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 May 31, ~~2021~~2022


☐			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 June 30, ~~2021~~2022 the registrant had outstanding ~~25,071,582~~24,788,614 shares of common stock; $1.00 par value per share.

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AZZ INC.

INDEX

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AZZ INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)

May 31, 2021 February 28, 2021
Assets
Current assets:
Cash and cash equivalents $ 12,403 $ 14,837
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:
Raw material 92,283 86,913
Work-in-process 6,214 4,453
Finished goods 1,453 1,546
Contract assets 71,185 58,056
Prepaid expenses and other 11,211 5,876
Assets held for sale 5,628 3,684
Total current assets 334,908 303,492
Property, plant and equipment, net 207,689 205,909
Operating lease right-of-use assets 48,698 37,801
Goodwill 354,839 353,881
Intangibles and other assets, net 93,105 95,359
Total assets $ 1,039,239 $ 996,442
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 48,831 $ 41,034
Income tax payable 4,778 0
Accrued salaries and wages 16,614 22,606
Other accrued liabilities 36,278 27,136
Customer deposits 421 348
Contract liabilities 17,098 16,138
Lease liability, short-term 7,174 6,588
Total current liabilities 131,194 113,850
Debt due after one year, net 185,435 178,419
Lease liability, long-term 40,702 32,629
Deferred income taxes 38,467 39,283
Other long-term liabilities 6,030 8,969
Total liabilities 401,828 373,150
Commitments and contingencies 0 0
Shareholders’ equity:
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 75,600 75,979
Retained earnings 559,173 547,289
Accumulated other comprehensive loss (22,433) (25,084)
Total shareholders’ equity 637,411 623,292
Total liabilities and shareholders' equity $ 1,039,239 $ 996,442


	May 31, 2022		February 28, 2022
Assets
Current assets:
Cash and cash equivalents	$	100,998	$	15,082
Accounts receivable (net of allowance for credit losses of $4,886 as of May 31, 2022 and $5,207 as of February 28, 2022)	255,749		167,016
Inventories:
Raw material	176,734		117,603
Work-in-process	9,032		7,285
Finished goods	3,649		1,212
Contract assets	155,863		74,629
Prepaid expenses and other	18,136		3,471
Assets held for sale	235		235
Total current assets	720,396		386,533
Property, plant and equipment, net	491,722		230,848
Right-of-use assets	51,909		43,286
Goodwill	918,877		385,613
Deferred tax assets	5,217		5,191
Intangibles and other assets, net	594,171		81,557
Total assets	$	2,782,292	$	1,133,028
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	185,645	$	43,987
Income tax payable	1,661		3,564
Accrued salaries and wages	27,261		28,424
Other accrued liabilities	57,477		24,092
Customer deposits	712		681
Contract liabilities	39,682		42,465
Lease liability, short-term	8,975		7,318
Debt due within one year	13,000		—

Total current liabilities	334,413		150,531
Debt due after one year, net	1,594,777		226,484
Lease liability, long-term	42,603		35,610
Deferred income taxes	48,137		47,672
Other long-term liabilities	74,803		5,366
Total liabilities	2,094,733		465,663
Commitments and contingencies	0		0
Shareholders’ equity:
Common stock, $1 par, shares authorized 100,000; 24,788 shares issued and outstanding at May 31, 2022 and 24,688 shares issued and outstanding at February 28, 2022	24,788		24,688
Capital in excess of par value	85,432		85,847
Retained earnings	604,039		584,154
Accumulated other comprehensive loss	(26,700)		(27,324)
Total shareholders’ equity	687,559		667,365
Total liabilities and shareholders' equity	$	2,782,292	$	1,133,028

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 May 31,				Three Months Ended May 31,
		2021		2020				2022		2021

Sales	Sales	$	229,826	$	213,293		Sales	$	314,398	$	229,826
Cost of sales	Cost of sales	171,899		171,085			Cost of sales	229,942		171,899
Gross margin	Gross margin	57,927		42,208			Gross margin	84,456		57,927

Selling, general and administrative	Selling, general and administrative	27,215		27,890			Selling, general and administrative	44,546		27,215

Operating income	Operating income	30,712		14,318			Operating income	39,910		30,712

