Currently there are no restrictions on dividend payments. ~~AZZ fully expects to continue to pay dividends. However, the decision is within the discretion of our Board and we expect any~~Any future dividends payments will be ~~made on a quarterly basis.~~reviewed each quarter and declared by the Board of Directors at its discretion.

Purchases of Equity Securities

In January 2012, our Board authorized the repurchase of up to ten percent of the outstanding shares of our Common Stock. The share repurchase authorization does not have an expiration date, and the amount and prices paid for any future share purchases under the authorization will be based on market conditions and other factors at the time of the purchase. ~~Repurchases~~Future repurchases under this share repurchase authorization would be made through open market purchases or private transactions in accordance with applicable federal securities laws, including Rule 10b-18 under the Exchange Act. 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. ~~The Company did not make any repurchases of its Common Stock during~~

During the three months ended February ~~28, 2019.~~29, 2020, we made the following repurchases of our Common Stock:



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Number of Shares that May Yet Be Purchased Under the Plan or Programs

December 1 - 31	—	—		—	1,052,800
January 1 - 31	130,800	$	43.34	130,800	922,000
February 1 - 29	—	—		—	922,000
Total	130,800	$	43.34	130,800	922,000

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. See Note 10 to the consolidated financial statements included in Item 8 of this Form 10-K for additional information regarding our equity incentive plans.

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. Companies) and the Index for NYSE Stocks (SIC 5000-5099 US Companies). These indices are prepared by Zacks Investment Research, Inc. ~~AZZ’s~~The Company's Common Stock is listed on The New York Stock Exchange and AZZ is ~~engaged~~operates in two industry segments. The shareholder return shown below is not necessarily indicative of future performance. Total return, as shown, assumes $100 invested on February 28, ~~2014,~~2015, in shares of AZZ Common Stock and each index, all with cash dividends reinvested. The calculations exclude trading commissions and taxes.

Comparison of Five Year-Cumulative Total Returns

Value of $100 Invested on February 28, ~~2014~~2015

For Fiscal Year Ended on the Last Day of February

Symbol CRSP Total Returns Index for: 2/14 2/15 2/16 2/17 2/18 2/19
AZZ Inc. 100.00
103.72
116.72
137.06
96.79
110.62
Index for NYSE Stock Market (US Companies) 100.00
112.24
101.24
127.49
142.45
149.72
Index for NYSE Stocks (SIC 5000-5099 US 100.00
103.87
94.28
120.51
135.40
129.13
Companies) Wholesale Trade - Durable Goods



Symbol	CRSP Total Returns Index for:	2/15	2/16	2/17	2/18	2/19	2/20
	AZZ Inc.	100.00	112.53	132.14	93.32	106.66	86.86
	Index for NYSE Stock Market (US Companies)	100.00	90.20	113.59	126.91	133.40	135.14
	Index for NYSE Stocks (SIC 5000-5099 US	100.00	96.77	124.24	140.12	132.77	129.24
	Companies) Wholesale Trade - Durable Goods

Item 6. Selected Financial Data

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements regarding our business and operations. 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.

A discussion regarding our financial condition and results of operations as well as our liquidity and capital resources for fiscal year 2019 compared to fiscal year 2018 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended February 28, 2019, which is available on the SEC’s website at www.sec.gov and our Investor Relations website at www.azz.com/investor-relations.

As mentioned in Item 1, ~~AZZ~~the Company operates two distinct business segments, the ~~Energy~~Metal Coatings segment and the ~~Metal Coatings~~Energy 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 12 to the ~~Consolidated Financial Statements.~~consolidated financial statements. References herein to fiscal years are to the twelve-month periods that end in February of the relevant calendar year. For example, the twelve-month period ended February ~~28, 2019~~29, 2020 is referred to as “fiscal ~~2019”~~2020” or “fiscal year ~~2019.~~2020.”

~~Recently Adopted Accounting Standards~~

~~On March 1, 2018, we adopted Accounting Standards Update ("ASU") No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ and the related amendments ("ASC 606") using the modified retrospective method applied to those contracts which were not completed as of February 28, 2018. Results for operating periods beginning on or after March 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with the accounting standards in effect for those periods. See Note 1 to the Consolidated Financial Statements for more information on the impact of our adoption of ASC 606.

~~During the fourth quarter of fiscal 2019, effective March 1, 2018, we adopted ASU 2016-02,~~ ~~Leases (Topic 842)~~ using a modified retrospective approach as of the period of adoption. Periods prior to the adoption continue to be presented under legacy guidance and there was no cumulative effect adjustment to beginning retained earnings on the March 1, 2018 adoption date. On the date of adoption, we recorded operating lease right of use assets of $42.1 million and lease liabilities of $42.8 million to reflect our portfolio of operating leases, which were previously unrecorded under legacy accounting guidance. However, the adoption did not have any impact on our consolidated statements of income or cash flows. We have elected the package of practical expedients permitted under the transition guidance within the new standard, which among several other items, allows the Company to carry-forward the historical lease classification from legacy guidance for leases that existed on the date of adoption.

Results of Operations

For the fiscal year ended February ~~28, 2019,~~29, 2020, we recorded net sales of ~~$927.1~~$1,061.8 million compared to ~~the~~ prior year’s net sales of ~~$810.4~~$927.1 million. Of ~~the~~ total net sales for fiscal ~~2019,~~2020, approximately ~~52.5%~~47.0% were generated from the Metal Coatings segment and approximately 53.0% of our net sales were generated from the Energy ~~Segment and approximately 47.5% were generated from the Metal Coatings Segment.~~segment. Net income for fiscal ~~2019~~2020 was ~~$51.2~~$48.2 million compared to ~~$45.2~~$51.2 million for fiscal ~~2018~~2019. Net income as a percentage of net sales was 4.5% for fiscal 2020 as compared to 5.5% for fiscal 2019 ~~as compared to 5.6% for fiscal~~ ~~2018~~. Earnings per share ~~increased~~decreased by ~~13.3%~~6.1% to $1.84 per share for fiscal 2020 compared to $1.96 per share for fiscal 2019 ~~compared to $1.73 per share for fiscal~~ ~~2018~~, on a diluted basis.

The results for fiscal 2020 include a loss on divestiture of $18.6 million related to the sale of our nuclear logistics business and impairment charges of $9.2 million related to the exit from the nuclear certified portion of our industrial welding solutions business.

Year ended February ~~28, 2019~~29, 2020 compared with year ended February 28, ~~2018~~2019

Our entire backlog, which is inclusive of transaction taxes for certain foreign subsidiaries, relates to our Energy segment. We ended fiscal ~~2019~~2020 with a backlog of ~~$332.9~~$243.8 million, ~~an increase~~a decrease of ~~$67.5~~$89.1 million or ~~25.4%~~26.8% compared to fiscal ~~2018. The Company's backlog as of year end pertains solely to the Energy segment's operations.~~2019. The book to revenue ratio ~~increased~~decreased in fiscal ~~2019~~2020 as compared to fiscal ~~2018.~~2019. The book to revenue ratio was 0.92 to 1 for fiscal 2020 and 1.07 to 1 for fiscal ~~2019 and 0.92~~2019. The reduction in book to ~~1 for~~revenue ratio in fiscal ~~2018.~~2020 resulted from a current year reduction in backlog in China as we completed several large orders received in prior years.

The following table reflects bookings and revenues for fiscal ~~2019~~2020 and ~~2018.~~2019.

Our total net sales for fiscal ~~2019~~2020 increased by ~~$116.7~~$134.7 million, or ~~14.4%~~14.5%, as compared to fiscal ~~2018.~~2019.

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

Year Ended
February 28, 2019 February 28, 2018
Net sales:
Energy $ 486,823
$ 421,033
Metal Coatings 440,264
389,397
Total net sales $ 927,087
$ 810,430

Our Energy segment recorded net sales for fiscal 2019 of $486.8 million, an increase of 15.6% compared to fiscal 2018 net sales of $421.0 million. The increase in net sales for fiscal 2019 was caused by several positive factors including improved turnarounds in the U.S. refinery market, increased international projects and an uptick in our electrical business. The increase was also attributable to incremental revenues from our fiscal 2019 and fiscal 2018 business acquisitions and was partially offset by continued softness in the nuclear market, which is due in part to the Westinghouse Bankruptcy discussed below.



