UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~November 30, 2020~~May 31, 2021


☐			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		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
(Address of principal executive offices)		(Zip Code)

(817) 810-0095

(Registrant’s telephone number, including area code)

NONE

(Former name, former address and former fiscal year, if changed since last report)

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

AZZ

New York Stock Exchange

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. Yes ☒ 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). Yes ☒ No ☐

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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

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 ☒

As of ~~December 31, 2020~~June 30, 2021 the registrant had outstanding ~~25,364,052~~25,071,582 shares of common stock; $1.00 par value per share.

Table of Contents

AZZ INC.

INDEX

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AZZ INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)


		November 30, 2020		February 29, 2020			May 31, 2021		February 28, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	19,195	$	36,687	Cash and cash equivalents	$	12,403	$	14,837
Accounts receivable (net of allowance for doubtful accounts of $5,234 as of November 30, 2020 and $4,951 as of February 29, 2020)		127,501		139,214
Accounts receivable (net of allowance for credit losses of $5,362 as of May 31, 2021 and $5,713 as of February 28, 2021)						Accounts receivable (net of allowance for credit losses of $5,362 as of May 31, 2021 and $5,713 as of February 28, 2021)	134,531		128,127
Inventories:	Inventories:					Inventories:
Raw material	Raw material	84,600		88,837		Raw material	92,283		86,913
Work-in-process	Work-in-process	7,475		5,543		Work-in-process	6,214		4,453
Finished goods	Finished goods	1,683		5,461		Finished goods	1,453		1,546
Contract assets	Contract assets	74,712		70,093		Contract assets	71,185		58,056
Prepaid expenses and other	Prepaid expenses and other	6,366		8,727		Prepaid expenses and other	11,211		5,876
Assets held for sale	Assets held for sale	3,178		0		Assets held for sale	5,628		3,684
Total current assets	Total current assets	324,710		354,562		Total current assets	334,908		303,492
Property, plant and equipment, net	Property, plant and equipment, net	201,178		213,104		Property, plant and equipment, net	207,689		205,909
Operating lease right-of-use assets	Operating lease right-of-use assets	38,474		43,208		Operating lease right-of-use assets	48,698		37,801
Goodwill	Goodwill	351,830		356,225		Goodwill	354,839		353,881
Intangibles and other assets, net	Intangibles and other assets, net	93,677		106,732		Intangibles and other assets, net	93,105		95,359
Total assets	Total assets	$	1,009,869	$	1,073,831	Total assets	$	1,039,239	$	996,442
Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity					Liabilities and Shareholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	53,715	$	61,987	Accounts payable	$	48,831	$	41,034
Income tax payable	Income tax payable	0		2,876		Income tax payable	4,778		0
Accrued salaries and wages	Accrued salaries and wages	21,883		38,882		Accrued salaries and wages	16,614		22,606
Other accrued liabilities	Other accrued liabilities	29,639		26,868		Other accrued liabilities	36,278		27,136
Customer deposits	Customer deposits	436		255		Customer deposits	421		348
Contract liabilities	Contract liabilities	11,521		18,418		Contract liabilities	17,098		16,138
Lease liability, short-term	Lease liability, short-term	6,261		6,327		Lease liability, short-term	7,174		6,588
Debt due within one year		0		125,000

Total current liabilities	Total current liabilities	123,455		280,613		Total current liabilities	131,194		113,850
Debt due after one year, net	Debt due after one year, net	181,978		77,878		Debt due after one year, net	185,435		178,419
Lease liability, long-term	Lease liability, long-term	33,323		38,114		Lease liability, long-term	40,702		32,629
Deferred income taxes	Deferred income taxes	33,073		37,926		Deferred income taxes	38,467		39,283
Other long-term liabilities	Other long-term liabilities	13,962		4,934		Other long-term liabilities	6,030		8,969
Total liabilities	Total liabilities	385,791		439,465		Total liabilities	401,828		373,150
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Common stock, $1 par, shares authorized 100,000; 25,430 shares issued and outstanding at November 30, 2020 and 26,148 shares issued and outstanding at February 29, 2020		25,430		26,148
Common stock, $1 par, shares authorized 100,000; 25,071 shares issued and outstanding at May 31, 2021 and 25,108 shares issued and outstanding at February 28, 2021						Common stock, $1 par, shares authorized 100,000; 25,071 shares issued and outstanding at May 31, 2021 and 25,108 shares issued and outstanding at February 28, 2021	25,071		25,108
Capital in excess of par value	Capital in excess of par value	73,390		66,703		Capital in excess of par value	75,600		75,979
Retained earnings	Retained earnings	552,443		572,414		Retained earnings	559,173		547,289
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(27,185)		(30,899)		Accumulated other comprehensive loss	(22,433)		(25,084)
Total shareholders’ equity	Total shareholders’ equity	624,078		634,366		Total shareholders’ equity	637,411		623,292
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	1,009,869	$	1,073,831	Total liabilities and shareholders' equity	$	1,039,239	$	996,442

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AZZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


		Three Months Ended November 30,				Nine Months Ended November 30,					Three Months Ended May 31,
		2020		2019		2020		2019			2021		2020

Sales	Sales	$	226,623	$	291,139	$	643,287	$	816,452	Sales	$	229,826	$	213,293
Cost of sales	Cost of sales	171,948		223,808		500,311		630,328		Cost of sales	171,899		171,085
Gross margin	Gross margin	54,675		67,331		142,976		186,124		Gross margin	57,927		42,208

Selling, general and administrative	Selling, general and administrative	25,228		33,903		79,867		99,515		Selling, general and administrative	27,215		27,890
Restructuring and impairment charges		1,576		0		20,269		0

Operating income	Operating income	27,871		33,428		42,840		86,609		Operating income	30,712		14,318

Interest expense	Interest expense	2,272		3,301		7,376		10,433		Interest expense	1,697		2,634

Other (income) expense, net	Other (income) expense, net	(724)		(743)		823		367		Other (income) expense, net	(969)		1,456
Income before income taxes	Income before income taxes	26,323		30,870		34,641		75,809		Income before income taxes	29,984		10,228
Income tax expense	Income tax expense	6,620		8,835		11,187		16,932		Income tax expense	7,647		4,687
Net income	Net income	$	19,703	$	22,035	$	23,454	$	58,877	Net income	$	22,337	$	5,541
Earnings per common share	Earnings per common share									Earnings per common share
Basic earnings per share	Basic earnings per share	$	0.76	$	0.84	$	0.90	$	2.25	Basic earnings per share	$	0.89	$	0.21
Diluted earnings per share	Diluted earnings per share	$	0.76	$	0.84	$	0.90	$	2.24	Diluted earnings per share	$	0.88	$	0.21

Cash dividends declared per common share	Cash dividends declared per common share	$	0.17	$	0.17	$	0.51	$	0.51	Cash dividends declared per common share	$	0.17	$	0.17

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AZZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


		Three Months Ended November 30,				Nine Months Ended November 30,					Three Months Ended May 31,
		2020		2019		2020		2019			2021		2020

Net income	Net income	$	19,703	$	22,035	$	23,454	$	58,877	Net income	$	22,337	$	5,541
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Foreign currency translation adjustments, net of income tax of $0	Foreign currency translation adjustments, net of income tax of $0	255		(215)		3,756		(1,434)		Foreign currency translation adjustments, net of income tax of $0	2,581		(1,039)
Interest rate swap, net of income tax of $7, $7, $21, and $22, respectively		(14)		(14)		(42)		(41)
Interest rate swap, net of income tax of $0 and $7, respectively										Interest rate swap, net of income tax of $0 and $7, respectively	0		(14)
Other comprehensive income (loss)	Other comprehensive income (loss)	241		(229)		3,714		(1,475)		Other comprehensive income (loss)	2,581		(1,053)
Comprehensive income	Comprehensive income	$	19,944	$	21,806	$	27,168	$	57,402	Comprehensive income	$	24,918	$	4,488

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AZZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Nine Months Ended November 30,					Three Months Ended May 31,
		2020		2019			2021		2020
Cash Flows From Operating Activities	Cash Flows From Operating Activities					Cash Flows From Operating Activities
Net income	Net income	$	23,454	$	58,877	Net income	$	22,337	$	5,541
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts		233		2,316
Adjustments to reconcile net income to net cash provided by (used in) operating activities:						Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Bad debt expense						Bad debt expense	(218)		129
Amortization and depreciation	Amortization and depreciation	34,176		37,208		Amortization and depreciation	11,084		11,668
Deferred income taxes	Deferred income taxes	(4,660)		(4,486)		Deferred income taxes	(892)		(2,147)
Loss on disposal of business		3,050		0
Non-cash restructuring and impairment charges		17,219		0
Net gain on sale of property, plant and equipment		0		(305)

Net (gain) loss on sale of property, plant and equipment						Net (gain) loss on sale of property, plant and equipment	(15)		40
Amortization of deferred borrowing costs	Amortization of deferred borrowing costs	503		404		Amortization of deferred borrowing costs	139		135
Share-based compensation expense	Share-based compensation expense	5,773		4,904		Share-based compensation expense	1,811		1,766
Effects of changes in assets and liabilities, net of acquisitions and dispositions:	Effects of changes in assets and liabilities, net of acquisitions and dispositions:					Effects of changes in assets and liabilities, net of acquisitions and dispositions:
Accounts receivable	Accounts receivable	9,715		(28,088)		Accounts receivable	(7,966)		8,721
Inventories	Inventories	(1,763)		6,245		Inventories	(8,254)		(4,449)
Prepaid expenses and other	Prepaid expenses and other	2,327		1,491		Prepaid expenses and other	(5,419)		(941)
Other assets	Other assets	226		286		Other assets	(778)		123
Net change in contract assets and liabilities	Net change in contract assets and liabilities	(15,297)		(54,149)		Net change in contract assets and liabilities	(9,839)		3,168
Accounts payable	Accounts payable	(7,782)		18,386		Accounts payable	6,321		(15,328)
Other accrued liabilities and income taxes payable	Other accrued liabilities and income taxes payable	(7,780)		28,965		Other accrued liabilities and income taxes payable	2,749		(19,610)
Net cash provided by operating activities		59,394		72,054
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	11,060		(11,184)
Cash Flows From Investing Activities	Cash Flows From Investing Activities					Cash Flows From Investing Activities
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	454		337		Proceeds from sale of property, plant and equipment	23		0
Purchase of property, plant and equipment	Purchase of property, plant and equipment	(27,885)		(22,543)		Purchase of property, plant and equipment	(7,489)		(10,847)
Proceeds from sale of subsidiaries, net		12,444		0
Acquisition of subsidiaries, net of cash acquired		0		(60,628)

Net cash used in investing activities	Net cash used in investing activities	(14,987)		(82,834)		Net cash used in investing activities	(7,466)		(10,847)
Cash Flows From Financing Activities	Cash Flows From Financing Activities					Cash Flows From Financing Activities
Proceeds from issuance of common stock		1,694		1,781

Payments for taxes related to net share settlement of equity awards	Payments for taxes related to net share settlement of equity awards	(646)		(1,217)		Payments for taxes related to net share settlement of equity awards	(2,101)		(539)
Proceeds from revolving loan	Proceeds from revolving loan	161,000		320,500		Proceeds from revolving loan	35,000		76,000
Payments on revolving loan	Payments on revolving loan	(182,000)		(306,500)		Payments on revolving loan	(28,000)		(60,000)

Purchases of treasury shares		(30,953)		0
Repurchase and retirement of treasury stock						Repurchase and retirement of treasury stock	(6,264)		0
Payments of dividends	Payments of dividends	(13,324)		(13,355)		Payments of dividends	(4,245)		(4,425)
Net cash (used in) provided by financing activities	Net cash (used in) provided by financing activities	(64,229)		1,209		Net cash (used in) provided by financing activities	(5,610)		11,036
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	2,330		(145)		Effect of exchange rate changes on cash	(418)		722
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	(17,492)		(9,716)		Net decrease in cash and cash equivalents	(2,434)		(10,273)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	36,687		24,005		Cash and cash equivalents at beginning of period	14,837		36,687
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	19,195	$	14,289	Cash and cash equivalents at end of period	$	12,403	$	26,414

Supplemental disclosures	Supplemental disclosures					Supplemental disclosures
Cash paid for interest	Cash paid for interest	$	5,241	$	8,426	Cash paid for interest	$	394	$	869
Cash paid for income taxes	Cash paid for income taxes	$	15,208	$	7,985	Cash paid for income taxes	$	1,322	$	11