Interest expense	Interest expense	1,697		2,634			Interest expense	7,473		1,697

Other (income) expense, net		(969)		1,456
Other expense (income), net							Other expense (income), net	798		(969)
Income before income taxes	Income before income taxes	29,984		10,228			Income before income taxes	31,639		29,984
Income tax expense	Income tax expense	7,647		4,687			Income tax expense	7,562		7,647
Net income	Net income	$	22,337	$	5,541		Net income	$	24,077	$	22,337
Earnings per common share	Earnings per common share						Earnings per common share
Basic earnings per share	Basic earnings per share	$	0.89	$	0.21		Basic earnings per share	$	0.97	$	0.89
Diluted earnings per share	Diluted earnings per share	$	0.88	$	0.21		Diluted earnings per share	$	0.96	$	0.88

Cash dividends declared per common share	Cash dividends declared per common share	$	0.17	$	0.17		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 May 31,
2021 2020
Net income $ 22,337 $ 5,541
Other comprehensive income (loss):
Foreign currency translation adjustments, net of income tax of $0 2,581 (1,039)
Interest rate swap, net of income tax of $0 and $7, respectively 0 (14)
Other comprehensive income (loss) 2,581 (1,053)
Comprehensive income $ 24,918 $ 4,488


	Three Months Ended May 31,
	2022		2021
Net income	$	24,077	$	22,337
Other comprehensive income:
Unrealized translation gain	624		2,581

Other comprehensive income	624		2,581
Comprehensive income	$	24,701	$	24,918

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)


		Three Months Ended May 31,					Three Months Ended May 31,
		2021		2020			2022		2021
Cash Flows From Operating Activities
Cash flows from operating activities						Cash flows from operating activities
Net income	Net income	$	22,337	$	5,541	Net income	$	24,077	$	22,337
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Bad debt expense		(218)		129
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Bad debt recoveries						Bad debt recoveries	(265)		(218)
Amortization and depreciation	Amortization and depreciation	11,084		11,668		Amortization and depreciation	15,119		11,084
Deferred income taxes	Deferred income taxes	(892)		(2,147)		Deferred income taxes	(2,722)		(892)

Net (gain) loss on sale of property, plant and equipment	Net (gain) loss on sale of property, plant and equipment	(15)		40		Net (gain) loss on sale of property, plant and equipment	(29)		(15)
Amortization of deferred borrowing costs	Amortization of deferred borrowing costs	139		135		Amortization of deferred borrowing costs	1,541		139
Share-based compensation expense	Share-based compensation expense	1,811		1,766		Share-based compensation expense	1,998		1,811
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	(7,966)		8,721		Accounts receivable	(10,625)		(7,966)
Inventories	Inventories	(8,254)		(4,449)		Inventories	(19,054)		(8,254)
Prepaid expenses and other	Prepaid expenses and other	(5,419)		(941)		Prepaid expenses and other	(12,452)		(5,419)
Other assets	Other assets	(778)		123		Other assets	300		(778)
Net change in contract assets and liabilities	Net change in contract assets and liabilities	(9,839)		3,168		Net change in contract assets and liabilities	(12,689)		(9,839)
Accounts payable	Accounts payable	6,321		(15,328)		Accounts payable	41,579		6,321
Other accrued liabilities and income taxes payable	Other accrued liabilities and income taxes payable	2,749		(19,610)		Other accrued liabilities and income taxes payable	(3,464)		2,749
Net cash provided by (used in) operating activities		11,060		(11,184)
Cash Flows From Investing Activities
Net cash provided by operating activities						Net cash provided by operating activities	23,314		11,060
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	23		0		Proceeds from sale of property, plant and equipment	33		23
Purchase of property, plant and equipment	Purchase of property, plant and equipment	(7,489)		(10,847)		Purchase of property, plant and equipment	(7,809)		(7,489)

Acquisition of subsidiaries, net of cash acquired						Acquisition of subsidiaries, net of cash acquired	(1,298,513)		—
Net cash used in investing activities	Net cash used in investing activities	(7,466)		(10,847)		Net cash used in investing activities	(1,306,289)		(7,466)
Cash Flows From Financing Activities
Cash flows from financing activities						Cash flows from financing activities

Payments for taxes related to net share settlement of equity awards	Payments for taxes related to net share settlement of equity awards	(2,101)		(539)		Payments for taxes related to net share settlement of equity awards	(2,313)		(2,101)
Proceeds from revolving loan	Proceeds from revolving loan	35,000		76,000		Proceeds from revolving loan	39,000		35,000
Payments on revolving loan	Payments on revolving loan	(28,000)		(60,000)		Payments on revolving loan	(116,000)		(28,000)