	Year Ended
	February 29, 2020		February 28, 2019
Net sales:
Metal Coatings	$	498,989	$	440,264
Energy	562,828		486,823
Total net sales	$	1,061,817	$	927,087

Our Metal Coatings segment, which consisted of ~~forty-two metal coating facilities~~forty galvanizing plants, one galvabar plant and seven surface technologies plants as of February ~~28, 2019,~~29, 2020, generated net sales of ~~$440.3~~$499.0 million, a ~~13.1%~~13.3% increase from the prior year’s net sales of ~~$389.4~~$440.3 million. The increase in sales was athe result of higher selling prices and higher volumes of steel ~~processed during the periods driven primarily by improvements in various markets.~~processed. The increase in volume was ~~also~~due primarily to our fiscal 2020 acquisitions and, in addition, we processed incrementally higher volumes at our pre-existing galvanizing facilities.

Our Energy segment recorded net sales for fiscal 2020 of $562.8 million, an increase of 15.6% compared to fiscal 2019 net sales of $486.8 million. The increase in net sales for fiscal 2020 was attributable to ~~incremental~~an uptick in the revenues ~~from~~for our ~~fiscal 2018 acquisitions.~~electrical products, due primarily to the satisfaction of the revenue recognition criteria for certain large international electrical projects

booked in the prior year, and increased revenues for our industrial solutions, due primarily to a large international refining project. In addition, we recognized increased revenues related to the Westinghouse bankruptcy settlement noted further below.

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

Year Ended
February 28, 2019 February 28, 2018
Operating income (loss):
Energy $ 31,332
$ (1,766 )
Metal Coatings 83,591
84,332
Corporate (37,967 ) (34,318 )
Total operating income $ 76,956
$ 48,248

Operating income for the Energy segment increased $33.1 million for fiscal 2019, to $31.3 million as compared to an operating loss of $1.8 million for fiscal 2018. Operating margins for this segment were 6.4% for fiscal 2019 as compared to (0.4)% for fiscal 2018. These increases were primarily attributable to the positive factors noted above and improvements in project margins. In addition, for fiscal 2018, the Company recognized an impairment charge of $10.5 million, classified within cost of sales, related to property, plant and equipment that was retired and a provision for doubtful accounts of $2.9 million, classified within selling, general and administrative, resulting from an adverse court decision related to certain outstanding accounts receivables. No such charges were recorded in fiscal 2019.



	Year Ended
	February 29, 2020			February 28, 2019
Operating income (loss):
Metal Coatings	$	107,926		$	83,591
Energy	32,845			31,332
Corporate	(42,796		)	(37,967		)
Loss on disposal of business	(18,632		)	—
Total operating income	$	79,343		$	76,956

Operating income for the Metal Coatings segment ~~decreased $0.7~~increased $24.3 million, or ~~0.9%~~29.1%, for fiscal ~~2019~~2020 to ~~$83.6~~$107.9 million as compared to ~~$84.3~~$83.6 million for the prior year. Operating margins were 21.6% for fiscal 2020 as compared to 19.0% for fiscal ~~2019 as compared to 21.7% for fiscal 2018.~~2019. These ~~decreases~~increases were primarily attributable to ~~higher zinc~~the increased volumes and ~~labor costs, which were not fully offset by increased~~ selling prices described above and a decline in zinc costs. In addition, fiscal 2019 included a charge of $1.3 million ~~incurred during fiscal 2019~~ for asset impairments, employee severance and other disposal costs related to the consolidation of two galvanizing facilities in the Gulf Coast region of the United States. No such charges were recorded in fiscal 2020.

Operating income for the Energy segment increased $1.5 million for fiscal 2020, to $32.8 million as compared to $31.3 million for fiscal 2019. Operating margins for this segment were 5.8% for fiscal 2020 as compared to 6.4% for fiscal 2019. The increase in operating income was primarily attributable to increased sales and utilization related to our industrial solutions and, to a lesser extent, due to the increased sales of our electrical products. However, this increase was significantly offset by an impairment charge of $9.2 million for certain intangibles and property, plant and equipment resulting from our decision to exit from the nuclear certified portion of our industrial welding solutions business. This impairment charge had a negative impact on margins as compared to the prior year comparative period.

Corporate expenses were $42.8 million for fiscal 2020 and $38.0 million for fiscal 2019 and $34.3 million for fiscal 2018. This increase is attributable to higher spend on outside services and higher employee costs in fiscal 2019, partially offset by lower stock based compensation expense related to certain employee performance share unit grants that were forfeited when various vesting conditions were not satisfied during fiscal 2019.

~~Interest expense for fiscal 2019 increased 8.0% to $15.0 million as compared to $13.9 million in fiscal~~ ~~2018. This~~ The increase is primarily attributable to higher employee related costs and stock-based compensation expense.

During the fourth quarter of fiscal 2020, we completed the sale of our nuclear logistics business reported within our Energy 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 of the business reflects our longer term strategy to focus on core businesses, markets and on our Metal Coatings segment. The historical annual sales, operating profit and net assets of the nuclear logistics business were not significant enough to qualify the sale as a discontinued operation.

Interest expense for fiscal 2020 decreased 10.1% to $13.5 million as compared to $15.0 million in fiscal 2019. This decrease is primarily attributable to lower interest rates on variable rate debt ~~partially offset by slightly~~and lower average outstanding debt balances during ~~fiscal 2019.~~the year. For additional information on outstanding debt, see Note 11 to the ~~Consolidated Financial Statements.~~consolidated financial statements. As of February ~~28, 2019,~~29, 2020, we had gross outstanding debt of ~~$241.0~~$203.0 million compared to ~~$301.3~~$241.0 million at the end of fiscal ~~2018.~~2019. AZZ's debt to equity ratio was 0.32 to 1 at the end of fiscal 2020 compared to 0.40 to 1 at the end of fiscal 2019 ~~compared to 0.53 to 1 at the end of fiscal~~ ~~2018~~.

Other (Income) Expense, Net

For fiscal ~~2019,~~2020, we recorded other ~~income,~~expense, net of $1.0 million as compared to other ~~expense,~~income, net of ~~$3.5~~$1.0 million in fiscal ~~2018. The increase resulted~~2019. For the current fiscal year, the activity consisted primarily of foreign currency losses resulting from unfavorable movements in exchange rates. For the prior fiscal year, the activity consisted primarily of adjustments related to a ~~downward revision to estimated losses on the impairment of~~bankruptcy proceeding for a non-trade note receivable ~~which was initially recognized in fiscal 2018 upon the bankruptcy declaration of the note debtor. The bankruptcy proceedings progressed better~~that ultimately settled at an amount higher than anticipated and the Company received amounts in excess of its initial loss estimates for the outstanding note, which originated from a non-compete litigation settlement with a competitor in a prior fiscal year. This increase in other income, net was partially offset by higher foreign exchange losses that were realized during fiscal 2019 as a result of unfavorable movements in exchange rates.originally estimated.

Provision For ~~(Benefit From)~~ Income Taxes

The provision for ~~(benefit from)~~ income taxes reflected an effective tax rate of 25.7% for fiscal 2020 and 18.7% for fiscal ~~2019 and (46.2)% for fiscal 2018.~~2019. The increase ~~in the effective rate was~~is due primarily to ~~the Tax Cuts~~state tax rate increases, reductions of realizable tax credits and ~~Jobs Act of 2017 (the “U.S. Tax Act”), which resulted in a provisional benefit for fiscal 2018 related~~non-material corrections to ~~the remeasurement of deferred taxes at a lower corporate rate that was offset by a one-time mandatory transition tax on undistributed earnings of foreign affiliates~~

The U.S. Tax Act requires complex computations to be performed that were not previously required by U.S. tax law, significant judgments to be made in interpretation of the provisions of the U.S. Tax Act, significant estimates in calculations, and the preparation and analysis of information not previously relevant. The U.S. Treasury Department, the IRS, and other standard-setting bodies will continue to interpret or issue guidance on how provisions of the U.S. Tax Act will be applied or otherwise administered. As future guidance is issued, we may make adjustments to amounts that we have previously recorded that may materially impact our financial statements in theprior period ~~in which the adjustments are made.~~

reported amounts. During the fourth quarter, ~~of fiscal 2019,~~at the same time the Company ~~completed its assessment~~was divesting of NLI, we identified a tax accounting correction to the NLI purchase accounting stemming from an original earn-out agreement treated differently for tax and book in prior years. The amount was determined to not be material to prior periods, and the tax accounting correction resulted in the Company recording a one-time tax expense of $1.9 million at February 29, 2020.