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AZZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)

Nine Months Ended November 30, 2020
Common Stock Capital in
Excess of
Par Value Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Shares Amount
Balance at February 29, 2020 26,148 $ 26,148 $ 66,703 $ 572,414 $ (30,899) $ 634,366
Share-based compensation — — 1,766 — — 1,766
Common stock issued under stock-based plans and related income tax expense 47 47 (586) — — (539)
Cash dividends paid — — — (4,425) — (4,425)
Net income — — — 5,541 — 5,541
Foreign currency translation — — — — (1,039) (1,039)
Interest rate swap — — — — (14) (14)
Balance at May 31, 2020 26,195 $ 26,195 $ 67,883 $ 573,530 $ (31,952) $ 635,656
Share-based compensation — — 2,317 — — 2,317
Common stock issued under stock-based plans and related income tax expense 23 23 (39) — — (16)
Common stock issued under employee stock purchase plan 58 58 1,636 — — 1,694
Repurchase and retirement of treasury shares (200) (200) — (6,179) — (6,379)
Cash dividends paid — — — (4,467) — (4,467)
Net loss — — — (1,790) — (1,790)
Foreign currency translation — — — — 4,540 4,540
Interest rate swap — — — — (14) (14)
Balance at August 31, 2020 26,076 $ 26,076 $ 71,797 $ 561,094 $ (27,426) $ 631,541
Share-based compensation — — 1,690 — — 1,690
Common stock issued under stock-based plans and related income tax expense 6 6 (97) — — (91)
Repurchase and retirement of treasury shares (652) (652) — (23,922) — (24,574)
Cash dividends paid — — — (4,432) — (4,432)
Net income — — — 19,703 — 19,703
Foreign currency translation — — — — 255 255
Interest rate swap — — — — (14) (14)
Balance at November 30, 2020 25,430 $ 25,430 $ 73,390 $ 552,443 $ (27,185) $ 624,078


	Three Months Ended May 31, 2021
	Common Stock			Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total

	Shares	Amount
Balance at February 28,2021	25,108	$	25,108	$	75,979	$	547,289	$	(25,084)	$	623,292
Share-based compensation expense	—	—		1,811		—		—		1,811
Common stock issued under stock-based plans and related income tax expense	89	89		(2,190)		—		—		(2,101)


Repurchase and retirement of common stock	(126)	(126)		—		(6,138)		—		(6,264)
Cash dividends paid	—	—		—		(4,245)		—		(4,245)
Net income	—	—		—		22,337		—		22,337
Foreign currency translation	—	—		—		(70)		2,651		2,581

Balance at May 31, 2021	25,071	$	25,071	$	75,600	$	559,173	$	(22,433)	$	637,411

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AZZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)


		Nine Months Ended November 30, 2019															Three Months Ended May 31, 2020
		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 Income (Loss)		Total

		Shares	Amount														Shares			Amount
Balance at February 28, 2019		26,115	$	26,115							$	46,141			$	560,224		$	(28,752)			$	603,728
Balance at February 28, 2020														Balance at February 28, 2020			26,148			$	26,148			$	66,703	$	572,414	$	(30,899)	$	634,366
Share-based compensation	Share-based compensation	—	—		1,350		—		—			1,350		Share-based compensation			—			—				1,766		—		—		1,766
Common stock issued under stock-based plans and related income tax expense	Common stock issued under stock-based plans and related income tax expense	37	37		(728)		—		—			(691)		Common stock issued under stock-based plans and related income tax expense			47			47				(586)		—		—		(539)

Cash dividends paid	Cash dividends paid	—	—		—		(4,440)		—			(4,440)		Cash dividends paid			—			—				—		(4,425)		—		(4,425)
Net income	Net income	—	—		—		21,284		—			21,284		Net income			—			—				—		5,541		—		5,541
Foreign currency translation	Foreign currency translation	—	—		—		—		(1,960)			(1,960)		Foreign currency translation			—			—				—		—		(1,039)		(1,039)
Interest rate swap	Interest rate swap	—	—		—		—		(14)			(14)		Interest rate swap			—			—				—		—		(14)		(14)
Balance at May 31, 2019		26,152	$	26,152	$	46,763	$	577,068	$	(30,726)		$	619,257
Share-based compensation		—	—		1,736		—		—			1,736

Common stock issued under stock-based plans and related income tax expense		51	51		1,730		—		—			1,781

Cash dividends paid		—	—		—		(4,454)		—			(4,454)
Net income		—	—		—		15,558		—			15,558
Foreign currency translation		—	—		—		—		741			741
Interest rate swap		—	—		—		—		(13)			(13)
Balance at August 31, 2019		26,221	$	26,221	$	50,211	$	588,172	$	(29,998)		$	634,606
Share-based compensation		—	—		1,818		—		—			1,818
Common stock issued under stock-based plans and related income tax expense		19	19		(545)		—		—			(526)
Balance at May 31, 2020														Balance at May 31, 2020			26,195			$	26,195			$	67,883	$	573,530	$	(31,952)	$	635,656

Cash dividends paid		—	—		—		(4,461)		—			(4,461)
Net income		—	—		—		22,035		—			22,035
Foreign currency translation		—	—		—		—		(215)			(215)
Interest rate swap		—	—		—		—		(14)			(14)
Balance at November 30, 2019		26,240	$	26,240	$	51,484	$	605,746	$	(30,227)		$	653,243

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AZZ INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.The Company and Basis of Presentation

AZZ Inc. (“AZZ”, the “Company”, "our" or “we”) was established in 1956 and incorporated under the laws of the state of Texas. The Company is a global provider of metal coating solutions, welding solutions, specialty electrical equipment and highly engineered services to the power generation, transmission, distribution, refining and industrial markets. The Company has 2 distinct operating segments: the Metal Coatings segment and the Infrastructure Solutions ~~segment (previously referred to as the Company's Energy segment).~~segment. AZZ Metal Coatings provides hot dip galvanizing, spin galvanizing, powder coating, anodizing and plating, and other metal coating applications to the steel fabrication and other industries through facilities located throughout the United States and Canada. AZZ Infrastructure Solutions is dedicated to delivering safe and reliable transmission of power from generation sources to end customers, and automated weld overlay solutions for corrosion and erosion mitigation to critical infrastructure in markets worldwide.

Presentation

The accompanying condensed consolidated balance sheet as of February ~~29, 2020, which~~28, 2021 was derived from audited financial statements, and the unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. These financial statements should be read in conjunction with the audited financial statements and related notes for the fiscal year ended February ~~29, 2020,~~28, 2021, included in the Company’s Annual Report on Form 10-K covering such period. Certain previously reported amounts have been reclassified to conform to current period presentation.

The Company's fiscal year ends on the last day of February and is identified as the fiscal year for the calendar year in which it ends. For example, the fiscal year ending February 28, ~~2021~~2022 is referred to as fiscal ~~2021.~~2022.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, which are necessary to present fairly the financial position of the Company as of ~~November 30, 2020,~~May 31, 2021, the results of its operations for the three ~~and nine~~ months ended ~~November 30,~~May 31, 2021 and 2020, ~~and 2019,~~ and cash flows for the ~~nine~~three months ended ~~November 30, 2020~~May 31, 2021 and ~~2019. These~~2020. The interim results reported herein are not necessarily indicative of results for a full year. Certain previously reported amounts have been reclassified to conform to current period presentation.

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 and the resulting economic contraction has resulted in increased business uncertainty. The Company continues to be impacted by the inability for its Infrastructure Solutions Industrial ~~Platform~~platform to access certain customer sites to perform services, temporary slow-downs in order placements in the Infrastructure Solutions Electrical ~~Platform,~~platform, and increased costs associated with maintaining safe operations across the entire business. The Company has been able to remain open during the entirety of the pandemic to service its customers. The consequences of a prolonged economic decline could include, but are not limited to, reduced sales, increased instances of uncollectible customer receivables, and increased asset impairments in future periods. Accordingly, the Company cannot reasonably estimate the length or severity of this pandemic, or the extent to which the disruption may materially impact its consolidated balance sheet, statements of operations or statements of cash flows for fiscal year ~~2021~~2022 or beyond.

Recently Adopted Accounting Pronouncements

In ~~June 2016,~~December 2019, the Financial Accounting Standards Board ~~("FASB"~~(“FASB”) ~~issued Accounting Standards Update ("ASU") No. 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument~~s (“ASU 2016-13”), which modifies the measurement of expected credit losses of certain financial instruments, including the Company's accounts receivable and contract assets. The Company adopted ASU 2016-13 in the first quarter of its fiscal 2021 utilizing the modified retrospective transition method. The adoption of ASU 2016-13 did not have a material impact on its consolidated financial statements.

~~In August 2018, the FASB issued ASU No. 2018-15,~~ ~~Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~ ("ASU 2018-15"), which aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software, in

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order to determine the applicable costs to capitalize and the applicable costs to expense as incurred. The Company adopted ASU 2018-15 in the first quarter of its fiscal 2021 and the adoption did not have a material impact on its consolidated financial statements.

~~Recently Issued Accounting Pronouncements~~

~~In December 2019, the FASB~~ issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income ~~Taxes.~~Taxes ("ASU 2019-12"). This standard is intended to simplify the accounting and disclosure requirements for income taxes by eliminating various exceptions in accounting for income taxes as well as clarifying and amending existing guidance to improve consistency in the application of ASC 740. The standard ~~will be~~was effective for the Company in the first quarter of its fiscal 2022. The Company adopted ASU 2019-12 in the first quarter of fiscal 2022 and ~~early~~the adoption ~~is permitted. The Company is currently evaluating the~~did not have a material impact ~~of adopting this new accounting guidance~~ on its consolidated financial statements.

Recently Issued Accounting Pronouncements

In March 2020 and as clarified in January 2021, the FASB issued Accounting Standards Update No. (“ASU”) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial

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Reporting” (“ASU 2020-04”), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective immediately for all entities. An entity may elect to apply the amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date between March 12, 2020 and December 31, 2022. The Company adopted ASU 2020-04 in the first quarter of fiscal 2022 and the adoption did not have a material impact on its financial condition, results of operations, and cash flows.

2.Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by giving effect to the potential dilution that could occur if stock awards vested and were converted into common shares during the period.

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):


		Three Months Ended November 30,				Nine Months Ended November 30,					Three Months Ended May 31,
		2020		2019		2020		2019			2021		2020
Numerator:	Numerator:									Numerator:
Net income for basic and diluted earnings per common share	Net income for basic and diluted earnings per common share	$19,703		$22,035		$23,454		$58,877		Net income for basic and diluted earnings per common share	$22,337		$5,541
Denominator:	Denominator:									Denominator:
Denominator for basic earnings per common share–weighted average shares	Denominator for basic earnings per common share–weighted average shares	25,936		26,234		26,090		26,185		Denominator for basic earnings per common share–weighted average shares	25,051		26,157
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:
Employee and director equity awards	Employee and director equity awards	115		29		87		61		Employee and director equity awards	219		35
Denominator for diluted earnings per common share	Denominator for diluted earnings per common share	26,051		26,263		26,177		26,246		Denominator for diluted earnings per common share	25,270		26,192
Earnings per share basic and diluted:	Earnings per share basic and diluted:									Earnings per share basic and diluted:
Basic income per common share	Basic income per common share	$	0.76	$	0.84	$	0.90	$	2.25	Basic income per common share	$	0.89	$	0.21
Diluted income per common share	Diluted income per common share	$	0.76	$	0.84	$	0.90	$	2.24	Diluted income per common share	$	0.88	$	0.21

~~The Company had 80,148 and 128,918 restricted stock units and stock appreciation rights for~~For the three ~~and nine~~ months ended ~~November 30, 2020, respectively, that~~May 31, 2021, 154,259 shares were ~~not included in~~excluded from the calculation of diluted EPS because the effect would be antidilutive. These ~~securities~~shares could be dilutive in future periods.

3.Sales

Disaggregated Sales

The following table presents disaggregated sales by customer industry (in thousands):


		Three Months Ended November 30,				Nine Months Ended November 30,					Three Months Ended May 31,
		2020		2019		2020		2019			2021		2020
Sales:	Sales:									Sales:
Industrial	Industrial	$	138,240	$	195,063	$	335,462	$	499,215	Industrial	$	153,983	$	130,109
Transmission and distribution	Transmission and distribution	56,656		55,316		203,332		184,283		Transmission and distribution	43,667		49,057
Power generation	Power generation	31,727		40,760		104,493		132,954		Power generation	32,176		34,127
Total sales	Total sales	$	226,623	$	291,139	$	643,287	$	816,452	Total sales	$	229,826	$	213,293

See Note 4 for sales information by segment.