Proceeds from long term debt						Proceeds from long term debt	1,540,000		—
Payments of debt financing costs						Payments of debt financing costs	(87,555)		—

Repurchase and retirement of treasury stock	Repurchase and retirement of treasury stock	(6,264)		0		Repurchase and retirement of treasury stock	—		(6,264)
Payments of dividends	Payments of dividends	(4,245)		(4,425)		Payments of dividends	(4,192)		(4,245)
Net cash (used in) provided by financing activities		(5,610)		11,036
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	1,368,940		(5,610)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(418)		722		Effect of exchange rate changes on cash	(49)		(418)
Net decrease in cash and cash equivalents		(2,434)		(10,273)
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	85,916		(2,434)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	14,837		36,687		Cash and cash equivalents at beginning of period	15,082		14,837
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	12,403	$	26,414	Cash and cash equivalents at end of period	$	100,998	$	12,403

Supplemental disclosures	Supplemental disclosures					Supplemental disclosures
Cash paid for interest	Cash paid for interest	$	394	$	869	Cash paid for interest	$	4,161	$	394
Cash paid for income taxes	Cash paid for income taxes	$	1,322	$	11	Cash paid for income taxes	$	4,034	$	1,322

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

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AZZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)

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


	Three Months Ended May 31, 2022
	Common Stock			Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Total

	Shares	Amount
Balance at February 28, 2022	24,688	$	24,688	$	85,847	$	584,154	$	(27,324)	$	667,365
Share-based compensation	—	—		1,998		—		—		1,998
Common stock issued under stock-based plans and related income tax expense	100	100		(2,413)		—		—		(2,313)


Cash dividends paid	—	—		—		(4,192)		—		(4,192)
Net income	—	—		—		24,077		—		24,077
Foreign currency translation	—	—		—		—		624		624

Balance at May 31, 2022	24,788	$	24,788	$	85,432	$	604,039	$	(26,700)	$	687,559

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AZZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)


		Three Months Ended May 31, 2020															Three Months Ended May 31, 2021
		Common Stock			Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total					Common Stock							Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Total

		Shares	Amount														Shares			Amount
Balance at February 28, 2020		26,148	$	26,148							$	66,703			$	572,414		$	(30,899)			$	634,366
Balance at February 28, 2021														Balance at February 28, 2021			25,108			$	25,108			$	75,979	$	547,289	$	(25,084)	$	623,292
Share-based compensation	Share-based compensation	—	—		1,766		—		—			1,766		Share-based compensation			—			—				1,811		—		—		1,811
Common stock issued under stock-based plans and related income tax expense	Common stock issued under stock-based plans and related income tax expense	47	47		(586)		—		—			(539)		Common stock issued under stock-based plans and related income tax expense			89			89				(2,190)		—		—		(2,101)

Repurchase and retirement of treasury shares														Repurchase and retirement of treasury shares			(126)			(126)				—		(6,138)		—		(6,264)
Cash dividends paid	Cash dividends paid	—	—		—		(4,425)		—			(4,425)		Cash dividends paid			—			—				—		(4,245)		—		(4,245)
Net income	Net income	—	—		—		5,541		—			5,541		Net income			—			—				—		22,337		—		22,337
Foreign currency translation	Foreign currency translation	—	—		—		—		(1,039)			(1,039)		Foreign currency translation			—			—				—		(70)		2,651		2,581
Interest rate swap		—	—		—		—		(14)			(14)
Balance at May 31, 2020		26,195	$	26,195	$	67,883	$	573,530	$	(31,952)		$	635,656

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

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, coil coating solutions, welding solutions, specialty electrical equipment and highly engineered services to the power generation, transmission, distribution, refining and industrial markets.

On May 13, 2022, the Company completed the acquisition of the Precoat Metals business division (“Precoat”) of Sequa Corporation (“Sequa”), a portfolio company of global investment firm Carlyle (the "Precoat Acquisition"). See Note 2 for further discussion about the Precoat Acquisition. As a result of the Precoat Acquisition, the Company had a change to its reportable segments, and added Precoat Metals as a new reportable segment. See Note 5.