In March 2020, subsequent to the end of our fiscal year 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted into law to provide emergency assistance and health care response for businesses and others affected by the 2020 coronavirus pandemic. Significant changes impacting businesses include, but are not limited to (i) the businesses' ability to temporarilyincrease the allowable interest deduction by raising the interest expense limitation from 30% of adjusted taxable income ("ATI") to 50% of ATI for tax years beginning in 2019 and 2020, (ii) temporary suspension of the ~~Tax Act under SAB 118, resulting in additional benefit~~80% taxable income limitation to allow net operating losses to fully offset taxable income for taxable years before 2021, (iii) a technical correction to the applicability of ~~$1.1 million resulting from revised estimates of the mandatory deemed repatriation of foreign earnings, foreign tax credits, and~~100% bonus depreciation ~~elections based on~~for qualified improvement property, and (iv) a provision for a retention credit for certain qualified wages paid by a qualified employer to an employee. We will account for the ~~finalization~~CARES Act during fiscal year 2021, the period of ~~our 2017 US federal income tax return. The change in bonus depreciation elections~~enactment, and ~~other temporary return to provisions items resulted in $0.8 million benefit related to~~we are currently evaluating the ~~finalization of the remeasurement of deferred tax assets and liabilities. The finalization of foreign earnings and profits and foreign tax credits resulted in a $0.3 million benefit.~~impact.

Westinghouse Electric Company Bankruptcy Case

We had existing contracts with subsidiaries of Westinghouse Electric Company (“WEC”). WEC and the relevant subsidiaries (the "Debtors") filed relief under Chapter 11 of the Bankruptcy Code on March 29, 2017 in the United States Bankruptcy Court for the Southern District of New York, jointly administered as In re Westinghouse Electric Company, et al., Case No. 17-10751 (the "Bankruptcy Case"). The Company has been collecting on post-petition amounts due and owed. On February 22, 2018, the United States Bankruptcy Court for the Southern District of New York approved the Debtors’ Modified First Amended Disclosure Statement for the Joint Chapter 11 Plan of Reorganization. In the Disclosure Statement, the Debtors estimated a 98.9% to 100% distribution on Allowed General Unsecured Claims. We ~~have~~filed approximately ~~$12~~$12.0 million of such claims ~~filed~~ with the court, which includes 100% of our pre-petition claims. ~~The total claims filed exceed the book value of our exposure and we expect to receive all amounts due.~~ In April 2019, for one of our plants, the Company entered into a settlement agreement with the third party bankruptcy administrator related to outstanding claims. The agreement amount of approximately $8.1 million represented 100% of those outstanding claims for such plant. The ~~balance~~impact of the ~~$12 million claims~~settlement noted above ~~are still outstanding.~~

~~At time of~~had no material impact on operating income for the Bankruptcy Case, we were subcontractors on various WEC engagements, including one in Georgia ("V.C. Summer") and one in South Carolina ("Plant Vogtle"). The ownership of V.C. Summer halted work earlier inperiod. During the ~~year and, during the third~~second quarter of fiscal ~~2018, we de-booked $11.0 million from backlog~~2020, the Company received full and final payment of all outstanding amounts related to ~~this project. Also during~~ the ~~third~~bankruptcy and recorded a favorable non material income impact in the second quarter related to the final reconciliations of ~~fiscal 2018,~~these accounts with our counter-parties.

Coronavirus (COVID-19)

In March 2020, the World Health Organization declared the viral strain of coronavirus ("COVID-19") a global pandemic and recommended containment and mitigation measures worldwide. The spread of COVID-19 has resulted in most governments issuing restrictive orders, including “shelter in place” orders around the globe to assist in mitigating the spread of the virus.

Subsequently, in March 2020, the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) department issued guidance clarifying that critical infrastructure industries have a responsibility to maintain operations while these restrictive measures are in place. The Company, based on input from the government as well as our customers, has continued most operations under the CISA guidelines in an effort to support critical infrastructure in the areas where we ~~received a notice of cancellation from WEC~~are either required to do so, or where we are able.

While we continue to support our customers, there remains uncertainties regarding the duration and, to what extent, if any, that the COVID-19 pandemic will ultimately have on the demand for our products and services or with our supply chain. We continue to closely monitor the situation as information becomes readily available and continue to take actions to provide for the ~~Plant Vogtle project, which negatively impacted~~safety of our ~~sales~~personnel, and ~~margin for~~to support the ~~second half~~requirements under CISA.

As of ~~fiscal year 2018 by approximately $6.1 million~~the date of this filing, our operations remain open globally and ~~$1.2 million, respectively.~~

~~Year ended February 28, 2018 compared with year ended February 28, 2017~~

~~We ended fiscal 2018 with a backlog of $265.4 million, a decrease of $52.5 million or 16.5% as compared~~the impact to fiscal 2017. The Company's backlog as of year end pertains to the Energy segment's operations. The book to revenue ratio declined in fiscal 2018 as compared to fiscal 2017. The book to revenue ratio was 0.92 to 1 for fiscal 2018our personnel and ~~0.99 to 1 for fiscal 2017.~~

~~The following table reflects bookings and shipments for fiscal 2018 and 2017.~~

~~Our total net sales for fiscal 2018 decreased by $53.1 million, or 6.2%, as compared to fiscal 2017.~~

~~The following table reflects the breakdown of revenue by segment (in thousands):~~

Our Energy Segment recorded net sales for fiscal 2018 of $421.0 million, a decrease of 13.7% compared to fiscal 2017 net sales of $488.0 million. The decrease in net sales for fiscal 2018 was caused by several factors including reduced turnarounds in the U.S. refinery market, continued softness in the petrochemical market, negative impacts from the Atlantic hurricane activity, cancellations and delays in the release of several large projects in the U.S. and overseas. In addition, net sales were negatively impactedoperations has been limited by the effects of COVID-19. However, we are experiencing certain customer order deferrals until later in fiscal 2021, but there have been few outright customer order cancellations. Accordingly, we cannot reasonably estimate the length or severity of this pandemic, or the extent to which the disruption may materially impact our consolidated balance sheet, statements of income or statements of cash flows for fiscal year 2021.

We have substantial liquidity as further discussed below, with both cash on ~~the nuclear market~~hand and with borrowing capacity under our revolving credit facility. In addition, we are closely monitoring our collection efforts from ~~the Westinghouse Electric Company bankruptcy filed on March 29, 2017.~~customers and payments to suppliers.

Our Metal Coatings Segment, which consisted of forty-five metal coating facilities as of February 28, 2018, generated net sales of $389.4 million, a 3.7% increase from the prior year’s net sales of $375.5 million. The increase was attributable to incremental revenues from our acquisitions during the year and increased prices. These increases were partially offset by decreased volumes in steel processed as a result of softness in the solar, petrochemical, and the oil and gas markets.

~~Operating Income~~

~~The following table reflects the breakdown of operating income (loss) by segment (in thousands):~~

Operating income (loss) for the Energy segment decreased $54.3 million, or 103.4%, for fiscal 2018, to a loss of $(1.8) million as compared to income of $52.6 million for fiscal 2017. Operating margins for this segment were (0.4)% for fiscal 2018 as compared to 10.8% for fiscal 2017. This decrease was attributable to the reduction in refinery turnarounds described above, which typically carry a higher margin, cancellations, margin degradations on certain large projects in the U.S. and overseas and the Westinghouse bankruptcy. In addition, for fiscal 2018, the Company recognized an impairment charge of $10.5 million related to property, plant and equipment that was retired and a provision for doubtful accounts of $2.9 million resulting from an adverse court decision related to certain outstanding accounts receivables. No such charges were recorded in the prior year comparable period.

Operating income for the Metal Coatings segment increased $5.3 million, or 6.7%, for fiscal 2018 to $84.3 million as compared to $79.0 million for the prior year. Operating margins were 21.7% for fiscal 2018 as compared to 21.0% for fiscal 2017. Excluding the impact of realignment charges of $7.3 million incurred in fiscal 2017, overall margins decreased in fiscal 2018 as a result of lower volumes and increased costs for zinc, partially offset by incremental margin earned from our acquisitions completed during the year.

Corporate expenses were $34.3 million for fiscal 2018 and $32.7 million for fiscal 2017. This increase is attributable to higher spend on professional services and higher employee costs in fiscal 2018.

Interest expense for fiscal 2018 decreased 5.9% to $13.9 million as compared to $14.7 million in fiscal 2017. This decrease is primarily attributable to more favorable interest rates during fiscal 2018 as a result of our partial or full repayment of certain outstanding debt obligations that were replaced with borrowings that carried lower interest rates. For additional information on outstanding debt, see Note 11 to the Consolidated Financial Statements. As of February 28, 2018, we had gross outstanding debt of $301.3 million compared to $272.3 million at the end of fiscal 2017. AZZ's debt to equity ratio was 0.53 to 1 at the end of fiscal 2018 compared to 0.51 to 1 at the end of fiscal 2017.