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Contract Liabilities

The following table shows the changes in contract liabilities for the ~~nine~~three months ended ~~November 30,~~May 31, 2021 and 2020, ~~and 2019,~~ respectively (in thousands):


		2020		2019			2021		2020
Balance at February 29,		$	18,418	$	56,928
Balance at February 28/29,						Balance at February 28/29,	$	16,138	$	18,418
Contract liabilities added during the period	Contract liabilities added during the period	5,017		22,237		Contract liabilities added during the period	12,375		4,796
Sales recognized during the period	Sales recognized during the period	(11,914)		(52,298)		Sales recognized during the period	(11,415)		(5,849)
Balance at November 30,		$	11,521	$	26,867
Balance at May 31,						Balance at May 31,	$	17,098	$	17,365

The Company did not record any sales for the ~~nine~~three months ended ~~November 30,~~May 31, 2021 or 2020 ~~or 2019~~ related to performance obligations satisfied in prior periods. The increases or decreases in accounts receivable, contract assets, and contract liabilities during the ~~nine~~three months ended ~~November 30,~~May 31, 2021 and 2020 ~~and 2019~~ were due primarily to normal timing differences between the Company’s performance and customer payments ~~divestitures, and, to a lesser extent, customer inspection delays and effects of COVID-19 on the Company's customers.~~in fiscal 2021.

The Company expects to recognize sales, related to the ~~$11.5~~$17.1 million balance of contract liabilities as of ~~November 30, 2020~~May 31, 2021 of approximately ~~$2.2~~$12.1 million, ~~$7.0~~$4.7 million, $0.2 million and ~~$2.3~~$0.1 million in fiscal ~~2021,~~ 2022, 2023, 2024 and ~~2023,~~2025, respectively.

4.Operating Segments

Segment Information

The Company has 2 distinct operating segments: the Metal Coatings segment and the Infrastructure Solutions segment.

The Metal Coatings segment provides hot dip galvanizing, spin galvanizing, powder coating, anodizing and plating, and other metal coating applications to the steel fabrication and other industries through facilities located throughout the United States and Canada. Hot dip galvanizing is a metallurgical process in which molten zinc reacts to steel. The zinc alloying provides corrosion protection to fabricated steel for extended periods of up to 50 years.

The Infrastructure Solutions segment provides specialized products and services designed to support primarily industrial and electrical applications. The product offerings include custom switchgear, electrical enclosures, medium and high voltage bus ducts, explosion proof and hazardous duty lighting and tubular products. The Infrastructure Solutions segment also focuses on life-cycle extension for the power generation, refining and industrial infrastructure, through providing automated weld overlay solutions for corrosion and erosion mitigation.

Sales and operating income by segment for each period were as follows (in thousands):


		Three Months Ended November 30,				Nine Months Ended November 30,					Three Months Ended May 31,
		2020		2019		2020		2019			2021		2020
Sales:	Sales:									Sales:
Metal Coatings	Metal Coatings	$	115,616	$	129,196	$	351,643	$	376,193	Metal Coatings	$	127,735	$	118,991
Infrastructure Solutions	Infrastructure Solutions	111,007		161,943		291,644		440,259		Infrastructure Solutions	102,091		94,302
Total sales	Total sales	$	226,623	$	291,139	$	643,287	$	816,452	Total sales	$	229,826	$	213,293

Operating income:	Operating income:									Operating income:
Metal Coatings	Metal Coatings	$	28,671	$	27,258	$	69,355	$	85,323	Metal Coatings	$	31,576	$	25,085
Infrastructure Solutions	Infrastructure Solutions	8,722		17,421		3,364		34,231		Infrastructure Solutions	9,624		(1,048)
Corporate	Corporate	(9,522)		(11,251)		(29,879)		(32,945)		Corporate	(10,488)		(9,719)
Total operating income	Total operating income	$	27,871	$	33,428	$	42,840	$	86,609	Total operating income	$	30,712	$	14,318

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Asset balances by segment for each period were as follows (in thousands):

November 30, 2020 February 29, 2020
Total assets:
Metal Coatings $ 474,830 $ 504,632
Infrastructure Solutions 515,103 548,032
Corporate 19,936 21,167
Total $ 1,009,869 $ 1,073,831

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	May 31, 2021		February 28, 2021
Total assets:
Metal Coatings	$	490,326	$	480,778
Infrastructure Solutions	521,428		489,986
Corporate	27,485		25,678
Total	$	1,039,239	$	996,442

Financial Information About Geographical Areas

The following table presents sales by geographic region for each period (dollars in thousands):


		Three Months Ended November 30,				Nine Months Ended November 30,					Three Months Ended May 31,
		2020		2019		2020		2019			2021		2020
Sales:	Sales:									Sales:
United States	United States	$	180,429	$	214,577	$	540,162	$	655,582	United States	$	191,116	$	190,842
International	International	46,194		76,562		103,125		160,870		International	38,710		22,451
Total	Total	$	226,623	$	291,139	$	643,287	$	816,452	Total	$	229,826	$	213,293

The following table presents fixed assets by geographic region for each period (dollars in thousands):


		November 30, 2020		February 29, 2020			May 31, 2021		February 28, 2021
Property, plant and equipment, net:	Property, plant and equipment, net:					Property, plant and equipment, net:
United States	United States	$	179,668	$	190,365	United States	$	180,004	$	180,718
Canada	Canada	15,088		16,385		Canada	14,953		15,007
Other countries	Other countries	6,422		6,354		Other countries	12,732		10,184
Total	Total	$	201,178	$	213,104	Total	$	207,689	$	205,909

5.Warranty Reserves

A reserve has been established to provide for the estimated future cost of warranties on certain delivered products. The warranty accrual is included in "Other accrued liabilities" on the condensed consolidated balance sheets. Management monitors established reserves and adjusts warranty estimates based upon the progression of resolution activities with the Company's customers. Warranties typically cover non-conformance to customer specifications ~~and~~or defects in material and workmanship.

The following table shows the changes in the warranty reserves for the ~~nine~~three months ended ~~November 30, 2020~~May 31, 2021 (dollars in thousands):


Balance at February ~~29, 2020~~28, 2021	$	~~3,702~~4,079
Warranty costs incurred	~~(1,251)~~(112)
Additions charged to income	~~1,073~~170
~~Transferred to held for sale~~	~~(478)~~
Balance at ~~November 30, 2020~~May 31, 2021	$	~~3,046~~4,137

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6.Debt

The Company's debt consisted of the following for each of the periods presented (dollars in thousands):

November 30, 2020 February 29, 2020
2017 Revolving Credit Facility $ 57,000 $ 78,000
2011 Senior Notes 125,000 125,000
Total debt, gross 182,000 203,000
Unamortized debt issuance costs (22) (122)
Total debt, net 181,978 202,878
Less amount due within one year 0 (125,000)
Debt due after one year, net $ 181,978 $ 77,878

On October 9, 2020, the Company completed a private placement transaction and entered into a Note Purchase Agreement, whereby the Company agreed to borrow $150.0 million of senior unsecured notes (the “Notes”), consisting of two separate tranches:

•~~7-year borrowing: $70.0 million priced at 2.77% coupon, and~~

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•~~12-year borrowing: $80.0 million priced at 3.17% coupon.~~

The proceeds of the $80.0 million tranche was funded on December 17, 2020. The $70.0 million tranche will be funded in January 2021. The Company expects to use the proceeds to repay the existing $125.0 million 5.42% Senior Notes maturing on January 20, 2021, as well as being available for general corporate purposes. Interest on the outstanding Notes will be paid semi-annually. See Note 12.


	May 31, 2021		February 28, 2021
2017 Revolving Credit Facility	$	36,000	$	29,000



2020 Senior Notes	150,000		150,000
Total debt, gross	186,000		179,000
Unamortized debt issuance costs	(565)		(581)
Total debt, net	185,435		178,419
Less amount due within one year	0		0
Debt due after one year, net	$	185,435	$	178,419

The Company's debt agreements require the Company to maintain certain financial ~~ratios.~~ratios, of which the most restrictive is a debt to EBITDA leverage ratio of at least 3.25 to 1.00. As of ~~November 30, 2020,~~May 31, 2021, the Company was in compliance with all covenants or other requirements set forth in the debt agreements.

7.Leases

The Company is a lessee under various operating leases for facilities and equipment. Supplemental information related to the Company's portfolio of operating leases was as follows (dollars in thousands):

Three Months Ended November 30, Nine Months Ended November 30,
2020 2019 2020 2019
Operating lease cost $ 3,545 $ 4,803 $ 11,713 $ 13,717
Operating cash flows from operating leases included in lease liabilities 2,069 2,234 6,313 6,640
ROU assets obtained in exchange for new operating lease liabilities 0 4,385 1,529 7,534


	Three Months Ended May 31,
	2021			2020
Operating cash flows from operating leases included in lease liabilities	$	2,299		$	2,119
Lease liabilities obtained from new ROU assets - operating	12,661			204
Weighted-average remaining lease term - operating leases (years)	8.4			7.6
Weighted-average discount rate - operating leases	4.6		%	5.0		%
Operating and financing cash flows from financing leases included in lease liabilities	18			—
Lease liabilities obtained from new ROU assets - financing	0			—
Weighted-average remaining lease term - financing leases (years)	4.3			—
Weighted-average discount rate - financing leases	4.3		%	—		%

The following table outlines the classification of lease expense in the statements of income (dollars in thousands):


	Three Months Ended May 31,
	2021		2020
Cost of sales	$	2,546	$	3,225
Selling, general and administrative	1,130		1,249
Total lease expense	$	3,676	$	4,474

November 30, 2020 February 29, 2020
Weighted-average remaining lease term - operating leases 7.13 years 7.94 years
Weighted-average discount rate - operating leases 4.86 % 4.89 %

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As of ~~November 30, 2020,~~May 31, 2021, maturities of the Company's lease liabilities were as follows (dollars in thousands):


Fiscal year:	Fiscal year:	Amount		Fiscal year:	Operating Leases		Finance Leases		Total
2021 (remaining 3 months)		$	2,055
2022		7,998
2022 (remaining 9 months)				2022 (remaining 9 months)	$	6,896	$	53	$	6,949
2023	2023	7,495		2023	8,709		71		8,780
2024	2024	6,620		2024	7,818		71		7,889
2025	2025	5,766		2025	6,777		68		6,845
2026				2026	5,330		14		5,344
Thereafter	Thereafter	17,424		Thereafter	21,962		0		21,962
Total lease payments	Total lease payments	47,358		Total lease payments	57,492		277		57,769
Less imputed interest	Less imputed interest	(7,774)		Less imputed interest	(9,872)		(21)		(9,893)
Total	Total	$	39,584	Total	$	47,620	$	256	$	47,876

8.Income Taxes

In response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures include deferring the due dates of tax payments and other changes to their income and non-income-based tax laws, as well as providing direct government assistance through grants and forgivable loans. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020 in the U.S., includes measures to assist companies, including temporary changes to income and non-income-based tax laws. With respect to the CARES Act, the Company ~~currently expects to benefit~~benefited from the deferral of certain payroll taxes through the end of calendar year 2020 and the technical correction with respect to qualified improvement property. ~~The Company continues to monitor U.S. and international governmental mandates and programs for applicability to the Company.~~

The provision for income taxes reflects an effective tax rate of ~~25.1%~~25.5% for the three months ended ~~November 30, 2020,~~May 31, 2021, as compared to ~~28.6%~~45.8% for the respective prior year comparable period. The decrease in the effective tax rate was primarily attributable to the unfavorable ~~adjustments recorded~~impact of COVID-19 on book earnings in the prior year ~~comparable period related~~quarter compared to ~~tax return to tax provision adjustments, as well as an India tax audit settlement that~~the current quarter ended May 31, 2021. The Company recorded discrete items in the first quarter of the prior year and the current year; however, since book income was ~~recorded~~significantly lower in the prior year, ~~quarter.~~

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~~For the nine months ended November 30, 2020,~~ the effective tax rate was ~~32.3%, compared to 22.3% for~~impacted more significantly by the prior year comparable period. The increase in the effective tax rate is primarily attributable to the fiscal 2021 restructuring charges impact on book income, coupled with the recognition of uncertain tax positions in the first quarter, as well as losses in foreign jurisdictions for which the Company does not expect to recognize the benefit.discrete items.