The Company has 2three distinct operating segments: the Metal Coatings segment, the Precoat Metals segment and the Infrastructure Solutions segment. AZZ Metal Coatings provides ~~hot dip~~hot-dip galvanizing, spin galvanizing, powder coating, anodizing and plating, and other metal coating applications to the steel fabrication and other industries through 41 galvanizing plants and six surface technologies facilities located ~~throughout~~in the United States and Canada. AZZ Precoat Metals provides advanced applications of protective and decorative coatings and related value-added services for steel and aluminum coil primarily serving the construction; appliance; heating, ventilation, and air conditioning (HVAC); container; transportation and other end markets. AZZ Precoat Metals operates through 13 facilities located in the United States. 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 28, ~~2021~~2022 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 28, ~~2021,~~2022, 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, 2022 is referred to as fiscal 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 May 31, ~~2021,~~2022, the results of its operations for the three months ended May 31, ~~2021~~2022 and ~~2020,~~2021, and cash flows for the three months ended May 31, ~~2021~~2022 and ~~2020.~~2021. 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~~continued uncertainty associated with COVID-19, and any of the ~~resulting economic contraction has resulted in increased business uncertainty. The~~ongoing variants, did not have a material adverse effect on the Company's results of operations for the three months ended May 31, 2022. While the Company continues to besupport its customers, there remains uncertainties regarding the duration and, to what extent, if any, that the COVID-19 pandemic, or newly identified variants, or additional regulatory requirements, will ultimately have on the demand for the Company's products and services or with its supply chain or its employees.

The impact of COVID-19 to the Company's personnel and operations has been limited. During the first quarter of fiscal 2023, the Company continued to see improvement in sales and operating income in both the Metal Coatings and Infrastructure Solutions operating segments. In addition, the Precoat Metals segment, which was acquired in the first quarter of fiscal 2023, was not materially impacted by the inability for its Infrastructure Solutions Industrial platform to access certain customer sites to perform services, temporary slow-downs in order placements in the Infrastructure Solutions Electrical platform,COVID-19. However, labor market and supply chain challenges have increased ~~costs associated with maintaining safe operations across the entire business. The Company has been able to remain open~~ during the ~~entirety~~current quarter, resulting in increased operating expenses as the constrained labor market and supply chain disruptions impacted the availability and cost of ~~the pandemic to service its customers. The Company~~labor and materials. We cannot reasonably estimate the ~~length or~~ severity of this pandemic or the government's mandates regarding the same, or the extent to which the disruption may materially impact ~~its~~our consolidated balance ~~sheet,~~sheets, statements of ~~operations~~income or statements of cash flows for fiscal year ~~2022~~2023 or beyond.

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Recently Adopted Accounting Pronouncements

In ~~December 2019,~~October 2021, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued ~~ASU~~Accounting Standards Update No. ~~2019-12, Income Taxes~~("ASU") 2021-08, Business combinations (Topic ~~740),~~ ~~Simplifying the~~805): Accounting for ~~Income Taxes~~Contract Assets and Contract liabilities from Contracts with Customers ("ASU ~~2019-12"~~2021-08"), which requires contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, .Revenue from Contracts with Customers ~~This~~("ASC 606") at the acquisition date as if the acquirer had originated the contracts rather than adjust them to fair value. The 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 was effective for ~~the Company in the first quarter of its~~ fiscal ~~2022.~~years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU ~~2019-12 in~~2021-08 during the first quarter of fiscal ~~2022 and the~~2023. The adoption of ASU 2021-08 did not have a material impact on ~~its consolidated~~the Company's financial ~~statements.~~condition, results of operations or cash flows as of May 31, 2022, including the acquisition of Precoat Metals during the first quarter of fiscal 2023.

~~Recently Issued Accounting Pronouncements~~

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

~~Table of~~ ~~Contents~~

~~Reporting”~~ 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~~continues to evaluate its contracts and transactions for the potential application of ASU 2020-04, ~~in the first quarter of fiscal 2022 and the adoption did not have a~~but there has been no material impact onto its financial condition, results of operations, or cash flows as of May 31, 2022.

2. Acquisitions

Precoat Acquisition

On May 13, 2022, the Company completed the acquisition of the Precoat Metals business division (“Precoat”) of Sequa Corporation (“Sequa”), a portfolio company of global investment firm Carlyle, for a purchase price of approximately $1.3 billion (the "Precoat Acquisition"). Headquartered in St. Louis, Missouri, Precoat is the leading independent provider of metal coil coating solutions in North America. Precoat engages in the advanced application of protective and ~~cash flows.~~decorative coatings and related value-added services for steel and aluminum coil primarily serving the construction; appliance; heating, ventilation and air conditioning (HVAC); container; transportation and other end markets. The acquisition represents a continued transition of the Company from a diverse holding company to a focused provider of coating and galvanizing services for critical applications.