~~Other (Income) Expense, Net~~

For fiscal 2018, a total of $3.5 million in expense was recorded to other (income) expense, net, which was primarily attributable to the impairment of the non-trade note receivable described above upon the bankruptcy declaration of the note debtor. For fiscal 2017, we recorded $1.1 million of income to other (income) expense, net, which was primarily attributable to a reimbursement of legal fees of $0.6 million from a lawsuit in fiscal 2016 and net foreign exchange gains.

~~Provision For (Benefit From) Income Taxes~~

The provision for (benefit from) income taxes reflected an effective tax rate of (46.2)% for fiscal 2018 and 28.2% for fiscal 2017. The decrease in the effective rate was due primarily to the U.S. Tax Cuts and Jobs Act of 2017, which resulted in a provisional benefit related to the remeasurement of deferred taxes at a lower corporate rate that was offset by a one-time mandatory transition tax on undistributed earnings of foreign affiliates.

Liquidity and Capital Resources

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

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

Net cash provided by operating activities for fiscal ~~2019~~2020 was ~~$114.7~~$144.8 million compared to ~~$78.9~~$111.5 million for fiscal ~~2018.~~2019. The increase in cash provided by operating activities for fiscal ~~2019~~2020 as compared to fiscal ~~2018~~2019 is primarily attributable to ~~the~~an increase in ~~net income~~non-cash charges, related primarily to the loss on disposal of the nuclear logistic business and other impairment charges, and positive impacts from ~~changes~~improvements in working ~~capital. The increase was also attributable to a decline in non-cash tax benefit accruals which were recorded in fiscal 2018~~capital resulting from ~~the remeasurement of deferred tax liabilities due to the decrease of U.S. corporate tax rates as part of the Tax Cuts~~our stronger focus on collections and ~~Jobs Act of 2017. This decline in non-cash tax benefit accruals was partially offset by lower non-cash impairment charges in fiscal 2019 as compared to fiscal 2018.~~inventory management.

Net cash used in investing activities for fiscal ~~2019~~2020 was ~~$32.1~~$71.7 million as compared to ~~$73.9~~$32.1 million for fiscal ~~2018.~~2019. The ~~decline~~increase in cash used during fiscal ~~2019~~2020 was primarily attributable to ~~decreased~~increased acquisition activity and ~~lower~~higher capital ~~expenditures.~~expenditures, partially offset from the net proceeds received from the divestiture of the nuclear logistics business. The breakdown of capital spending by segment for fiscal 2020, 2019 ~~2018~~ and ~~2017~~2018 can be found in Note 12 to the Consolidated Financial Statements.

Net cash used in financing activities for fiscal ~~2019~~2020 was ~~$78.0~~$59.7 million compared to ~~net cash provided by financing activities of $3.8~~$74.8 million for fiscal ~~2018.~~2019. The ~~increase~~decrease in cash used for financing activities during fiscal ~~2019~~2020 was primarily attributable to ~~significantly increased~~lower net ~~repayments of~~ borrowings ~~under our revolving credit facility,~~and was partially offset by ~~lower principal payments under our other long-term debt agreements.~~increased treasury share activity.

Financing and Capital

2017 Revolving Credit Facility

On March 27, 2013, the Company entered into a credit agreement (the “Credit Agreement”) with Bank of America and other lenders. The Credit Agreement provided for a $75.0 million term facility and a $225.0 million revolving credit facility that included a $75.0 million “accordion” feature. The Credit Agreement is used to provide for working capital needs, capital improvements, dividends, future acquisitions and letter of credit needs.

On March 21, 2017, the Company executed the Amended and Restated Credit Agreement (the “2017 Credit Agreement”) with Bank of America and other lenders. The 2017 Credit Agreement amended the Credit Agreement by the following: (i) extending the maturity date until March 21, 2022, (ii) providing for a senior revolving credit facility in a principal amount of up to $450 million, with an additional $150 million accordion, (iii) including a $75 million sublimit for the issuance of standby and commercial letters of credit, (iv) including a $30 million sublimit for swing line loans, (v) restricting indebtedness incurred in respect of capital leases, synthetic lease obligations and purchase money obligations not to exceed $20 million, (vi) restricting investments in any foreign subsidiaries not to exceed $50 million in the aggregate, and (vii) including various financial covenants and certain restricted payments relating to dividends and share repurchases as specifically set forth in the 2017 Credit Agreement. The balance due on the $75.0 million term facility under the previous Credit Agreement was paid in full as a result of the execution of the 2017 Credit Agreement.

The financial covenants, as defined in the 2017 Credit Agreement, require the Company to maintain on a consolidated basis a Leverage Ratio not to exceed 3.25:1.0 and an Interest Coverage Ratio of at least 3.00:1.0. The 2017 Credit Agreement will be used to finance working capital needs, capital improvements, dividends, future acquisitions, letter of credit needs and potential share repurchases.

Interest rates for borrowings under the 2017 Credit Agreement are based on either a Eurodollar Rate or a Base Rate plus a margin ranging from 0.875% to 1.875% depending on our Leverage Ratio (as defined in the 2017 Credit Agreement). The Eurodollar Rate is defined as LIBOR for a term equivalent to the borrowing term (or other similar interbank rates if LIBOR is unavailable). The Base Rate is defined as the highest of the applicable Fed Funds rate plus 0.50%, the Prime rate, or the Eurodollar Rate plus 1.0% at the time of borrowing. The 2017 Credit Agreement also carries a Commitment Fee for the unfunded portion ranging from 0.175% to 0.30% per annum, depending on our Leverage Ratio. The effective interest rate was 4.06% as of February ~~28, 2019.~~29, 2020.

As of February ~~28, 2019,~~29, 2020, we had ~~$116.0~~$78.0 million of outstanding debt against the revolving credit facility and letters of credit outstanding in the amount of ~~$18.7~~$14.4 million, which left approximately ~~$315.3~~$357.6 million of additional credit available under the 2017 Credit Agreement.

On January 21, 2011, the Company entered into a Note Purchase Agreement (the “2011 Agreement”), pursuant to which the Company issued $125.0 million aggregate principal amount of its 5.42% unsecured Senior Notes (the “2011 Notes”), through a private placement (the “2011 Note Offering”). Amounts under the agreement are due in a balloon payment on the January 2021 maturity date. Pursuant to the 2011 Agreement, the Company's payment obligations with respect to the 2011 Notes may be accelerated under certain circumstances.

The 2011 Notes contain various financial covenants requiring the Company, among other things, to a) maintain on a consolidated basis net worth equal to at least the sum of $116.9 million plus 50.0% of future net income; b) maintain a ratio of indebtedness to EBITDA (as defined in Note Purchase Agreement) not to exceed 3.25:1.00; c) maintain on a consolidated basis a Fixed Charge Coverage Ratio (as defined in the Note Purchase Agreement) of at least 2.0:1.0; d) not at any time permit the aggregate amount of all Priority Indebtedness (as defined in the Note Purchase Agreement) to exceed 10.0% of Consolidated Net Worth (as defined in the Note Purchase Agreement).

~~2008~~As of February 29, 2020, the 2011 Senior Notes

~~On March 31, 2008,~~ are reflected in current liabilities as the maturity date is January 2021. The Company ~~entered into a Note Purchase Agreement (the “Note Purchase Agreement”) pursuant to which~~has the Company issued $100.0 million aggregate principal amount of its 6.24% unsecured Senior Notes (the “2008 Notes”) through a private placement (the “2008 Note Offering”). Amounts were due under the Agreement in seven annual installments of $14.3 million commencing in March of 2012 through the March 2018 maturity date. On March 31, 2018, the Company made the final principal payment of $14.3 millionability and intent to fully settle ~~the 2008 Senior Notes~~these notes on the ~~scheduled~~ maturity ~~date.~~date through a combination of additional borrowings that are available under the 2017 Credit Agreement, existing cash and cash equivalent balances and through cash generated from ongoing operations.

As of February ~~28, 2019,~~29, 2020, the Company was in compliance with all of its debt covenants.

Share Repurchase Program

In January of 2012, our Board authorized the repurchase of up to ten percent of the outstanding shares of our Common Stock. The share repurchase authorization does not have an expiration date, and the amount and prices paid for any future share purchases under the authorization will be based on market conditions and other factors at the time of the purchase. Repurchases under this share repurchase authorization would be made through open market purchases or private transactions in accordance with applicable federal securities laws, including Rule 10b-18 under the Exchange Act. ~~The Company did not make any repurchases of its common shares during~~During the twelve months ended February ~~28, 2019.~~29, 2020, the Company repurchased 130,800 shares for $5.8 million at an average price of $44.34 per share.