9.~~Share-based Compensation~~

~~The Company has 2 share-based compensation plans, the 2014 Long Term Incentive Plan (the "2014 Plan") and the Amended and Restated 2005 Long Term Incentive Plan (the “2005 Plan”).~~

The 2014 Plan provides for broad-based equity grants to employees, including executive officers, and members of the board of directors and permits the granting of restricted shares, restricted stock units, performance awards, stock appreciation rights and other stock-based awards. The maximum number of shares that may be issued under the 2014 Plan is 1.5 million. The 2005 Plan permitted the granting of stock appreciation rights and other equity-based awards to certain employees. This plan was terminated upon the effective date of the 2014 Plan and no future grants may be made under the 2005 Plan. There are stock appreciation rights granted under the 2005 Plan prior to its termination that remain outstanding, and if exercised, such awards will be settled from the balance of shares available for issuance under the 2005 Plan. As of November 30, 2020, there were approximately 49,000 shares available for issuance under the 2005 Plan. The 2005 Plan will be formally retired when all remaining outstanding stock appreciation rights are exercised, forfeited or expire. All outstanding stock appreciation rights will expire on or before March 1, 2021.

~~Restricted Stock Unit Awards~~

Restricted stock unit ("RSU") awards are valued at the market price of our common stock on the grant date. Awards generally vest ratably over a period of three years but these awards may vest and be issued earlier in accordance with the Plan’s vesting provisions. RSU awards have dividend equivalent rights (“DERs”), which entitle holders of RSUs to the same dividend value per share as holders of common stock. DERs are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs. DERs are accumulated and paid when the underlying awards vest.

~~A summary of the Company’s non-vested restricted stock unit award activity (including DERs) for the nine months ended November 30, 2020 is as follows:~~

Restricted Stock Units Weighted Average Grant Date Fair Value
Outstanding as of February 29, 2020 194,946 $ 44.34
Granted 131,120 28.78
Vested (72,747) 45.67
Forfeited (26,124) 36.82
Outstanding as of November 30, 2020 227,195 $ 35.65

~~Performance Share Unit Awards~~

The Company grants performance share unit ("PSU") awards to certain employees, which also include DERs as described above. These PSU awards have a three year performance cycle and vest on the third anniversary of the grant date subject to various vesting conditions. The fiscal 2019 and 2020 PSU awards have vesting conditions based on the Company’s degree of achievement of a target annual average adjusted return on assets during these three year periods relative to the performance of a predetermined group of peer companies. In addition, these PSU awards may have vesting conditions or certain vesting multipliers, which are based on the Company’s total shareholder return ("TSR") during such three years in comparison to a defined specific industry peer group. For fiscal 2021, the Company's annual PSU awards are subject to the Company's TSR relative to its proxy peer group and will not be subject to any multiplier. The Company estimates the grant date value of PSU awards using a Monte Carlo simulation model on the date of grant.

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~~A summary of the Company’ non-vested performance share unit award activity (including DERs) for the nine months ended November 30, 2020 is as follows:~~

Performance Stock Units Weighted Average Grant Date Fair Value
Outstanding as of February 29, 2020 109,936 $ 47.75
Granted 69,955 33.22
Vested 0 0
Forfeited (36,307) 50.54
Outstanding as of November 30, 2020 143,584 $ 39.97

The PSU awards in the table above are presented at the face value of the respective grants. However, the PSU awards prior to fiscal 2021 that may ultimately vest can vary in a range 0% to 250%, and 0% to 200% thereafter, of the face amount of such awards depending on the outcome of the performance or market vesting conditions.

~~Stock Appreciation Rights~~

Stock appreciation rights ('SARs") were granted with an exercise price equal to the market value of our common stock on the date of grant. These awards generally have a contractual term of seven years and generally vest ratably over a period of three years from the date of grant although some may vest immediately on issuance. These awards are valued using the Black-Scholes option-pricing model.

~~A summary of the Company’s SARs activity for the nine months ended November 30, 2020 is as follows:~~

Options/SAR’s Weighted Average Exercise Price
Outstanding as of February 29, 2020 94,826 $ 44.58
Granted 0 0
Exercised 0 0
Forfeited (43,489) 45.10
Outstanding as of November 30, 2020 51,337 $ 44.13
Exercisable as of November 30, 2020 51,337 $ 44.13

~~The average remaining contractual term for SARs outstanding and SARs that were exercisable as of November 30, 2020 was 0.29 years and such awards had 0 intrinsic value.~~

~~Employee Stock Purchase Plan~~

The Company also has an Employee Stock Purchase Plan ("ESPP"), which allows employees of the Company to purchase common stock of the Company through accumulated payroll deductions. Offerings under the ESPP have a duration of 24 months (the "offering period") and commence on each January 1 and July 1, and end on June 30 and December 31, respectively. On the first day of an offering period (the “enrollment date”) the participant is granted the option to purchase shares on each exercise date at the lower of 85% of the market value of a share of the Company's common stock on the enrollment date or the exercise date. The participant’s right to purchase common stock under the plan is restricted to no more than $25,000 per calendar year and the participant may not purchase more than 5,000 shares during any offering period. Participants may terminate their interest in a given offering or a given exercise period by withdrawing all of their accumulated payroll deductions at any time prior to the end of the offering period. The fair value of the estimated number of shares to be issued under each offering is determined using the Black-Scholes option-pricing model. The Company issued 58,107 and 51,438 shares from the ESPP during the nine months ended November 30, 2020 and 2019, respectively.

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~~Share-based Compensation Expense~~

~~Share-based compensation expense and related income tax benefits related to all the plans listed above were as follows (in thousands):~~

Nine Months Ended November 30,
2020 2019
Compensation expense $ 5,773 $ 4,904
Income tax benefits $ 525 $ 1,030

~~Unrecognized compensation cost related to the Company's employee equity grants at November 30, 2020 totals $10.1 million and is expected to be recognized over a period of 1.91 years.~~

~~The Company’s policy is to issue shares required under these plans from the Company’s authorized but unissued shares.~~

~~10.~~ Equity

On January 19, 2012, the Company's Board of Directors authorized the repurchase of up to 10 percent of the then outstanding shares of the Company's Common Stock (the "2012 Share Repurchase Program"). The 2012 Share Repurchase Program did not have an expiration date, and the amount and prices paid for any future share purchases under the authorization were to be based on market conditions and other factors at the time of the purchase. Repurchases under the 2012 Share Repurchase Program were made through open market purchases or private transactions.

On November 10, 2020, the Company's Board of Directors authorized a $100 million share repurchase program pursuant to which the Company may repurchase its Common Stock (the “2020 Share ~~Repurchase Program”~~Authorization”). Repurchases under the 2020 Share ~~Repurchase Program~~Authorization will be made through open market and/or private transactions, in accordance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans, which allows stock repurchases when the Company might otherwise be precluded from doing so.

~~11. Goodwill and Intangible Assets~~

Goodwill is evaluated for impairment on at least an annual basis, or more frequently if indicators of impairment exist. The impairment tests are based on Level 3 fair value inputs. Fair value is an exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Hierarchy Levels 1, 2, or 3 are terms for the priority of inputs to valuation techniques used to measure fair value. Hierarchy Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Hierarchy Level 2 inputs are inputs, other than quoted prices included with level 1, that are directly or indirectly observable for the asset or liability. Hierarchy Level 3 are inputs that are not observable in the market. During the nine months ended November 30, 2020, the Company continued to execute its strategy to divest of non-core businesses, which began in the last quarter of 2020 with the planned exit of most of our business serving customers in the nuclear power businesses. The Company closed certain transactions in the second quarter of 2021 and the Company classified other businesses as held-for-sale in the accompanying consolidated balance sheet. In connection with the divestitures, the Company allocated goodwill to the businesses disposed of or held for sale based on the relative fair value of those businesses compared with the fair value of the reporting unit where goodwill was recorded. The determination of the amount of goodwill to allocate to the disposal group as opposed to the ongoing operations required significant management judgment regarding future cash flows, discount rates and other market relevant data.

Authorization.

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~~In addition, the Company performed goodwill impairment tests~~10. Assets Held for those reporting units following the allocation of goodwill to the divested or held for sale businesses during the second quarter of fiscal 2021. NaN goodwill impairment charges have been recorded during fiscal 2021. The changes in the carrying amounts of goodwill by reportable segment for the ~~nine months ended~~ ~~November 30, 2020 are as follows:~~

Metal Coatings Infrastructure Solutions Total
Balance as of February 29, 2020 $ 157,048 $ 199,177 $ 356,225
Allocated to Galvabar (1,132) 0 (1,132)
Allocated to Southern Mechanical Services 0 (2,262) (2,262)
Allocated to disposal group 0 (1,693) (1,693)
Foreign currency translation adjustment 692 0 692
Balance as of November 30, 2020 $ 156,608 $ 195,222 $ 351,830

Sale

~~12. Restructuring and Impairment Charges~~

~~As described in Note 11, the~~The Company has been executing a plan to divest certain non-core businesses.During the first nine months of fiscal 2021, the Company closed on the sale of its Galvabar business and its Southern Mechanical Services business, and the board of directors approved a plan to divest certain other businesses within the Company. The Company recorded net proceeds of $8.3 million and a loss on the sale of the Galvabar business, which is included in the Metal Coatings segment, of $1.2 million. During the third quarter of fiscal 2021, the Company completed the sale of Southern Mechanical Services, which is included in the Infrastructure Solutions segment, for net proceeds of $4.1 million. The Company recognized impairment charges of $0.9 million for Southern Mechanical Services during the second quarter, and an additional loss on sale of $1.9 million during the third quarter of fiscal 2021. The loss of the sale of these businesses are included in "Restructuring and impairment charges" in the consolidated statements of operations.

As of November 30, 2020, one additional business in the Infrastructure Solutions segment and two non-operating locations in the Metal Coatings segment are classified as held for sale. The assets and liabilities of the businesses expected to be disposed of within the next twelve months are included in "Assets held for sale" in the accompanying consolidated balance sheet. In addition, the Company expects to close a small number of Metal Coatings locations that were in underperforming and lower growth geographies.

~~During the nine months ended November 30, 2020, the Company recorded certain charges related to its restructuring activities, which are summarized in the table below:~~

Nine Months Ended November 30,
` Metal Coatings Infrastructure Solutions Total
Write down on assets held for sale to estimated sales price $ 2,930 $ 4,100 $ 7,030
Write down of assets expected to be abandoned 6,922 0 6,922
Loss on sale of subsidiaries 1,191 1,859 3,050
Write down of excess inventory 0 2,511 2,511
Costs associated with assets held for sale 0 756 756
Total charges $ 11,043 $ 9,226 $ 20,269

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~~Assets Held for Sale~~

The strategic decision to divest of these businesses reflects the Company's ~~longer term~~long-term strategy to become a more focused metal coatings company. The historical annual sales, operating profit and net assets of these businesses were not significant enough to qualify as discontinued operations.

Assets and liabilities allocated to the disposal group are as follows:


	As of ~~November 30, 2020~~May 31, 2021
Assets
Accounts receivable	$	~~1,313~~4,715
Inventories	~~1,024~~2,600
Contract assets	~~3,303~~2,204
Other current assets	11186
Property, plant and equipment	~~1,768~~1,348
Other assets	6043
Goodwill	1,693

Liabilities
Accounts payable	~~365~~856
Contract liabilities	~~1,086~~1,926
Other accrued liabilities	~~1,050~~877
Lease liability – long term	312
Total carrying value	~~6,668~~9,118
Less: Impairment of carrying value of remaining assets held for sale to estimated sales price	(3,490)
Fair value of disposal group	$	~~3,178~~5,628

~~Infrastructure Solutions Segment~~11. Commitments and Contingencies

Legal

~~During~~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 ~~first nine months~~Company’s intellectual property, worker’s compensation, environmental matters, and various commercial disputes, all arising in the normal course of ~~fiscal 2021,~~business. As discovery progresses on all outstanding legal matters, the Company will continue to evaluate opportunities to either settle the disputes for nuisance value or potentially enter into mediation as a ~~result~~way to resolve the disputes prior to trial. As the pending cases progress through additional discovery and potential mediation, our assessment of the ~~continued market pressures~~likelihood of an unfavorable outcome on the pending lawsuits may change. 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 ~~oil and gas services market,~~aggregate, to have a material effect on the ~~Company undertook an evaluation~~Company’s financial position, results of ~~inventory within the tubular products business.~~operations or cash flows. As a result of the evaluation, the Company determined certain inventories to be in excess of their net realizable value, and recorded an inventory write down of $2.5 million to record the inventory at its current market value.