The Precoat Acquisition was funded primarily with proceeds from the Term Loan B. See Note 7 for a description of the Term Loan B. The Company incurred acquisition costs of $11.5 million for the three months ended May 31, 2022, which are included in Selling, general and administrative expense in the accompanying condensed consolidated statements of operations. Precoat Metals contributed revenue of $43.7 million and operating income of $6.6 million to the Company's condensed consolidated statements of operations from May 13, 2022, through May 31, 2022.

The Company accounted for the Precoat Acquisition as a business combination under the acquisition method of accounting. Goodwill from the acquisition of $534.6 million represents the excess purchase price over the estimated value of net tangible and intangible assets and liabilities assumed, and is expected to be deductible for income tax purposes. The Company's chief operating decision maker will assess performance and allocate resources to Precoat separately from the Metal Coatings and Infrastructure Solutions segments; therefore, Precoat will be accounted for as a separate segment, the Precoat Metals segment. See Note 5 for more information about the Company's segments. Goodwill from the acquisition was allocated to the Precoat Metals segment. Assets acquired and liabilities assumed in the Precoat Acquisition were recorded at their estimated fair values as of the acquisition date.

The Company has not finalized these estimates; therefore, the fair value estimates set forth below are subject to adjustment during the measurement period following the acquisition date. The final allocation of purchase consideration could include changes in the estimated fair value of working capital (including accounts receivable, inventories, contract assets, prepaid assets, account payable and accrued liabilities), right-of-use assets and lease liabilities, property, plant and equipment, intangible assets, deferred tax liabilities and other long-term liabilities. Adjustments in the purchase price allocation may require a change in the amount allocated to goodwill during the period in which the adjustments are determined.

When determining the fair values of assets acquired and liabilities assumed, management made significant estimates, judgments and assumptions. The Company has engaged third-party valuation experts to assist in the purchase price allocation, the recorded valuation of property and equipment, intangible assets, pension benefit obligation and certain other assets and liabilities. Preliminary estimates from third-party experts along with the analysis and expertise of management have formed the basis for the preliminary allocation. Detailed analysis and review of the condition, existence and utility of assets acquired, and assumptions inherent in the estimation of fair value of intangible assets and pension obligation is currently ongoing. Management believes that the current information provides a reasonable basis for estimating fair values of assets acquired and liabilities assumed. These

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estimates, judgments and assumptions are subject to change and should be treated as preliminary values as there could be significant changes upon final valuation. The Company expects to complete the final valuations within one year of the acquisition date.

The following table represents the preliminary summary of the assets acquired and liabilities assumed, in aggregate, related to the Precoat Acquisition, as of the date of the acquisition (in thousands):


	May 13, 2022
Assets

Accounts receivable	$	77,422
Inventories	44,309
Contract assets	70,731
Prepaid expenses and other	2,245
Property, plant and equipment	262,154
Right-of-use asset	10,954
Goodwill	534,599
Intangibles and other assets	513,546
Total fair value of assets acquired	$	1,515,960
Liabilities
Accounts payable	$	(99,223)
Accrued expenses	(31,891)
Other accrued liabilities	(3,741)
Customer deposits	(1,574)
Lease liability, short-term	(1,706)
Lease liability, long-term	(9,248)
Deferred tax liabilities	(3,100)
Other long-term liabilities	(66,247)
Total fair value of liabilities assumed	(216,730)
Total Purchase Price, net of cash acquired	$	1,299,230

DAAM Acquisition

On February 28, 2022, the Company entered into an agreement to acquire all the outstanding shares of DAAM Galvanizing Co. Ltd. ("DAAM"), a privately held hot-dip galvanizing company based in Edmonton, Alberta Canada, for approximately $35.5 million. DAAM currently operates two galvanizing facilities in Canada; one located in Edmonton, Alberta and a second in Saskatoon, Saskatchewan, as well as a service depot in Calgary, Alberta. The addition of DAAM expanded the Company's geographical coverage in the Northwest and enhanced the scope of metal coatings solutions in Canada. The business is included in the Company's Metal Coatings segment. The goodwill arising from this acquisition was allocated to the Metal Coatings segment the Company estimates that approximately 50% of the goodwill amount is expected to be deductible for income tax purposes.