We have exposure to commodity price increases in both segments of our business, primarily copper, aluminum, steel and nickel based alloys in the Energy segment and zinc and natural gas in the Metal Coatings segment. 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.

Off Balance Sheet Arrangements and Contractual Commitments

As of February ~~28, 2019,~~29, 2020, the Company 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, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources of the Company.

The following summarizes our operating lease obligations, purchase commitments, debt principal payments and interest payments ~~(based on current interest rates~~ for ~~variable rate debt) for the remainder of~~ the next five years and beyond (in thousands):

Purchase Commitments ⁽¹⁾

(1) Purchase commitments consist of non-cancelable forward contracts to purchase zinc at various volumes and prices. All such contracts expire in fiscal 2021.

(2) For variable rate debt, interest payments are calculated using current interest rates.

In addition, as of February ~~28, 2019,~~ 29, 2020, we had outstanding letters of credit in the amount of ~~$44.3~~$30.5 million. These letters of credit are issued for a number of reasons, but are most commonly issued in lieu of customer retention withholding payments covering warranty or performance periods.

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, revenues 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. We continually evaluate the information used to make these estimates. With the global economic contraction and uncertainty caused by the COVID-19 pandemic, certain of our accounting estimates, particularly estimates involving prospective financial information, may change as business and economic conditions change. Such changes, if they were to occur, could be material to the Company’s financial statements. Accounting policies and estimates considered most critical are allowances for doubtful accounts, accruals for contingent liabilities, revenue recognition, impairment of long-lived assets, identifiable intangible assets and goodwill, including purchase accounting, accounting for income taxes and stock-based compensation expense. Actual results may differ from these estimates under different assumptions or conditions. The development and selection of the critical accounting policies and the related disclosures below have been reviewed with the Audit Committee of the Board of Directors. More information regarding significant accounting policies can be found in Note 1 to the Consolidated Financial Statements.

Allowance for Doubtful Accounts

The carrying value of our accounts receivable is continually evaluated based on the likelihood of collection. An allowance is maintained for estimated losses resulting from our customers’ inability to make required payments. The allowance is determined by historical experience of uncollected accounts, the level of past due accounts, overall level of outstanding accounts receivable, information about specific customers with respect to their inability to make payments and future expectations of conditions that might impact the collectibility of accounts receivable. 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.

Accruals for Contingent Liabilities

The amounts we record for estimated claims, such as self-insurance programs, warranty, environmental and other contingent liabilities, requires us to make judgments regarding the amount of expenses that will ultimately be incurred. We use past history and experience and other specific circumstances surrounding these claims in evaluating the amount of liability that should be recorded. Actual results may be different than what we estimate.

We determine revenue recognition through the following steps:

1)Identification of the contract with a customer,

2)Identification of the performance obligations in the contract,

3)Determination of the transaction price,

4)Allocation of the transaction price to performance obligations in the contract, and

5)Recognition of revenue when, or as, the Company satisfies a performance obligation

Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration that we expect to be entitled to in exchange for those goods or services.The amount and timing of revenue recognition varies by segment based on the nature of the goods or services provided and the terms and conditions of the customer contract.

Metal Coatings Segment

Our Metal Coatings segment is a provider of hot dip galvanizing, powder coating and other metal coating applications to the steel fabrication and other industries. Within this segment, our contracts are typically governed by a customer purchase order or work order. The contract generally specifies the delivery of what constitutes a single performance obligation consisting of metal coating services. We combine contracts for revenue recognition purposes that are executed with the same customer within a short timeframe from each other and that purport to be for a single commercial objective.

We recognize revenue over time as the metal coating is applied to customer provided material as our process enhances a customer controlled asset. Contract modifications are rare within the Metal Coatings segment and most contracts are on a fixed price basis with no variable consideration.

Our Energy segment is a provider of specialized products and services designed to support industrial, ~~nuclear~~electrical and ~~electrical~~nuclear applications. Within this segment, the contract is governed by a customer purchase order and an executed product or services agreement. The contract generally specifies the delivery of what constitutes a single performance obligation consisting of either custom built products, custom services, or off-the-shelf products. When we enter into an arrangement with multiple performance obligations, the transaction price is allocated to each performance obligation based on the relative standalone selling prices of the goods or services being provided to the customer and revenue is recognized upon the satisfaction of each performance obligation. We combine contracts for revenue recognition purposes that are executed with the same customer within a short timeframe from each other and that purport to be for a single commercial objective.

For custom built products, we recognize revenues over time provided that the goods do not have an alternative use to the Company and we have an unconditional right to payment for work completed to date plus a reasonable margin. For custom services, which consist of specialized welding and other professional services, we recognize revenues over time as the services are rendered due to the fact that the services enhance a customer owned asset. For off-the-shelf products, which consist of tubing and lighting products, we recognize revenue at a point-in-time upon the transfer of the goods to the customer.

For revenues recognized over time, we generally use the cost-to-cost method of revenue recognition. Under this approach, the extent of progress towards completion is measured based on the ratio of costs incurred to date versus the total estimated costs upon completion of the project. This requires that we estimate the total contract revenues, project costs and margin, which can involve significant management judgment. As a significant change in one or more of these estimates could affect the profitability of our contracts, management reviews and updates its contract related estimates regularly. We recognize adjustments in estimated margin on contracts under a cumulative catch-up basis and subsequent revenues are recognized using the adjusted estimate. If the estimate of contract margin indicates an anticipated loss on the contract, we recognize the total estimated loss in the period it is identified.

Due to the custom nature of the goods and services provided, contracts within the Energy segment are often modified to account for changes in contract specifications and requirements. A contract modification exists when the modification either creates new, or changes the existing, enforceable rights and obligations in the contract. For us, most contract modifications are related to goods or services that are not distinct from those in the original contract due to the significant interrelationship or interdependencies between the deliverables. Such modifications are accounted for as if they were part of the original contract. As a result, the transaction price and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis.

In addition to fixed consideration, the contracts within our Energy segment can include variable consideration, including claims, incentive fees, liquidated damages or other penalties. We recognizes revenue for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. We estimate the amount of revenue to be recognized on variable consideration using the expected value or the most likely amount method, whichever is expected to better predict the amount.

~~Metal Coatings Segment~~

Our Metal Coatings segment is a provider of hot dip galvanizing, powder coating and other metal coating applications to the steel fabrication industry. Within this segment, the contract is governed by a customer purchase order or work order. The contract generally specifies the delivery of what constitutes a single performance obligation consisting of metal coating services.

~~We combine contracts for revenue recognition purposes that are executed with the same customer within a short timeframe from each other and that purport to be for a single commercial objective.~~

We recognize revenue over time as the metal coating is applied to the customer provided material as the process enhances a customer controlled asset. Contract modifications are rare within this segment and most contracts are on a fixed price basis with no variable consideration.

Contract Assets and Liabilities

The timing of revenue recognition, billings and cash collections results in accounts receivable, contract assets (unbilled receivables), and contract liabilities (customer advances and deposits) on the consolidated balance sheets, primarily related to our Energy segment. Amounts are billed as work progresses in accordance with agreed upon contractual terms, either at periodic intervals (e.g., weekly or monthly) or upon achievement of contractual milestones. Billing can occur subsequent to revenue recognition, resulting in contract assets. In addition, we ~~can~~sometimes receive advances or deposits from its customers, before revenue is recognized, resulting in contract liabilities. These assets and liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period.

No general rights of return exist for customers and we establish provisions for estimated warranties. We generally do not sell extended warranties. Revenue is recognized net of applicable sales and other taxes. We do not adjust the contract price for the effects of a significant financing component if we expect, at contract inception, that the period between when we transfer a good or service to a customer and when the customer pays for that good or service will be one year or less, which is generally the case. Sales commissions are deferred and recognized over the same period as the related revenues. Shipping and handling is treated as a fulfillment obligation instead of a separate performance obligation and such costs are expensed as incurred.