12. Subsequent Event

~~Metal Coatings Segment~~

~~During the first nine months of fiscal~~On July 8, 2021, the Company ~~approved~~refinanced its current un-secured revolving credit facility, which was scheduled to mature in March 2022, with a ~~plan to close~~new five-year un-secured revolving credit facility under that certain ~~locations within~~credit agreement, dated July 8, 2021 by and among the ~~Metal Coatings segment~~Company, borrower, Citibank, N.A., as administrative agent and the other agents and lender parties thereto (the “2021 Credit Agreement”). The 2021 Credit Agreement matures in ~~future periods. Management performed an analysis of~~July 2026 and includes the ~~assets at each location expected to be closed.For assets that will not be transferred to another location for use in operations, management wrote the assets down to reflect a decrease in the estimated useful life and lower value to the Company.~~following significant terms;

~~The~~i.provides for a senior un-secured revolving credit facility with a principal amount of up to $400.0 million revolving loan commitments, and includes an additional $200.0 million uncommitted incremental accordion facility,

ii.interest rate margin ranges from 87.5 bps to 175 bps for Eurodollar Rate loans, and from 0.0 bps to 75 bps for Base Rate loans, depending on leverage ratio of the Company ~~recognized~~and its consolidated subsidiaries as a group,

iii.includes a letter of credit sub-facility up to $85.0 million for the ~~following charges to income from operations related to locations expected to be closed:~~

issuance of standby and commercial letters of credit,

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	~~Nine Months Ended November 30, 2020~~iv.includes a $50.0 million sublimit for swing line loans,

~~Inventory write down~~	$	~~336~~
~~Property & equipment write downs~~	~~2,956~~
~~Intangible impairment~~	~~3,258~~
~~Other~~	~~372~~
~~Total~~	$	~~6,922~~

v.includes customary representations and warranties, affirmative covenants and negative covenants, and events of default, including restrictions on incurrence of non-ordinary course debt, investment and dividends, subject to various exceptions, carve-outs and baskets, and

vi.includes a maximum leverage ratio financial covenant and an interest coverage ratio financial covenant, each to be tested at quarter end.

~~13. Subsequent Event~~The proceeds of the loans under the 2021 Credit Agreement will be used primarily to finance working capital needs, capital improvements, dividends, future acquisitions and general corporate purposes.

~~On January 4,~~The foregoing summary of certain terms and provisions of the 2021 Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the ~~Company acquired all the assets~~2021 Credit Agreement, a copy of ~~Acme Galvanizing, Inc., a privately held hot-dip galvanizing~~which is attached hereto as Exhibit 10.3 to this Form 10-Q and ~~zinc electroplating company based in Milwaukee, Wisconsin, for net proceeds of $4.2 million.~~is incorporated herein by reference.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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,”~~"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 ~~report~~Quarterly Report may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand for ~~the~~our products and services, ~~offered by AZZ Inc. ("AZZ", the "Company", "our" or "we")~~ including demand by the metal coatings market, power generation markets, electrical transmission and distribution markets, and the industrial ~~markets,~~markets. In addition, within each of ~~which may~~the markets we serve, our customers and our operations could potentially be adversely impacted by the ongoing ~~COVID-19 pandemic where our ability to assess the future and full impact on the Company, our customers and our suppliers is limited.~~coronavirus ("COVID-19") pandemic. We could also experience fluctuations in prices and raw material cost, including zinc and natural gas, which are used in ~~our~~the hot dip galvanizing ~~process or other potential~~process; supply-chain ~~disruptions or~~vendor delays; customer requested delays of our products or services; ~~changes~~delays in ~~the political stability and economic conditions impacting our business in the domestic and foreign markets that 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; economic volatility or changes in the political stability in the United States and other foreign markets in which we operate; acts of war or terrorism inside the United States or ~~abroad.~~abroad; and other changes in economic and financial conditions. AZZ has provided additional information regarding risks associated with the business in AZZ's Annual Report on Form 10-K for the fiscal year ended February ~~29, 2020~~28, 2021 and other filings with the SEC, available for viewing on AZZ's website at www.azz.com and on the SEC's website at www.sec.gov.

You are urged to consider these factors carefully 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.

The following discussion should be read in conjunction with management’s discussion and analysis contained in our Annual Report on Form 10-K for the fiscal year ended February ~~29, 2020,~~28, 2021, and with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

Results of Operations

Strategy

We have a developed strategy and periodically review our strategy against our performance, market conditions and competitive threats. As a result of our ongoing evaluations and assessments, as well as the uncertainties brought upon the Company by the COVID-19 pandemic, we further evaluated our strategies and better defined our core and non-core operations. As a result of this ongoing assessment, during the second quarter of fiscal year 2021, management approved a plan to divest certain businesses, close certain under-performing operations and recorded impairment charges against assets. During the third quarter of fiscal 2021, we publicly announced strategic and financial initiatives to enhance shareholder value. ~~We are conducting~~These initiatives include a comprehensive Board-led review of our portfolio and capital allocation and ~~have engaged~~the engagement of leading independent financial, legal and tax advisors in support of this review. We have continued these initiatives in fiscal 2022. These actions will allow us to accelerate the strategy to become a more focused metal coatings company, which we believe will more rapidly enhance shareholder value.

~~During the third quarter of fiscal 2021, we divested two businesses and closed one underperforming operation. See "Restructuring and Impairment charges" below.~~

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~~continued uncertainty associated with COVID-19 ~~resulted in virtually all governments issuing restrictive orders, including “shelter in place” orders around the globe to assist in mitigating the spread of the virus.~~

~~Table of~~ ~~Contents~~

Subsequently, in March 2020, the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency ("CISA") department issued guidance clarifying that critical infrastructure industriesdid not have a ~~responsibility to maintain~~material adverse effect on our results of operations ~~while these restrictive measures are in place. Based on input from~~for the ~~government and our customers, we continue to operate under the CISA guidelines in an effort to support critical infrastructure in the areas where we are either required to do so, or where we are able.~~

We have been impacted by the inability for our Infrastructure Solutions Industrial Platform to access certain customer sites to perform services, temporary slow-downs in order placements in the Infrastructure Solutions Electrical Platform, and have incurred costs associated with maintaining safe operations across our entire business. We have been able to remain open during the entirety of the pandemic to service our customers.three months ended May 31, 2021. While we continue to support our customers, there remains uncertainties ~~remain~~ regarding the duration ~~recurrence~~ and, to what extent, if any, that the COVID-19 pandemic, or newly identified variants, will ultimately have on the demand for our products and services or with our supply chain. We continue to monitor the situation as information becomes readily available and continue to take actions to provide for the safety of our personnel, and to support the requirements under the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency ("CISA").

~~As described above,~~

Our operations remain open globally and the ~~spread~~impact to our personnel and operations has been limited by the effects of COVID-19. The most significant impact to us has been our ability to serve customers at their business locations.We have experienced limited customer order deferrals, but there have been few outright customer order cancellations. During the first

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quarter of fiscal 2022, we continued to see improvement in sales and operating income in both of our operating segments. While governments have taken actions, including the approval of vaccines to limit the impacts of COVID-19, and the resulting economic contraction has resulted in increased business uncertainty. The consequences of a prolonged economic decline could include, but are not limited to, reduced sales, increased instances of uncollectible customer receivables, and increased asset impairments in future periods. 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 ~~operations~~income or statements of cash flows for fiscal year ~~2021 and beyond.~~2022.

In ~~addition, in~~ March 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which among other things, provides employer payroll tax credits for wages paid to employees who are unable to work during the COVID-19 pandemic and options to defer payroll tax payments. Based on ~~a preliminary~~an evaluation of the CARES Act, we qualified for the deferral of payroll and other tax ~~payments and we continue to evaluate certain employer payroll tax credits.~~payments.

Overview

We have two distinct operating segments, the Metal Coatings segment and the Infrastructure Solutions ~~segment (previously referred to as our Energy segment).~~segment. Management believes that the most meaningful analysis of our results of operations is to analyze our performance by segment. We use sales and operating income by segment to evaluate our segments. Segment operating income consists of sales less cost of sales and selling, general and administrative expenses that are specifically identifiable to a segment. For a reconciliation of segment operating income to consolidated operating income, see Note 4 to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

~~Restructuring and Impairment Charges~~

During the ~~nine~~three months ended ~~November 30, 2020,~~May 31, 2021, we ~~have been executing~~continue to execute a plan to divest certain non-core ~~businesses. During the first nine months of fiscal 2021, we closed on the sale of two~~ businesses, ~~and~~which was approved by the board of directors ~~approved a plan to divest certain other businesses within the Company.~~in fiscal 2021. As of ~~November 30, 2020,~~May 31, 2021, one ~~additional~~ business in our Infrastructure Solutions segment ~~and two~~is classified as held for sale. In addition, one non-operating ~~locations~~location in our Metal Coatings segment ~~are~~is classified as held for sale. The assets and liabilities of ~~the businesses~~these locations are expected to be disposed of within the next twelve months, and are included in "Assets held for sale" in the accompanying consolidated balance sheet. ~~In addition, we expect to close a small number of Metal Coatings locations that were in underperforming and lower growth geographies.~~

~~During the nine months ended November 30, 2020, we recorded certain charges related to these restructuring activities, which are summarized in the table below:~~

Nine Months Ended November 30, 2020
Metal Coatings Infrastructure Solutions Total
Write down on assets held for sale to estimated sales price $ 2,930 $ 4,100 $ 7,030
Write down of assets expected to be abandoned 6,922 — 6,922
Loss on sale of subsidiaries 1,191 1,859 3,050
Write down of excess inventory — 2,511 2,511
Costs associated with assets held for sale — 756 756
Total charges $ 11,043 $ 9,226 $ 20,269

~~Table of~~ ~~Contents~~

Orders and Backlog

Our backlog ~~is exclusive of transaction taxes for certain foreign subsidiaries and~~ relates entirely to our Infrastructure Solutions ~~segment.~~segment and excludes transaction taxes for certain foreign subsidiaries. As of ~~November 30, 2020,~~May 31, 2021, backlog ~~was $174.4 million, a decrease of $36.3~~remained flat to February 28, 2021, at $186.1 million. Our backlog decreased $19.3 million, or ~~17.2%~~9.4%, as compared to ~~$210.6~~$205.4 million ~~as of August 31, 2020. Our backlog decreased $100.1 million, or 36.5%, as compared to~~for the same period in the prior fiscal year. The decrease in backlog is primarily due to the continued impact of COVID-19, which resulted in a decrease in bookings and sales over the past 12 months, and, to a lesser extent, divestitures that occurred in fiscal 2021. For the three months ended ~~November 30, 2020,~~May 31, 2021, backlog was favorably impacted by an increase in our incoming net bookings ~~decreased by $69.3~~of $54.9 million, or ~~27.0%~~31.4%, ~~when~~ compared to same period of fiscal 2020 and our book-to-sales ratio decreased to 0.86 to 1 from 0.91 to 1. These decreases were primarily attributable to a decrease in net bookings related to lower overall demand for our electrical products, which was due primarily to the slowdown in the economy as a result of COVID-19. The reductions in backlog were also2021, due to a decrease in ~~net bookings~~some COVID-19 related restrictions during the quarter. The decrease in restrictions also favorably impacted our book-to-sales ratio, which increased to 1.00, from 0.82. The decrease in backlog was also due to an increase in sales recognized in the current quarter compared to the ~~nine months ended November 30, 2019,~~prior quarter, primarily related ~~primarily~~ to sales recognized in the current quarter for certain large international projects ~~that~~for which bookings were recorded in prior ~~years with no corresponding sales in the current period.~~years.