The Company has engaged third-party valuation experts to assist in the purchase price allocation, the recorded valuation of property and equipment, intangible assets and certain other assets and liabilities. Preliminary estimates from third-party experts along with the analysis and expertise of management have formed the basis for the preliminary allocation. As of May 31, 2022, the purchase price allocation for certain assets acquired has not been finalized, including property, plant and equipment and intangible assets. As such, the fair values of the assets acquired and liabilities assumed should be treated as preliminary values as there could be significant changes upon final valuation.

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The following table represents the preliminary summary of the assets acquired and liabilities assumed, in aggregate, related to the DAAM acquisition, as of the date of the acquisition (in thousands):


	February 28, 2022
Assets
Accounts receivable	$	4,586
Inventories	3,119
Prepaid and other assets	23
Property, plant and equipment	14,436
Goodwill	24,369
Liabilities
Accounts payable and other accrued liabilities	(7,437)
Deferred tax liabilities	(3,596)
Total purchase price	$	35,500

Unaudited Pro Forma Information

The following unaudited pro forma financial information for the three months ended May 31, 2022 and 2021 combines the historical results of the Company and the acquisitions of Precoat Metals and DAAM, assuming that the companies were combined as of March 1, 2021 and include business combination accounting effects from the Precoat Acquisition, including amortization charges from acquired intangible assets, depreciation expense on acquired property, plant and equipment, interest expense on the financing transactions used to fund the Precoat Acquisition, acquisition-related transaction costs and tax-related effects. The pro forma information as presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions of Precoat Metals and DAAM had taken place on March 1, 2021 or of future operating performance.


	Three Months Ended May 31,
	2022		2021
Revenue	$	507,418	$	407,087
Net income	$	25,774	$	16,191

3. 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.

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

Three Months Ended May 31,
2021 2020
Numerator:
Net income for basic and diluted earnings per common share $22,337 $5,541
Denominator:
Denominator for basic earnings per common share–weighted average shares 25,051 26,157
Effect of dilutive securities:
Employee and director equity awards 219 35
Denominator for diluted earnings per common share 25,270 26,192
Earnings per share basic and diluted:
Basic income per common share $ 0.89 $ 0.21
Diluted income per common share $ 0.88 $ 0.21


	Three Months Ended May 31,
	2022		2021
Numerator:
Net income	$	24,077	$	22,337
After-tax interest expense for Convertible Notes	547		—
Numerator for diluted earnings per share	$	24,624	$	22,337
Denominator:
Weighted average shares outstanding for basic earnings per share	24,709		25,051
Effect of dilutive securities:
Employee and director stock awards	161		219
Convertible Notes	805		—
Denominator for diluted earnings per share	25,675		25,270
Earnings per share basic and diluted:
Basic earnings per share	$	0.97	$	0.89
Diluted earnings per share	$	0.96	$	0.88

For the three months ended May 31, 2022 and 2021, 81,647 and 154,259 shares, respectively, were excluded from the calculation of diluted ~~EPS~~earnings per share because the effect would be antidilutive. These shares could be dilutive in future periods.

3.4. Sales

Disaggregated Sales

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


		Three Months Ended May 31,				Three Months Ended May 31,
		2021		2020				2022		2021
Sales:	Sales:						Sales:
Industrial		$	153,983	$	130,109
Industrial (General industry, Oil & Gas and Construction)							Industrial (General industry, Oil & Gas and Construction)	$	207,502	$	153,983
Transmission and distribution	Transmission and distribution	43,667		49,057			Transmission and distribution	72,312		43,667
Power generation	Power generation	32,176		34,127			Power generation	34,584		32,176
Total sales	Total sales	$	229,826	$	213,293		Total sales	$	314,398	$	229,826

See Note 45 for sales information by segment.

Contract Liabilities

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

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~~Contract Liabilities~~

The following table shows the changes in contract liabilities for the three months ended May 31, ~~2021~~2022 and ~~2020,~~2021, respectively (in thousands):


		2021		2020			2022		2021
Balance at February 28/29,		$	16,138	$	18,418
Balance at February 28,						Balance at February 28,	$	42,465	$	16,138
Contract liabilities added during the period	Contract liabilities added during the period	12,375		4,796		Contract liabilities added during the period	36,674		12,375
Sales recognized during the period	Sales recognized during the period	(11,415)		(5,849)		Sales recognized during the period	(39,457)		(11,415)
Balance at May 31,	Balance at May 31,	$	17,098	$	17,365	Balance at May 31,	$	39,682	$	17,098

The Company did not record any sales for the three months ended May 31, ~~2021~~2022 or ~~2020~~2021 related to performance obligations satisfied in prior periods. The increases or decreases in accounts receivable, contract assets, and contract liabilities during the three months ended May 31, 2021 and 2020 were due primarily to normal timing differences between the Company’s performance and customer payments in fiscal 2021.