Impairment of Long-Lived Assets, Identifiable Intangible Assets and Goodwill

We record impairment losses on long-lived assets, including identifiable intangible assets, when events and circumstances indicate that the assets might be impaired and the undiscounted projected cash flows associated with those assets are less than the carrying amounts of those assets. In those situations, impairment losses on long-lived assets are measured based on the excess of the carrying amount over the asset’s fair value, generally determined based upon discounted estimates of future cash flows. A significant change in events, circumstances or projected cash flows could result in an impairment of long-lived assets, including identifiable intangible assets. An annual impairment test of goodwill is performed in the fourth quarter of each fiscal year. The test is calculated using the anticipated future cash flows after tax from our operating segments. Based on the present value of the future cash flows, we will determine whether an impairment may exist. A significant change in projected cash flows or cost of capital for future years could result in an impairment of goodwill in future years. Variables impacting future cash flows include, but are not limited to, the level of customer demand for and response to products and services we offer to the power generation market, the electrical transmission and distribution markets, the general industrial market and the hot dip galvanizing market, changes in economic conditions of these various markets, raw material and natural gas costs and availability of experienced labor and management to implement our growth strategies. ~~Our~~During fiscal 2020, 2019 and 2018, our testing concluded that none of our goodwill was impaired. See note 8 to the consolidated financial statements for information about the goodwill write-off related to the divestiture of our nuclear logistics business and note 5 to the consolidated financial statements regarding our impairment charges.

Accounting for Income Taxes

Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. We are subject to income taxes in both the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future.

In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations. Generally accepted accounting principles in the United States of America ("GAAP") states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. We may (1) record unrecognized tax benefits as liabilities in accordance with GAAP and (2) adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available.

We currently do not record unrecognized tax benefits related to U.S. federal, state or, foreign tax exposure. We continue to review our tax exposure for any significant need to record unrecognized tax benefits in the future.

Stock-based Compensation Expense

Stock-based compensation expense consists of the expense for restricted stock units ("RSUs"), performance share units ("PSUs"), stock appreciation rights ("SARs") and employee stock purchase plan ("ESPP") shares granted to our employees and directors. The compensation cost is measured based on the grant-date fair value of those awards and is recognized over the respective vesting periods of the awards.

For SARs and ESPP awards, we estimate the grant date fair value using a Black-Scholes pricing model. For PSUs, which generally have performance-based and market-based vesting conditions, we estimate the grant date fair value using a Monte Carlo simulation. The inputs required for these valuation models are subjective and require significant management judgment. For RSUs we estimate the grant date fair value based on the close price of our common stock on the date of grant.

Recent Accounting Pronouncements

See Part II, Item 8. Consolidated Financial Statements and Supplementary Data, Note 1, Summary of Significant Account Policies, of the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K, 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.

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, 2019,~~29, 2020, we did not hold any derivative financial instruments.

In our Energy 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. In 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. We manage our exposure to changes in the price of zinc by entering into agreements with our zinc suppliers and such agreements generally include protective caps or other fixed prices. We also secure firm pricing for natural gas supplies with individual utilities when possible. We believe these agreements ensure adequate supplies and partially offset exposure to commodity price escalation.

We had ~~$116.0~~$78.0 million in gross debt outstanding at February ~~28, 2019 related to~~29, 2020 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.

Foreign Exchange Rates

The ~~company’s~~Company’s foreign exchange exposures result primarily from inter-company 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, 2019,~~29, 2020, the Company had exposure to foreign currency exchange rates related to our operations in Canada, China, Brazil, Poland, and the Netherlands.

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. 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.

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements and Schedules

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Opinion on the financial statements

We have audited the accompanying consolidated balance sheet of AZZ Inc. (a Texas corporation) and subsidiaries (the “Company”) as of February 29, 2020, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the year ended February 29, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 29, 2020, and the results of its operations and its cash flows for the year ended February 29, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of February 29, 2020, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated April 29, 2020 expressed an adverse opinion.

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition - Energy Customers

As described in Note 1, the Company recognizes revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The amount and timing of revenue recognition varies based on the nature of the goods or services provided and the terms and conditions of the Company’s contracts with customers. The Company enters into contracts with energy customers which generally specify the delivery of what constitutes a single performance obligation of either custom built products, custom services, or off-the shelf products. Management determines, based on the provisions of the customer contracts, whether revenue for a particular project should be recorded upon delivery of the product or service or whether a portion of the total expected contract revenue should be recognized over time as work progresses. This requires a detailed evaluation of each material contract. We determined that revenue recognition pertaining to energy customer contracts is a critical audit matter.

Our determination that revenue recognition pertaining to customer contracts is a critical audit matter results from the significant judgment exercised by management in determining the amount of revenue to recognize for a particular period. Processes involving higher amounts of management judgment include the interpretation of the provisions of customer contracts, which may include unique contract terms, to determine whether revenue should be recognized at a point in time or over time as work progresses. In addition, for contracts where management determines revenue should be recognized over time as work progresses, management must estimate both total expected project costs and expected gross margin, including evaluating customer change orders, for all

uncompleted contracts to determine the appropriate amount of revenue to recognize. Given the high degree of management judgment involved in evaluating project estimates and estimating the amount of revenue to recognize, the audit effort required to evaluate management’s judgments in determining revenue recognition for the Company’s contracts with energy customers was extensive and required a high degree of auditor judgment.

Our audit procedures related to these aspects of the Company’s revenue recognition for customer contracts included the following:

Measurement of loss (goodwill allocation) - NLI Divestiture

As described in Note 15, on February 29, 2020, the Company sold Nuclear Logistics LLC (“NLI”), a wholly owned subsidiary included in the Company’s Energy segment, to a third party. The Company recorded a loss of $18.6 million upon the sale, which was measured as the difference between the fair value of consideration received and the adjusted carrying value of the net assets of NLI. The determination of the adjusted carrying value of the net assets of NLI involved identifying and measuring the assets and liabilities of NLI, including goodwill allocated to NLI, as of the closing date of the transaction. NLI was previously included in an existing reporting unit for the purpose of periodic goodwill impairment testing. The allocation of goodwill to NLI was a necessary step in measuring the loss to record upon sale. As described in Note 8, management allocated $7.9 million of goodwill to NLI that was previously recorded at the reporting unit level. We determined that estimating the amount of loss to recognize for the February 29, 2020 sale of NLI is a critical audit matter.

Our determination that estimating the amount of loss to recognize for the sale of NLI is a critical audit matter results from the significant judgment exercised by management in determining the amount of goodwill to allocate to NLI for the purpose of measuring the loss. Allocating goodwill involved fair value measurements of multiple businesses within the reporting unit. The estimated fair value of those businesses was primarily based on financial forecasts, including the development of discounted cash flow models prepared by management with the assistance of third party valuation specialists. Those discounted cash flow models include inputs and assumptions that are subjectively determined and are sensitive to variations in key assumptions, which included but were not limited to estimated future revenues, gross margins, discount rates, income taxes, and other business assumptions. Management utilized a third party valuation specialist to assist with determining the estimated fair values of certain businesses. Given the high degree of management judgment involved in allocating goodwill to NLI for the purpose of measuring the loss to record, the audit effort required in testing the amount of loss recorded for the NLI divestiture was extensive and required a high degree of auditor judgment.

Our audit procedures related to these aspects of the Company’s accounting for the February 29, 2020 sale of NLI included the following:

We read the applicable transaction documents to ensure management’s accounting for the divestiture was consistent with the substance of the transaction.

As described in Note 1, the Company’s accounting for income taxes requires the recognition of deferred tax assets, liabilities, and valuation reserve analysis for the expected future tax consequences of events that have been included in the financial statements and the recognition of liabilities for uncertain tax positions. The Company operates in multiple countries, which requires specialized knowledge of the income tax laws in various federal, state, and foreign jurisdictions. In addition, the Company’s acquisition and divestiture strategy adds complexity to the accounting for income taxes. We determined that the accounting for income taxes is a critical audit matter.

Our determination that the accounting for income taxes is a critical audit matter results from the specialized skill and knowledge required to properly account for income taxes and the significant amount of management judgement necessary to evaluate the realizability of deferred tax assets and the recognition of uncertain tax positions. Further impacting our determination were the changes management made to the Company’s processes and internal controls in the fourth quarter of the most recent fiscal year in response to a material weakness in internal controls related to income taxes as of February 29, 2020. The amount of specialized skill and knowledge necessary to account for income taxes, the high level of management judgment necessary, and the ineffective control environment required a significant audit effort, and required a high degree of auditor judgement.

Our audit procedures related to the accounting for income taxes included the following:

We tested the tax adjustments recorded for the Company’s current period business combinations and divestitures, including the use of our Firm’s valuation specialists when applicable.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2020.

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of AZZ Inc. (a Texas corporation) and subsidiaries (the “Company”) as of February 29, 2020, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, because of the effect of the material weakness described in the following paragraph on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of February 29, 2020, based on criteria established in the 2013 Internal Control-Integrated Framework issued by COSO.