The table below includes the progression of backlog (dollars in thousands):


		Period Ended			Period Ended				Period Ended			Period Ended
Backlog	Backlog	2/29/2020	$	243,799	2/28/2019	$	332,894	Backlog	2/28/2021	$	186,119	2/28/2020	$	243,799
Net bookings	Net bookings		174,865			256,344		Net bookings		229,805			174,865

Sales recognized	Sales recognized		(213,293)			(289,123)		Sales recognized		(229,826)			(213,293)
Backlog	Backlog	5/31/2020	$	205,371	5/31/2019	$	300,115	Backlog	5/31/2021	$	186,098	5/31/2020	$	205,371
Book to sales ratio	Book to sales ratio		0.82			0.89		Book to sales ratio		1.00			0.82
Net bookings			208,627			238,007
Sales recognized			(203,372)			(236,190)
Backlog		8/31/2020	210,626		8/31/2019	301,932
Book to sales ratio			1.03			1.01
Net bookings			194,376			263,695
Backlog adjusted due to divestiture			(4,026)			—
Sales recognized			(226,623)			(291,139)
Backlog		11/30/2020	174,353		11/30/2019	274,488
Book to Sales ratio			0.86			0.91

Segment Sales

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

Three Months Ended November 30, Nine Months Ended November 30,
2020 2019 2020 2019
Sales:
Metal Coatings $ 115,616 $ 129,196 $ 351,643 $ 376,193
Infrastructure Solutions 111,007 161,943 291,644 440,259
Total sales $ 226,623 $ 291,139 $ 643,287 $ 816,452

For the three months ended November 30, 2020, consolidated sales decreased $64.5 million, or 22.2%, as compared to the same period in fiscal 2020. Sales for the Metal Coatings segment decreased $13.6 million, or 10.5%, for the three months ended November 30, 2020 as compared to the same period in fiscal 2020. The decrease was related to lower volumes of steel processed, due primarily to the slowdown in the economy as a result of COVID-19. Sales for the Infrastructure Solutions segment decreased $50.9 million, or 31.5%, for the three months ended November 30, 2020 as compared to the same period in fiscal 2020. In the Industrial Platform, the decrease was due to lower sales from certain large international electrical projects recognized in the prior period with no corresponding sales in the current period and lower sales related to oil and gas markets.

For the nine months ended November 30, 2020, consolidated sales decreased $173.2 million, or 21.2%, as compared to the year-to-date period in fiscal 2020. Sales for the Metal Coatings segment decreased $24.6 million, or 6.5%, for the nine


	Three Months Ended May 31,
	2021		2020
Sales:
Metal Coatings	$	127,735	$	118,991
Infrastructure Solutions	102,091		94,302
Total sales	$	229,826	$	213,293

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For the three months ended ~~November 30, 2020~~May 31, 2021, consolidated sales increased $16.5 million, or 7.8%, as compared to the same period in fiscal 2021. Sales for the Metal Coatings segment increased $8.7 million, or 7.3%, for the three months ended May 31, 2021, as compared to the same period in fiscal 2021. The increase was primarily due to improved price realization for our superior quality and service, the acquisition of a metal coatings facility in the fourth quarter of fiscal 2021 and the improved performance of our surface technology offerings. The volume of steel processed remained steady in the current quarter, compared to the prior year quarter. Sales for the Infrastructure Solutions segment increased $7.8 million, or 8.3%, for the three months ended May 31, 2021 as compared to the same period in fiscal 2020. The ~~decrease~~increase was primarily related to ~~lower volumes of steel processed, primarily due to the slowdown~~an improvement in the ~~economy as~~spring turnaround season in the Industrial platform (as the prior year was significantly impacted by COVID-19), partially offset by a ~~result~~decrease related to a divestiture in the third quarter of ~~COVID-19. Sales for~~fiscal 2021. In the ~~Infrastructure Solutions segment~~Electrical platform, sales decreased ~~$148.6 million, or 33.8%, for the nine months ended November 30, 2020 as~~ compared to the ~~same period in fiscal 2020. In the Industrial Platform, the decrease was~~prior year, primarily due to lower sales ~~from certain large international electrical~~in China as projects ~~recognized~~near completion, partially offset by an increase in ~~the prior period with no corresponding~~backlog and sales for switchgear and enclosure products in the current period and lower sales related to oil and gas markets. The decrease is also due to the Westinghouse bankruptcy settlement amounts received in the prior year-to-date period that did not repeat in fiscal year 2021.

our domestic operations.

Segment Operating Income

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

Three Months Ended November 30, Nine Months Ended November 30,
2020 2019 2020 2019
Operating income:
Metal Coatings $ 28,671 $ 27,258 $ 69,355 $ 85,323
Infrastructure Solutions 8,722 17,421 3,364 34,231
Corporate (9,522) (11,251) (29,879) (32,945)
Total operating income $ 27,871 $ 33,428 $ 42,840 $ 86,609


	Three Months Ended May 31, 2021								Three Months Ended May 31, 2020
	Metal Coatings		Infra- structure Solutions		Corporate		Total		Metal Coatings		Infra- structure Solutions		Corporate		Total
Operating income (loss):
Sales	$	127,735	$	102,091	$	—	$	229,826	$	118,991	$	94,302	$	—	$	213,293
Cost of sales	92,078		79,821		—		171,899		89,339		81,746		—		171,085
Gross margin	35,657		22,270		—		57,927		29,652		12,556		—		42,208
Selling, general and administrative	4,081		12,646		10,488		27,215		4,567		13,604		9,719		27,890

Total operating income	$	31,576	$	9,624	$	(10,488)	$	30,712	$	25,085	$	(1,048)	$	(9,719)	$	14,318

Operating income for the Metal Coatings segment increased ~~$1.4~~$6.5 million, or ~~5.2%~~25.9%, for the three months ended ~~November 30, 2020,~~May 31, 2021, as compared to the same period in fiscal 2021. The increase was primarily due to the increase in sales described above, a decrease in the cost of zinc in the kettles and the achievement of operational efficiencies in our surface technologies platform. Operating income for the Infrastructure Solutions segment increased by $10.7 million, or 1,018.3%, for the three months ended May 31, 2021 as compared to the same period in fiscal 2021. The increase was primarily related to the increase in sales as noted above and cost controls implemented in fiscal 2021 across the platform to mitigate disrupted markets.

Corporate expenses increased $0.8 million, or 7.9%, for the three months ended May 31, 2021, as compared to the same period in fiscal 2021. The increase is primarily due to increases in administrative costs associated with the previously announced strategic review.

Other (income) expense, net

Other income was $1.0 million for the three months ended May 31, 2021, as compared to other expense of $1.4 million the same period in fiscal 2020. The increase was primarily due to ~~a decrease in zinc costs, which led to an increase in gross margin.~~The increase was partially offset by a lower volume of steel processed, as described above. Operating income for the Infrastructure Solutions segment decreased by $8.7 million, or 49.9%, for the three months ended November 30, 2020 as compared to the same period in fiscal 2020. The decrease was primarily related to the decrease in sales as noted above, as well as the loss on the sale of a subsidiary of $1.9 million for the three months ended November 30, 2020. See "Restructuring and Impairment charges" above.

In the Metal Coatings segment, operating income decreased $16.0 million, or 18.7%, for the nine months ended November 30, 2020, as compared to the same period in fiscal 2020, primarily related to the lower volumes noted above, partially offset by a decrease in zinc costs. Operating income was also significantly impacted by the loss on sale of a subsidiary and impairment and restructuring charges, which impacted operating income in the year-to-date period by $11.0 million, of which the majority was recognized in the second quarter of fiscal 2021. Operating income for the Infrastructure Solutions segment decreased by $30.9 million, or 90.2%, for the nine months ended November 30, 2020 as compared to the same period in fiscal 2020. The decrease was primarily related to the decrease in sales as noted above, as well as impairment charges and the loss on the sale of a subsidiary, which totaled $9.2 million for the year-to-date period. See "Restructuring and Impairment charges" above.

~~Corporate Expenses~~

Corporate expenses decreased $1.7 million, or 15.4%, for the three months ended November 30, 2020, as compared to the same period in fiscal 2020. The decrease is primarily due to lower payroll and administrative costs.

On a year-to-date basis, corporate expenditures decreased $3.1 million, or 9.3%, to $29.9 million, compared to the same period in the prior year, primarily driven by lower payroll, travel and other administrative costs.

~~Other (income) expense, net~~

~~Other income was flat at $0.7 million for the three months ended November 30, 2020, as compared to the same period in fiscal 2020.~~

Other expense increased $0.4 million, to $0.8 million, for the nine months ended November 30, 2020, as compared to expense of $0.4 million in the comparable prior year. The increase was primarily due to miscellaneous revenue received in the prior year with no corresponding revenuefavorable foreign exchange transaction adjustments in the current ~~year, coupled with miscellaneous expense in the current year with no corresponding expense in the prior~~ year. ~~The increase in expense was partially offset by a decrease in foreign currency transaction loss.~~

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Interest Expense

Interest expense for the three months ended ~~November 30, 2020 was $2.3~~May 31, 2021 decreased $0.9 million, or 35.6%, to $1.7 million, as compared to ~~$3.3~~$2.6 million for the respective prior period. ~~Interest expense decreased by $1.0 million, or 31.2% for the three months ended November 30, 2020.~~ The decrease was primarily attributable to ~~lower average outstanding debt balances~~Company's 2020 Senior Notes, which were funded in late fiscal 2021, and ~~favorable~~carry lower interest rates ~~on our variable rate debt on~~than the ~~revolving credit facility.~~

Interest expense for the nine months ended November 30, 2020 was $7.4 million, as compared to $10.4 million for the respective prior period. Interest expense decreased by $3.1 million, or 29.3%, for the nine months ended November 30, 2020. The decrease was primarily attributable to lower average outstanding debt balances and favorable interest rates on our variable rate debt on the revolving credit facility. Our gross debt to equity ratio was 0.29 to 1 as of November 30, 2020, compared to 0.39 to 1 as of November 30, 2019, as we reduced debt during the year-to-date period.

Company's previous senior notes.

Income Taxes

discrete items.

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Liquidity and Capital Resources

We have historically met our cash needs through a combination of cash flows from operating activities along with bank and bond market debt. Our cash requirements generally include cash dividend payments, capital improvements, debt repayment, acquisitions, and share repurchases. 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.

Cash Flows

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


		Nine Months Ended November 30,					Three Months Ended May 31,
		2020		2019			2021		2020
Net cash provided by operating activities		$	59,394	$	72,054
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	$	11,060	$	(11,184)
Net cash used in investing activities	Net cash used in investing activities	(14,987)		(82,834)		Net cash used in investing activities	(7,466)		(10,847)
Net cash (used in) provided by financing activities	Net cash (used in) provided by financing activities	(64,229)		1,209		Net cash (used in) provided by financing activities	(5,610)		11,036

~~For the nine months ended November 30, 2020, net~~Net cash provided by operating activities for the three months ended May 31, 2021 was ~~$59.4~~$11.1 million, compared to net cash used in ~~investing~~operating activities ~~was $15.0~~of $11.2 million ~~net cash used in financing activities was $64.2 million, and~~for the ~~net effect of exchange rate changes on cash was an~~prior year quarter. The increase ~~of $2.3 million, resulting in a net decrease in cash and cash equivalents of $17.5 million. In comparison to the comparable period in fiscal 2020, the decrease~~ in cash provided by operating activities for the ~~nine months ended November 30, 2020, are~~current quarter is primarily attributable to ~~changes~~increased net income.

Net cash used in ~~working capital as a result of lower sales.~~investing activities for the three months ended May 31, 2021 was $7.5 million, compared to $10.8 million for the prior year quarter. The ~~Company's use of~~decrease in cash used for investing activities ~~was lower due to lower spend on acquisitions and the sale of two businesses during~~for the current ~~year-to-date period.~~ quarter was primarily attributable to decreased capital expenditures.

Net cash used in financing activities ~~increased during~~for the ~~nine~~three months ended ~~November 30, 2020 as~~May 31, 2021 was $5.6 million, compared to $11.0 million of cash provided by investing activities for the prior year ~~comparable period,~~quarter. The increase in cash used for financing activities during the current quarter was primarily ~~due~~attributable to an increase in net ~~repayments~~payments on the ~~revolving loan in the current year, compared to net proceeds from the revolving loan in the prior year, as well as share~~ revolver, and repurchases ~~in the current year.~~of shares of Company common stock. See “Share Repurchases” sections below for additional information.

Our working capital was ~~$201.3~~$203.7 million as of ~~November 30, 2020,~~May 31, 2021, as compared to ~~$73.9~~$189.6 million as of February ~~29, 2020.~~28, 2021.

Financing and Capital

On October 9, 2020, we completed a private placement transaction and entered into a Note Purchase Agreement, whereby we agreed to borrow $150.0 million of senior unsecured notes (the ~~“Notes”~~“2020 SeniorNotes”), consisting of two separate tranches:

•7-year borrowing: $70.0 million priced at 2.77% coupon, and

•12-year borrowing: $80.0 million priced at 3.17% coupon.