~~The~~ Company expects to recognize sales, related to the ~~$17.1~~$39.7 million balance of contract liabilities as of May 31, ~~2021~~2022 of approximately ~~$12.1~~$32.1 million, ~~$4.7~~$7.4 million, ~~$0.2~~$0.1 million and $0.1 million in fiscal ~~2022,~~ 2023, 2024, 2025 and ~~2025,~~2026, respectively.

4.5. Operating Segments

Segment Information

The Company has 23 distinct operating segments: the Metal Coatings segment, the Precoat Metals segment and the Infrastructure Solutions segment.

The Metal Coatings segment provides ~~hot dip~~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~~Hot-dip galvanizing is a metallurgical process in which molten zinc reacts to steel. The zinc alloying provides corrosion protection toand extends the life-cycle of fabricated steel for ~~extended periods of up to 50 years.~~several decades.

The Precoat Metals segment provides aesthetic and corrosion protective coatings and related value-added services for steel and aluminum coil primarily serving the construction; appliance; heating, ventilation, and air conditioning (HVAC); container; transportation and other end markets in the United States.

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 May 31,				Three Months Ended May 31,
		2021		2020				2022		2021
Sales:	Sales:						Sales:

Metal Coatings	Metal Coatings	$	127,735	$	118,991		Metal Coatings	$	160,846	$	127,735
Precoat Metals							Precoat Metals	43,691		—
Infrastructure Solutions	Infrastructure Solutions	102,091		94,302			Infrastructure Solutions	109,861		102,091
Total sales	Total sales	$	229,826	$	213,293		Total sales	$	314,398	$	229,826

Operating income:	Operating income:						Operating income:
Metal Coatings	Metal Coatings	$	31,576	$	25,085		Metal Coatings	$	44,435	$	31,576
Precoat Metals							Precoat Metals	6,648		—
Infrastructure Solutions	Infrastructure Solutions	9,624		(1,048)			Infrastructure Solutions	12,851		9,624
Corporate	Corporate	(10,488)		(9,719)			Corporate	(24,024)		(10,488)
Total operating income	Total operating income	$	30,712	$	14,318		Total operating income	$	39,910	$	30,712

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


		May 31, 2021		February 28, 2021			May 31, 2022		February 28, 2022
Total assets:	Total assets:					Total assets:
Metal Coatings	Metal Coatings	$	490,326	$	480,778	Metal Coatings	$	594,207	$	575,088
Precoat Metals						Precoat Metals	1,538,809		—
Infrastructure Solutions	Infrastructure Solutions	521,428		489,986		Infrastructure Solutions	526,311		525,086
Corporate	Corporate	27,485		25,678		Corporate	122,965		32,854
Total	Total	$	1,039,239	$	996,442	Total	$	2,782,292	$	1,133,028

Financial Information About Geographical Areas

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


		Three Months Ended May 31,				Three Months Ended May 31,
		2021		2020				2022		2021
Sales:	Sales:						Sales:
United States	United States	$	191,116	$	190,842		United States	$	281,589	$	191,116
International	International	38,710		22,451			International	32,809		38,710
Total	Total	$	229,826	$	213,293		Total	$	314,398	$	229,826

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


		May 31, 2021		February 28, 2021			May 31, 2022		February 28, 2022
Property, plant and equipment, net:	Property, plant and equipment, net:					Property, plant and equipment, net:
United States	United States	$	180,004	$	180,718	United States	$	456,409	$	194,539
Canada	Canada	14,953		15,007		Canada	25,900		26,264
Other countries	Other countries	12,732		10,184		Other countries	9,413		10,045
Total	Total	$	207,689	$	205,909	Total	$	491,722	$	230,848

6. 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 or defects in material and workmanship.