	Fiscal Year										Fiscal Year
	2019 (a)		2018 (b)		2017 (c)		2016 (d)		2015 (e)		2020 (a)		2019 (b)		2018 (c)		2017 (d)		2016 (e)
	(In thousands, except per share amounts)										(In thousands, except per share amounts)
Summary of operations:
Net sales	$	927,087	$	810,430	$	863,538	$	889,400	$	819,692	$	1,061,817	$	927,087	$	810,430	$	863,538	$	889,400
Net income	51,208		45,169		61,264		75,544		65,616		48,234		51,208		45,169		61,264		75,544
Earnings per share:
Basic earnings per common share	1.97		1.74		2.36		2.93		2.56		1.84		1.97		1.74		2.36		2.93
Diluted earnings per common share	1.96		1.73		2.35		2.91		2.55		1.84		1.96		1.73		2.35		2.91
Total assets	1,088,570		1,028,209		978,354		988,201		929,727		1,073,831		1,088,570		1,028,209		978,354		988,201
Total debt	241,000		301,286		272,290		326,982		337,848		203,000		241,000		301,286		272,290		326,982
Total liabilities	484,842		463,006		445,218		503,831		505,275		439,465		484,842		463,006		445,218		503,831
Shareholders’ equity	603,728		565,203		533,136		484,370		424,452		634,366		603,728		565,203		533,136		484,370
Working capital	213,774		197,415		160,282		165,976		156,532		73,949		213,774		197,415		160,282		165,976
Cash provided by operating activities	114,668		78,909		111,176		143,589		118,157		144,759		111,476		76,810		111,176		143,589
Capital expenditures	25,616		29,612		41,434		39,861		29,377		35,044		25,616		29,612		41,434		39,861
Depreciation & amortization	50,245		50,526		50,357		47,417		46,089		50,194		50,245		50,526		50,357		47,417
Cash dividend per common share	0.68		0.68		0.64		0.60		0.58		0.68		0.68		0.68		0.64		0.60
Weighted average shares outstanding - basic	26,038		25,970		25,965		25,800		25,676		26,191		26,038		25,970		25,965		25,800
Weighted average shares outstanding - diluted	26,107		26,036		26,097		25,937		25,778		26,281		26,107		26,036		26,097		25,937


	Period Ended				Period Ended				Period Ended	Amount			Period Ended	Amount
Backlog	2/28/2018	$	265,417		2/28/2017	$	317,922		2/28/2019	$	332,894		2/28/2018	$	265,417
Net bookings		988,558				746,508				972,722				988,558
Acquired backlog		6,006				11,417				—				6,006
Revenues recognized		(927,087		)		(810,430		)		(1,061,817		)		(927,087		)
Backlog	2/28/2019	$	332,894		2/28/2018	$	265,417		2/29/2020	$	243,799		2/28/2019	$	332,894
Book to revenue ratio		1.07				0.92				0.92				1.07



	Period Ended				Period Ended
Backlog	2/28/2017	$	317,922		2/28/2016	$	310,623
Net bookings		746,508				858,934
Acquired backlog		11,417				11,903
Revenues recognized		(810,430		)		(863,538		)
Backlog	2/28/2018	$	265,417		2/28/2017	$	317,922
Book to revenue ratio		0.92				0.99


	Twelve Months Ended						Twelve Months Ended
	February 28, 2019			February 28, 2018			February 29, 2020			February 28, 2019
Net cash provided by operating activities	$	114,668		$	78,909		$	144,759		$	111,476
Net cash used in investing activities	(32,073		)	(73,939		)	(71,748		)	(32,073		)
Net cash (used in) provided by financing activities	(78,004		)	3,800
Net cash used in financing activities							(59,739		)	(74,812		)


	Operating Leases		Debt		Interest		Total		Operating Leases		Purchase Commitments ⁽¹⁾		Debt		Interest ⁽²⁾		Total
Fiscal year:
2020	$	7,882	$	—	$	11,843	$	19,725
2021	7,185		125,000		11,803		143,988		$	8,311	$	43,200	$	125,000	$	10,035	$	186,546
2022	6,803		—		5,029		11,832		7,990		—		—		3,260		11,250
2023	6,454		116,000		550		123,004		7,505		—		78,000		421		85,926
2024	5,771		—		—		5,771		6,687		—		—		—		6,687
2025									5,755		—		—		—		5,755
Thereafter	24,718		—		—		24,718		17,494		—		—		—		17,494
Total	$	58,813	$	241,000	$	29,225	$	329,038	$	53,742	$	43,200	$	203,000	$	13,716	$	313,658



Symbol	CRSP Total Returns Index for:	2/14	2/15	2/16	2/17	2/18	2/19
	AZZ Inc.	100.00	103.72	116.72	137.06	96.79	110.62
	Index for NYSE Stock Market (US Companies)	100.00	112.24	101.24	127.49	142.45	149.72
	Index for NYSE Stocks (SIC 5000-5099 US	100.00	103.87	94.28	120.51	135.40	129.13
	Companies) Wholesale Trade - Durable Goods


A.	The lines represent monthly index levels derived from compounded daily returns that include all dividends.


B.	The indexes are reweighted daily, using the market capitalization on the previous trading day.


C.	If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.


D.	The index level for all series was set to $100 on ~~02/28/2014.~~February 28, 2015.


(a)	Includes the acquisitions of K2 Partners, Inc. and Tennessee Galvanizing, Inc. in April 2019, NuZinc, LLC in August 2019, and Preferred Industries, Ltd. in September 2019. In addition, fiscal year 2020 includes a loss on disposal of business of $18.6 million and impairment charges of $9.2 million.


(b)	Includes the acquisition of Lectrus Corporation onin March ~~22,~~ 2018. Also includes the adoption of ASU 2016-02, Leases (Topic 842) and ASU 2014-09, Revenue from Contracts with Customers (Topic 606) on March 1, 2018.


~~(b)~~(c)	Includes the acquisitions of Enhanced Powder Coating, Ltd. onin June ~~30,~~ 2017, Powergrid Solutions, Inc. onin September 6, 2017, and Rogers Brothers Company onin February 1,2018. In addition, fiscal year 2018


~~(c)~~	~~Includes the acquisition~~ includes impairment charges of ~~Power Electronics, Inc. on March 1, 2016.~~$10.8 million.


(d)	Includes the ~~acquisitions~~acquisition of ~~US Galvanizing, LLC on June 5, 2015 and Alpha Galvanizing~~Power Electronics, Inc. ~~on February 1,~~in March 2016.


(e)	Includes the ~~acquisition~~acquisitions of ~~Zalk Steel & Supply Co. on~~US Galvanizing, LLC in June ~~20, 2014.~~2015 and Alpha Galvanizing Inc. in February 2016.



	Year Ended
	February 28, 2018		February 28, 2017
Net sales:
Energy	$	421,033	$	488,002
Metal Coatings	389,397		375,536
Total net sales	$	810,430	$	863,538



		Page
1.	Consolidated Financial Statements

	Report of Independent Registered Public Accounting Firm - Consolidated Financial Statements	2928
	Report of Independent Registered Public Accounting Firm - Internal Controls Over Financial Reporting	3031
	Report of Independent Registered Public Accounting Firm - Consolidated Financial Statements ~~of Income~~	32
	~~Consolidated Statements of Comprehensive Income~~	33
	Consolidated ~~Balance Sheets~~Statements of Income	34
	Consolidated Statements of ~~Cash Flows~~Comprehensive Income	35
	Consolidated ~~Statements of Shareholders’ Equity~~Balance Sheets	36
	Consolidated Statements of Cash Flows	37
	Consolidated Statements of Shareholders’ Equity	38
	Notes to Consolidated Financial Statements	3739

2.	Consolidated Financial Statement Schedule

	Schedule II – Valuation and Qualifying Accounts and Reserves	6062


◦	The accumulation of historical costs incurred for the project,


◦	Management’s estimate of the total expected costs for the entire project, including costs yet to be incurred to complete the project, and