The proceeds of the $80.0 million tranche was funded on December 17, 2020. The $70.0 million tranche ~~will be~~was funded in January 2021. The proceeds ~~will be utilized~~were used to repay the existing $125.0 million 5.42% Senior Notes maturing on January 20, 2021, as well as ~~being available~~ for general corporate purposes. Interest on the outstanding 2020 Senior Notes ~~will be~~is paid ~~semi-annually.~~

~~Financing~~semi-annually, in January and ~~Capital~~July.

As of ~~November 30, 2020,~~May 31, 2021, we had ~~$182.0~~$186.0 million of ~~floating~~floating- and ~~fixed rate~~fixed-rate notes outstanding with varying maturities through fiscal ~~2023~~2032 and we were in compliance with all of the covenants related to these outstanding borrowings. As of ~~November 30, 2020,~~May 31, 2021, we had approximately ~~$383.2~~$404.0 million of additional credit available for future draws or letters of credit.

~~For additional information on the Company's outstanding borrowings see Note 6 of the consolidated financial statements and further below under Contractual Obligations.~~

~~Share Repurchase Program~~

On ~~January 19, 2012, our Board of Directors authorized~~July 8, 2021, the ~~repurchase of up~~Company refinanced its current un-secured revolving credit facility, which was scheduled to ~~ten percent of~~mature in March 2022, with a new five-year un-secured revolving credit facility under that certain credit agreement, dated July 8, 2021 by and among the ~~then outstanding shares of our Common Stock~~Company, borrower, Citibank, N.A., as administrative agent and the other agents and lender parties thereto (the ~~"2012 Share Repurchase Program"~~“2021 Credit Agreement”). The ~~2012 Share Repurchase Program did not have an expiration date,~~2021 Credit Agreement matures in July 2026 and includes the amount and prices paid for any future share purchases under the authorization were to be based on market conditions and other factors at the time of the purchase. Repurchases under the 2012 Share Repurchase Program were made through open market purchases or private transactions in accordance with applicable federal securities laws, including Rule 10b-18 under the Exchange Act.following significant terms;

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i.provides for a senior un-secured revolving credit facility with a principal amount of up to $400.0 million revolving loan commitments, and includes an additional $200.0 million uncommitted incremental accordion facility,

ii.interest rate margin ranges from 87.5 bps to 175 bps for Eurodollar Rate loans, and from 0.0 bps to 75 bps for Base Rate loans, depending on leverage ratio of the Company and its consolidated subsidiaries as a group,

iii.includes a letter of credit sub-facility up to $85.0 million for the issuance of standby and commercial letters of credit,

iv.includes a $50.0 million sublimit for swing line loans,

vi.includes a maximum leverage ratio financial covenant and an interest coverage ratio financial covenant, each to be tested at quarter end.

The proceeds of the loans under the 2021 Credit Agreement will be used primarily to finance working capital needs, capital improvements, dividends, future acquisitions and general corporate purposes.

The foregoing summary of certain terms and provisions of the 2021 Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the 2021 Credit Agreement, a copy of which is attached hereto as Exhibit 10.3 to this Form 10-Q and is incorporated herein by reference.

Share Repurchase Program

On November 10, 2020, ~~our~~the Company's Board of Directors authorized a $100 million share repurchase program pursuant to which the Company may repurchase its Common Stock (the “2020 Share ~~Repurchase Program”~~Authorization”). Repurchases under the 2020 Share ~~Repurchase Program~~Authorization will be made through open market and/or private transactions, in accordance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans, which allows stock repurchases when the Company might otherwise be precluded from doing so.

During the ~~nine~~three months ended ~~November 30, 2020,~~May 31, 2021, the Company repurchased ~~852,452~~125,770 of its common shares in the amount of ~~$31.0~~$6.3 million at an average purchase price of ~~$36.31 under the 2012 Share Repurchase Program. The Company did not purchase any shares~~$49.80 under the 2020 Share ~~Repurchase Program during the nine months ended November 30, 2020.~~Authorization. For additional information regarding our share repurchases during the current year-to-date period, see Part II, “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.”

Other Exposures

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

As of ~~November 30, 2020,~~May 31, 2021, we did not have any off-balance sheet arrangements as defined under SEC rules. Specifically, there were no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on the financial condition, changes in financial condition, sales or expenses, results of operations, liquidity, capital expenditures or capital resources of the Company.

The following summarizes our operating lease obligations, purchase commitments, debt principal payments, and interest payments for the remainder of the next five fiscal years and beyond (in thousands):

Operating
Leases (1)
Purchase Commitments (2)
Long-Term
Debt
Interest (3)
Total
Fiscal:
2021 $ 2,055 $ 5,000 $ 125,000 $ 3,801 $ 135,856
2022 7,998 — — 1,655 9,653
2023 7,495 — 57,000 287 64,782
2024 6,620 — — 6,620
2025 5,766 — — — 5,766
Thereafter 17,424 — — — 17,424
Total $ 47,358 $ 5,000 $ 182,000 $ 5,743 $ 240,101

(1) The Company has entered into a new lease in Poland that is expected to commence in March 2021, and will result in contractual obligations of approximately $3.3 million over the 15-year lease term, which is not included in the table above.

~~(2) Purchase commitments consist of non-cancelable forward contracts to purchase zinc at various volumes and prices. All such contracts expire in fiscal 2021.~~

~~(3) For variable rate debt, interest payments are calculated using current interest rates.~~

As of ~~November 30, 2020,~~May 31, 2021, we had outstanding letters of credit in the amount of ~~$28.1~~$25.5 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 financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the condensed consolidated financial statements and

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the accompanying notes. On an ongoing basis, we evaluate our estimates and assumptions. These estimates and assumptions are based on current facts, historical experience, and various other factors that we believe are reasonable under the circumstances to determine reported amounts of assets, liabilities, sales and expenses that are not readily apparent from other sources.

During the ~~nine~~three months ended ~~November 30, 2020,~~May 31, 2021, there were no significant changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in Part II, Item 7. Management’s Discussion

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and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended February ~~29, 2020.~~28, 2021.

Recent Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the Company’s market risk disclosures during the first ~~nine~~three months of fiscal ~~2021.~~2022. For a discussion of the Company’s exposure to market risk, refer to the Company’s market risk disclosures set forth in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our Annual Report on Form 10-K for the year ended February ~~29, 2020.~~28, 2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, management of the Company has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that ~~due to the material weaknesses described below,~~ the Company's disclosure controls and procedures were ~~not~~ effective as of the end of the period covered by this Form 10-Q to provide reasonable assurance that information required to be disclosed by us in our reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules; and (ii) accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely discussions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

As of August 31, 2019, the Company identified multiple control deficiencies that constituted a material weakness in its internal control over financial reporting related to the Company’s accounting for income taxes. Specifically, management identified financial statement errors related to income tax accounting and deficiencies in the Company's tax compliance and reporting process. The financial statement errors impacted current and deferred income tax expense, deferred tax assets and liabilities, financial statement recognition and disclosure of uncertain tax positions, and current income taxes payable. These financial statement errors, which were not detected timely by management, were the result of ineffective design and operation of controls pertaining to the preparation of the Company's income tax provision. While these errors were not material to any prior period, and the cumulative effect of correcting additional errors is not material to the current period, the deficiencies identified represent a material weakness in the Company’s internal control over financial reporting.

Management implemented remediation activities, including personnel changes, to address the control deficiencies identified above. The remediation plan that has been implemented through November 30, 2020 includes: (i) new controls over the preparation of the Company’s income tax provision and related disclosures, including enhanced management review controls, as well as oversight regarding key aspects of the income tax provision work papers and the Company’s income tax compliance program; and (ii) the addition of personnel with strong tax provision experience, additional training for impacted employees, and the engagement of a third-party to review and assist with the remediation plan.

Management believes the actions taken are adequate to remediate the material weakness that the Company previously identified. Management will to continue to test the enhanced control environment in the fourth quarter. If the results of remaining controls testing progresses as planned, management expects sufficient evidence will be available to conclude the material weakness described above no longer exists with the filing of the Company’s FY2021 Annual Report on Form 10-K. As management continues to evaluate and improve internal control over financial reporting, the Company may decide to take

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~~additional measures to further address internal control deficiencies or, in appropriate circumstances, make revisions to its internal controls.~~

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

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company and its subsidiaries are named defendants and plaintiffs in various routine lawsuits incidental to our business. These proceedings include labor and employment claims, use of the Company’s intellectual property, worker’s compensation, environmental matters, and various commercial disputes, all arising in the normal course of business. 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 legal 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 condition, results of operations or cash flows.

Item 1A. Risk Factors

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

~~Other than the following COVID-19 pandemic risk factor below, there~~There have been no material changes from risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K. See the discussion of the Company’s risk factors under Part I, Item 1A. in the Company’s Annual Report on Form 10-K for the fiscal year ended February ~~29, 2020.~~28, 2021.

The outbreak and global spread of the novel coronavirus (“COVID-19”) has impacted and is expected to continue to impact our business as well as the operations of some of our customers and suppliers, product demand, logistics, and facility operations and the duration, unknown at this time, of the challenges associated with the virus may result in significant adverse effects on our business, financial condition and results of operations.

~~On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the virus continues to significantly impact the geographical areas in which we operate.~~A myriad of international, national and local measures have been implemented by governments and businesses over the past few months to address the virus and attempt to slow its outbreak, including shelter in place orders and similar restrictions, restrictions on business operations, closure of borders and other measures that have had negative effects on the economy. The rapid spread of COVID-19, as well as the measures governments and private organizations have implemented in order to stem the spread of this pandemic, is resulting in significant worldwide disruptions and contractions in economic activity.

~~Our business and customers support critical infrastructure sectors as defined by the Department of Homeland Security and similar global agencies.These sectors are deemed vital, such that their incapacitation would have a debilitating effect on security, national economic security, national public health or safety or any combination thereof.~~

COVID-19 has impacted and is anticipated to continue to impact our business, including the normal operations of our facilities, overall demand for electrical products and industrial services, changes to supply chain availability and costs, logistics delays, including temporary closures as may be mandated or otherwise made necessary by governmental authorities, and any additional carryover of economic effects.Even though our facilities are all currently operational, and have implemented prevention procedures, including enhanced cleaning procedures and social distancing efforts, we believe the future impact of COVID-19 will vary across our diversified portfolio during the remainder of this fiscal year and potentially beyond.~~We believe our Infrastructure Solutions segment will be more significantly impacted than our Metal Coatings segment.~~The Infrastructure Solutions segment has experienced postponement of certain contracts and certain restrictions and conditions have also presented or delayed the Company’s access to certain customer facilities to deliver products and services during the quarter.

~~The duration of the COVID-19 outbreak continues to be evaluated by governments and experts, and therefore, at this time, we cannot determine the overall ultimate impact on the Company.The extent of the impact will depend on future~~

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~~developments, which are highly uncertain and cannot be predicted.~~The duration, unknown at this time, of the challenges associated with the global COVID-19 pandemic could result in significant adverse effect on our business, financial condition, results of operations and cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On January 19, 2012, our Board of Directors authorized the repurchase of up to ten percent of the then outstanding shares of our Common Stock (the "2012 Share Repurchase Program"). The 2012 Share Repurchase Program 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 are made through open market purchases or private transactions in accordance with applicable federal securities laws, including Rule 10b-18 under the Exchange Act.

On November 10, 2020, ~~our~~the Company's Board of Directors authorized a $100 million share repurchase program pursuant to which the Company may repurchase ~~our~~its Common Stock (the “2020 Share ~~Repurchase Program”~~Authorization”). Repurchases under the 2020 Share ~~Repurchase Program~~Authorization will be made through open market and/or private transactions, in accordance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans, which allows stock repurchases when the Company might otherwise be precluded from doing so. ~~The Company did not purchase any shares under the 2020 Share Repurchase Program during the nine months ended November 30, 2020.~~

The following table provides information with respect to purchases of common stock of the Company made during the ~~nine~~three months ended ~~November 30, 2020,~~May 31, 2021, by the Company or any "affiliated purchaser" as defined in Rule 10b-18(a)(3) under the Exchange act:

Period Total Number of Share Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publically Announced Plans or Programs Maximum Number of shares that May Yet Be Purchased Under the Plans or Programs
Beginning balance, February 29, 2020 — $ — — 882,916
March 1 through March 31 — — — 882,916
April 1 through April 30 — — — 882,916
May 1 through May 31 — — — 882,916
June 1 through June 30 — — — 882,916
July 1 through July 30 117,000 31.81 117,000 765,916
August 1 through August 31 83,000 32.01 83,000 682,916
September 1 through September 31 — — — 682,916
October 1 through October 31 181,700 34.69 181,700 501,216
November 1 through November 30 470,752 38.81 470,752 30,464
Total 852,452 $ 36.31 852,452 30,464


Period	Total Number of Share Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publically Announced Plans or Programs	Approximate Dollar Value that May Yet Be Used Under the Plans or Programs
Beginning balance, February 29, 2021					$	84,002,349
March 1 through March 31	60,649	$	49.47	60,649	83,941,700
April 1 through April 30	56,043	49.82		56,043	83,885,657
May 1 through May 31	9,078	51.92		9,078	83,876,579






Total	125,770	$	49.80	125,770	$	83,876,579

Item 5. Other Information.