	Common Stock					Capital In Excess Of Par Value			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total			Common Stock					Capital In Excess Of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total
	Shares		Amount			Capital In Excess Of Par Value			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total			Shares		Amount			Capital In Excess Of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance at February 29, 2016	25,874		$	25,874		$	35,148		$	453,908		$	(30,560	)	$	484,370
Share-based compensation	13		13			5,857			—			—			5,870
Restricted stock units	25		25			(605		)	—			—			(580		)
Stock issued for SARs	81		81			(322		)	—			—			(241		)
Employee stock purchase plan	71		71			2,843			—			—			2,914
Retirement of treasury shares	(100	)	(100		)	(5,182		)	—			—			(5,282		)
Cash dividend paid	—		—			—			(16,645		)	—			(16,645		)
Net income	—		—			—			61,264			—			61,264
Foreign currency translation	—		—			—			—			1,520			1,520
Interest rate swap	—		—			—			—			(54		)	(54		)
Balance at February 28, 2017	25,964		$	25,964		$	37,739		$	498,527		$	(29,094	)	$	533,136		25,964		$	25,964		$	42,922		$	493,344		$	(29,094	)	$	533,136
Share-based compensation	16		16			6,105			—			—			6,121			—		—			6,121			—			—			6,121
Restricted stock units	43		43			(1,256		)	—			—			(1,213		)
Stock issued for SARs	6		6			(11		)	—			—			(5		)
Employee stock purchase plan	77		77			3,240			—			—			3,317
Common stock issued from stock plans, net of shares withheld for employee taxes																		65		65			(1,283		)	—			—			(1,218		)
Common stock issued under employee stock purchase plan																		77		77			3,240			—			—			3,317
Retirement of treasury shares	(147	)	(147		)	(7,371		)	—			—			(7,518		)	(147	)	(147		)	—			(7,371		)	—			(7,518		)
Cash dividend paid	—		—			—			(17,678		)	—			(17,678		)	—		—			—			(17,678		)	—			(17,678		)
Net income	—		—			—			45,169			—			45,169			—		—			—			45,169			—			45,169
Foreign currency translation	—		—			—			—			3,928			3,928			—		—			—			—			3,928			3,928
Interest rate swap	—		—			—			—			(54		)	(54		)	—		—			—			—			(54		)	(54		)
Balance at February 28, 2018	25,959		$	25,959		$	38,446		$	526,018		$	(25,220	)	$	565,203		25,959		$	25,959		$	51,000		$	513,464		$	(25,220	)	$	565,203
Impact of ASC 606 Adoption	—		—			—			716			—			716			—		—			—			716			—			716
Share-based compensation	15		15			4,644			—			—			4,659			—		—			4,659			—			—			4,659
Restricted stock units	31		31			(583		)	—			—			(552		)
Stock issued for SARs	9		9			(30		)	—			—			(21		)
Employee stock purchase plan	101		101			3,664			—			—			3,765
Common stock issued from stock plans, net of shares withheld for employee taxes																		55		55			(628		)	—			—			(573		)
Common stock issued under employee stock purchase plan																		101		101			3,664			—			—			3,765
Cash dividend paid	—		—			—			(17,718		)	—			(17,718		)	—		—			—			(17,718		)	—			(17,718		)
Net income	—		—			—			51,208			—			51,208			—		—			—			51,208			—			51,208
Foreign currency translation	—		—			—			—			(3,478		)	(3,478		)	—		—			—			—			(3,478		)	(3,478		)
Interest rate swap	—		—			—			—			(54		)	(54		)	—		—			—			—			(54		)	(54		)
Balance at February 28, 2019	26,115		$	26,115		$	46,141		$	560,224		$	(28,752	)	$	603,728		26,115		$	26,115		$	58,695		$	547,670		$	(28,752	)	$	603,728
Share-based compensation																		—		—			6,290			—			—			6,290
Common stock issued from stock plans, net of shares withheld for employee taxes																		74		74			(1,305		)	—			—			(1,231		)
Common stock issued under employee stock purchase plan																		90		90			3,023			—			—			3,113
Retirement of treasury shares																		(131	)	(131		)	—			(5,668		)	—			(5,799		)
Cash dividend paid																		—		—			—			(17,822		)	—			(17,822		)
Net income																		—		—			—			48,234			—			48,234
Foreign currency translation																		—		—			—			—			(2,093		)	(2,093		)
Interest rate swap																		—		—			—			—			(54		)	(54		)
Balance at February 29, 2020																		26,148		$	26,148		$	66,703		$	572,414		$	(30,899	)	$	634,366



	2020			2019
Balance at beginning of period	$	56,928		$	22,698
Contract liabilities added during the period	14,292			54,331
Revenue recognized during the period	(52,802		)	(20,101		)
Balance at end of period	$	18,418		$	56,928



	2020		2019		2018
Net sales:
Industrial - oil and gas, construction, and general	$	605,236	$	526,465	$	461,945
Transmission and distribution	254,836		212,433		194,503
Power generation	201,745		188,189		153,982
Total net sales	$	1,061,817	$	927,087	$	810,430



Buildings and structures	10-25 years
Machinery and equipment	3-15 years
Furniture and fixtures	3-15 years
Automotive equipment	3 years
Computers and software	33-7 years



Balance at February 29, 2016	$	2,915
Warranty costs incurred	(1,947		)
Additions charged to income	1,130
Balance at February 28, 2017	$	2,098
Warranty costs incurred	(2,225		)
Additions charged to income	2,140
Balance at February 28, 2018	$	2,013
Warranty costs incurred	(2,195		)
Additions charged to income	1,933
Balance at February 28, 2019	$	1,751



	2020			2019
Foreign currency translation adjustments	$	(30,949	)	$	(28,856	)
Interest rate swap	50			104
Accumulated other comprehensive loss	$	(30,899	)	$	(28,752	)



Balance Sheet	February 28, 2018		ASC 606 Adjustments		March 1, 2018
Assets
Inventories	$	110,761	$	7,664	$	118,425
Liabilities and shareholders' equity
Contract liabilities	22,698		6,948		29,646
Retained Earnings	526,018		716		526,734



Balance Sheet	As Reported		Balance Excluding ASC 606 Effects		Change
Assets
Inventories	$	124,847	$	119,627	$	5,220
Liabilities and shareholders' equity
Contract liabilities	56,928		53,444		3,484



Consolidated Statements of Income	As Reported		Balance Excluding ASC 606 Effects		Change
Net sales	$	927,087	$	923,623	$	3,464
Cost of goods sold	728,466		726,022		2,444
Gross profit	198,621		197,601		1,020
Operating income	76,956		75,936		1,020



	2020		2019
Raw materials	$	88,837	$	94,410
Work-in-process	5,543		19,067
Finished goods	5,461		11,370
	$	99,841	$	124,847



	2020			2019
Land	$	21,826		$	21,677
Building and structures	162,851			156,447
Machinery and equipment	252,726			245,588
Furniture, fixtures, software and computers	28,938			27,075
Automotive equipment	4,394			3,766
Construction in progress	16,466			13,065
	487,201			467,618
Less accumulated depreciation	(274,097		)	(257,391		)
Net property, plant, and equipment	$	213,104		$	210,227



	2020		2019
Accrued interest	$	1,042	$	1,196
Accrued warranty	3,702		1,751
Commissions	4,180		3,370
Personnel expenses	8,646		6,282
Group medical insurance	3,083		2,024
Sales and other taxes payable	3,098		1,301
Other	3,117		1,707
Total	$	26,868	$	17,631



Balance at February 29, 2016	$	61
Restructuring and other related costs	7,862
Non-cash adjustments	(6,602		)
Cash payments	(1,014		)
Balance at February 28, 2017	$	307
Restructuring and other related costs	—
Cash payments	(307		)
Balance at February 28, 2018	$	—
Restructuring and other related costs	1,301
Non-cash adjustments	(810		)
Cash payments	(491		)
Balance at February 28, 2019	$	—


	EIN/Pension Plan Number		Pension Protection Act Reported Status (1)				FIP/RP Status (3)		Company Contributions (4)												Surcharge Imposed (5)	Expiration Date of Collective Bargaining Agreements		EIN/Pension Plan Number		Pension Protection Act Reported Status (1)			FIP/RP Status (2)	Company Contributions (3)											Surcharge Imposed (4)	Expiration Date of Collective Bargaining Agreements
						Year Ended																	Fiscal Year
Pension Fund		2019 (2)	Pension Protection Act Reported Status (1)		2018			February 28, 2019				February 28, 2018				February 28, 2017							2020			Pension Protection Act Reported Status (1)		2019			2020			2019				2018
Boilermaker-Blacksmith National Pension Trust		EIN:48-6168020 Plan: 001		Endangered		Endangered			Implemented		$	5,651			$	4,070			$	7,359					No		Various through 12/31/2019	EIN:48-6168020 Plan: 001		Critical		Endangered	Implemented		$	5,337			$	5,651			$	4,070	Yes	Various through 12/31/2020
Contributions to other multiemployer pension plans									627				470				736													366			627				470
Total contributions									$	6,278			$	4,540			$	8,095												$	5,703		$	6,278			$	4,540


(2)	In April 2019, the Boilermaker-Blacksmith National Pension Trust disclosed that the plan will be classified in critical status commencing for the plan year beginning January 1, 2019 because there is a projected funding deficiency in the plan year ending December 31, 2028.