~~On October 29, 2020,~~Change in Control Agreement

The Company’s Compensation Committee of the Board of Directors, ~~(the “Board”~~in consultation with its independent compensation advisor, Meridian Compensation Partners, LLC (“Meridian”) ~~of AZZ Inc. (the “Company”) appointed Mr. Philip Schlom as Senior Vice President and Chief Financial Officer~~, conducted a review of the ~~Company. Mr. Schlom, 56, had been serving as~~existing change in control severance benefits being provided to the Company’s ~~Interim Chief Financial Officer since May 2020~~executive officers (the “Executive Officers”). Based upon the review and ~~joined the Company in October 2019 as the Vice President, Chief Accounting Officer.~~

On November 4, 2020, Mr. Schlom entered into an employment agreement (the “Employment Agreement”) with the Company, which has a three year term, unless terminated earlier in accordance with the terms of the Employment Agreement.

In his position as the Company’s Senior Vice President and Chief Financial Officer, Mr. Schlom is eligible to earn a pro-rata annual cash incentive bonus under the Company’s Senior Management Bonus Plan (the “STI Plan”), which provides for an annual cash incentive target based upon 65% of Mr. Schlom’s annual base salary pursuant to the achievement of certain individual and Company performance criteria. He will also be eligible each year to receive an annual equity award, the amount and nature to be determined annually by the Company’s Compensation Committee. For the Company’s fiscal year endingadvice

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~~February 28, 2021, Mr. Schlom’s equity award target value consisted of 50% performance share units (“PSUs”) and 50% RSUs issued under~~provided to the Compensation Committee by Meridian, the Company’s ~~2014 Long Term Incentive Plan (the “2014 LTI Plan”). The Employment Agreement also provides for~~Board of Directors approved certain modifications to its existing change in control severance ~~payments, which may include base salary~~benefits to ensure uniformity of terms and ~~accrued paid time off through~~conditions among its Executive Officers and to align severance benefits with the ~~date~~market practices of ~~termination, as well as a pro-rated annual cash bonus, based upon~~ the Company’s ~~actual performance and~~industry peer companies. Effective July 8, 2021, the ~~number of days of employment in the calendar year of termination, in the event Mr. Schlom’s employment is terminated by the~~ Company without Cause or by Mr. Schlom for Good Reason (each term as defined in the Employment Agreement). In the event of a termination, the receipt of severance payments is conditioned upon the execution of a general release in a form approved by the Company. Mr. Schlom is also subject to confidentiality and other restrictive covenants prohibiting competition, solicitation of customers and employees and interference with business relationships during his employment and for 12 months thereafter.

Name Position FY2021
Base Salary FY2021
STI Plan Target FY2021
LTI Plan Target
Philip Schlom SVP and Chief Financial Officer $350,000 $227,500 $300,000

~~In addition to the Employment Agreement, Mr. Schlom and the Company also~~ entered into a standardized change in control form agreement (the ~~“Change~~“CIC Agreement”) with its Executive Officers, including our named executive officers (except for the Chief Executive Officer), whom will retain his existing change in ~~Control Agreement”).~~control agreement. The ~~Change in Control~~material terms of the standardized form CIC Agreement ~~will remain in effect for so long as Mr. Schlom~~states that if an Executive Officer is ~~employed by the Company and provides, among other things, that, upon the occurrence of a Change in Control (as defined in~~terminated (i) during the Change in Control ~~Agreement)~~Period, (ii) without Cause, or (iii) such Executive Officer resigns for Good Reason (all capitalized terms are defined in the form CIC Agreement which is attached as Exhibit 10.7, and is incorporated herein), ~~Mr. Schlom~~the Executive Officers will ~~receive certain payments from~~be entitled to (i) any accrued but unpaid Annual Base Salary for the fiscal year in which employment ends (plus accrued and unpaid expenses reimbursable in accordance with Company ~~if his employment is terminated~~polices; (ii) 24 months of Annual Cash Compensation (defined as Annual Base Salary and Target Cash Bonus) paid on a regular payroll cycle over a 24 month period; (iii) accelerated vesting of all outstanding time-based equity awards; and (iv) 24 months of medical, dental and vision insurance coverage (100% paid by the Company) substantially comparable to the coverage maintained by the Company ~~without Cause or by Mr. Schlom~~ for ~~Good Reason (each such term as defined in~~ the ~~Employment Agreement), in each case within 12 months~~Executive Officer immediately prior to the date of such ~~Change in Control.~~

Mr. Schlom has no family relationships with any director or executive officer of the Company, and there are no arrangements or understandings with any person pursuant to which he will be appointed Senior Vice President and Chief Financial Officer of the Company. In addition, there have been no transactions directly or indirectly involving Mr. Schlom that would be required to be disclosed pursuant to Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934.

~~Promotion of Gary Hill~~

~~On October 8, 2020, Mr. Gary Hill, 55, the Company's President and General Manager – Industrial Platform, was promoted to Chief Operating Officer – Infrastructure Solutions of the Company.~~

Mr. Hill’s biographical information, including his previous leadership positions held in the Company, and his business experience, may be found in the Company’s Proxy Statement filed with the Securities and Exchange Commission on May 27, 2020 (the “2020 Proxy Statement”) and is incorporated herein by reference.

~~In connection with Mr. Hill’s promotion to Chief Operating Officer – Infrastructure Solutions, his annual base salary increased to $355,000.~~All other terms and conditions of Mr. Hill’s existing employment agreement and compensation arrangements were previously discussed in the Company’s 2020 Proxy Statement and remain unchanged and in full force and effect and are incorporated herein by reference.

Mr. Hill remains subject to confidentiality and other restrictive covenants prohibiting competition, solicitation of customers and employees and interference with business relationships during his employment and for 12 months thereafter.

~~There are no transactions to which the Company is a party and in which Mr. Hill has a material interest that are required to be disclosed under Item 404(a) of Regulation S-K.Mr. Hill has no family relationship with any directors or executive officers of the Company.~~termination.

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Item 6. Exhibits


3.1						Amended and Restated Certificate of Formation of AZZ Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the Registrant on July 14, 2015)

3.2						Amended and Restated Bylaws of AZZ Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed by the Registrant on January 23, 2017)

10.1*						AZZ Inc. 2018 Employee Stock Purchase Plan (incorporated by reference to Appendix A to the Registrant's Definitive Proxy Statement on Form DEFA filed on May 25, 2018.).

10.2						Note Purchase Agreement, dated as of January 20, 2011, by and among AZZ incorporated and the purchasers identified therein (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on January 21, 2011).

10.3						~~Amended and Restated~~ Credit Agreement by and between AZZ Inc. as borrower, ~~Bank of America~~CitiBank,CitiBank, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer, and the other Lender's party ~~thereto~~hereto. ~~(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on March 24, 2017).~~Filed Herewith.

10.4*						AZZ incorporated 2014 Long Term Incentive Plan (incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Form DEFA filed May 29, 2014).

10.5*						First Amendment to AZZ Inc. 2014 Long Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Registrant on January 21, 2016.
10.6						Note Purchase Agreement, dated as of October 9, 2020, by and among AZZ Inc. and the purchasers identified therein (incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q filed by the Registrant on October 13, 2020).
10.7*						~~Employment~~Form of Change in Control Agreement by and between AZZ Inc. and ~~Philip Schlom, dated as of November 4, 2020~~ ~~(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on November 4, 2020).~~
10.8*						~~Change in Control Agreement between AZZ Inc. and Philip Schlom, dated as of November 4, 2020~~certain Executive Officers thereof. ~~(incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Registrant on November 4, 2020).~~Filed Herewith.
31.1						Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed Herewith.

31.2						Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed Herewith.

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed Herewith.

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed Herewith.

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

* Management contract, compensatory plan or arrangement

3225

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AZZ Inc.
(Registrant)

Date:

~~January 11,~~July 9, 2021

By:

/s/ Philip A. Schlom

Philip A. Schlom
Chief Financial Officer

3326


		PAGE NO.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Shareholders’ Equity	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2017
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2722
Item 4.	Controls and Procedures	2722

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	2923
Item 1A.	Risk Factors	2923
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3023
Item 5	Other Information	3223
Item 6.	Exhibits	3225

	SIGNATURES	3326


	Nine Months Ended November 30, 2020
	Common Stock			Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total

	Shares	Amount
Balance at February 29, 2020	26,148	$	26,148	$	66,703	$	572,414	$	(30,899)	$	634,366
Share-based compensation	—	—		1,766		—		—		1,766
Common stock issued under stock-based plans and related income tax expense	47	47		(586)		—		—		(539)



Cash dividends paid	—	—		—		(4,425)		—		(4,425)
Net income	—	—		—		5,541		—		5,541
Foreign currency translation	—	—		—		—		(1,039)		(1,039)
Interest rate swap	—	—		—		—		(14)		(14)
Balance at May 31, 2020	26,195	$	26,195	$	67,883	$	573,530	$	(31,952)	$	635,656
Share-based compensation	—	—		2,317		—		—		2,317
Common stock issued under stock-based plans and related income tax expense	23	23		(39)		—		—		(16)
Common stock issued under employee stock purchase plan	58	58		1,636		—		—		1,694
Repurchase and retirement of treasury shares	(200)	(200)		—		(6,179)		—		(6,379)
Cash dividends paid	—	—		—		(4,467)		—		(4,467)
Net loss	—	—		—		(1,790)		—		(1,790)
Foreign currency translation	—	—		—		—		4,540		4,540
Interest rate swap	—	—		—		—		(14)		(14)
Balance at August 31, 2020	26,076	$	26,076	$	71,797	$	561,094	$	(27,426)	$	631,541
Share-based compensation	—	—		1,690		—		—		1,690
Common stock issued under stock-based plans and related income tax expense	6	6		(97)		—		—		(91)

Repurchase and retirement of treasury shares	(652)	(652)		—		(23,922)		—		(24,574)
Cash dividends paid	—	—		—		(4,432)		—		(4,432)
Net income	—	—		—		19,703		—		19,703
Foreign currency translation	—	—		—		—		255		255
Interest rate swap	—	—		—		—		(14)		(14)
Balance at November 30, 2020	25,430	$	25,430	$	73,390	$	552,443	$	(27,185)	$	624,078


	Restricted Stock Units	Weighted Average Grant Date Fair Value
Outstanding as of February 29, 2020	194,946	$	44.34
Granted	131,120	28.78
Vested	(72,747)	45.67
Forfeited	(26,124)	36.82
Outstanding as of November 30, 2020	227,195	$	35.65


	Performance Stock Units	Weighted Average Grant Date Fair Value
Outstanding as of February 29, 2020	109,936	$	47.75
Granted	69,955	33.22
Vested	0	0
Forfeited	(36,307)	50.54
Outstanding as of November 30, 2020	143,584	$	39.97


	Options/SAR’s	Weighted Average Exercise Price
Outstanding as of February 29, 2020	94,826	$	44.58
Granted	0	0
Exercised	0	0
Forfeited	(43,489)	45.10
Outstanding as of November 30, 2020	51,337	$	44.13
Exercisable as of November 30, 2020	51,337	$	44.13


	Operating Leases (1)		Purchase Commitments (2)		Long-Term Debt		Interest (3)		Total
Fiscal:
2021	$	2,055	$	5,000	$	125,000	$	3,801	$	135,856
2022	7,998		—		—		1,655		9,653
2023	7,495		—		57,000		287		64,782
2024	6,620		—		—				6,620
2025	5,766		—		—		—		5,766
Thereafter	17,424		—		—		—		17,424
Total	$	47,358	$	5,000	$	182,000	$	5,743	$	240,101