The following table shows the changes in ~~the~~ warranty reserves for the three months ended May 31, 2022 and 2021 ~~(dollars in~~(in thousands):


~~Balance at February 28, 2021~~	$	~~4,079~~
~~Warranty costs incurred~~	~~(112)~~
~~Additions charged to income~~	~~170~~

~~Balance at May 31, 2021~~	$	~~4,137~~


	Three Months Ended May 31,
	2022		2021
Beginning balance	$	3,686	$	4,079
Warranty costs incurred	(721)		(112)
Amounts charged to income (expense)	(152)		170
Acquisitions	1,662		—
Ending balance	$	4,475	$	4,137

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6.7. Debt

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


		May 31, 2021		February 28, 2021			May 31, 2022		February 28, 2022
2017 Revolving Credit Facility		$	36,000	$	29,000

Revolving Credit Facility						Revolving Credit Facility	$	—	$	77,000
2020 Senior Notes	2020 Senior Notes	150,000		150,000		2020 Senior Notes	150,000		150,000
Term Loan B						Term Loan B	1,300,000		—
Convertible Notes						Convertible Notes	240,000		—
Total debt, gross	Total debt, gross	186,000		179,000		Total debt, gross	1,690,000		227,000
Unamortized debt issuance costs	Unamortized debt issuance costs	(565)		(581)		Unamortized debt issuance costs	(82,223)		(516)
Total debt, net	Total debt, net	185,435		178,419		Total debt, net	1,607,777		226,484
Less amount due within one year	Less amount due within one year	0		0		Less amount due within one year	(13,000)		—
Debt due after one year, net		$	185,435	$	178,419

Total debt due after one year, net						Total debt due after one year, net	$	1,594,777	$	226,484

2021 Credit Agreement

On July 8, 2021, the Company entered into a five-year unsecured revolving credit facility under a credit agreement, by and among the Company, borrower, Citibank, N.A., as administrative agent and the other agents and lender parties thereto (the “2021 Credit Agreement”). The 2021 Credit Agreement matures in July 2026 and includes the following significant terms;

i.provides for a senior unsecured revolving credit facility with a principal amount of up to $400.0 million of 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 the leverage ratio of the Company and its consolidated subsidiaries as a group;

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

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

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

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

On May 13, 2022, the 2021 Credit Agreement was repaid with proceeds from the 2022 Credit Agreement, which is described below.

2022 Credit Agreement and Term Loan B

On May 13, 2022, the Company replaced 2021 Credit Agreement with a new Credit Agreement (the "2022 Credit Agreement") by and among the Company, borrower, Citibank, N.A., as administrative and collateral agent, and the other agents and lender parties thereto the 2022 Credit Agreement. The 2022 Credit Agreement includes the following significant terms;

i.provides for a senior secured initial term loan in the aggregate principal amount of $1.3 billion (the "Term Loan B"), due May 13, 2029, which is secured by substantially all of the assets of the Company;

ii.provides for a senior secured revolving credit facility in the aggregate principal amount of $400.0 million (the "Revolving Credit Facility"), due May 13, 2027;

iii.includes a letter of credit sub-facility of up to $100.0 million, which is part of, and not in addition to, the Revolving Credit Facility;

iv.borrowings under the Term Loan B and the Revolving Credit Facility each bear an interest rate of Secured Overnight Financing Rate ("SOFR") plus 4.25%;

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

vi.includes a maximum quarterly leverage ratio financial covenant and an interest coverage ratio financial covenant;

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The proceeds of the advances under the Revolving Credit Facility will be utilized primarily to finance working capital needs, capital improvements, dividends, acquisitions and for general corporate purposes. The proceeds of the Term Loan B were used to finance a portion of the Precoat Acquisition, pay transaction-related costs owed under the Securities Purchase Agreement (defined below) and refinance certain prior indebtedness, including the repayment of outstanding borrowings under the 2021 Credit Agreement. The proceeds were also utilized to redeem 100% of the Company’s 2020 Senior Notes on June 6, 2022.

Outstanding principal of the Term Loan B is payable on the last business day of each May, August, November and February, beginning August 31, 2022, in a quarterly aggregate principal amount of $3.25 million, with the entire remaining principal amount due on May 13, 2029, the maturity date.

The effective interest rate for the 2022 Credit Facility and the Term Loan B was 4.91% at May 31, 2022.

The Company's credit agreement requires the Company to maintain a maximum Total Net Leverage Ratio (as defined in the loan agreement) no greater than 6.25 through November 2022. For each subsequent quarter, the maximum ratio decreases by 25 basis points through May 31, 2024, when the maximum Total Net Leverage Ratio reaches 4.5.

Convertible Subordinated Notes

On May 13, 2022, the Company completed the issuance of $240.0 million aggregate principal amount of 6.00% convertible subordinated notes due June 30, 2030 (the "Convertible Notes"). Interest on the Convertible Notes is payable semi-annually, on June 30 and December 31.

The Convertible Notes are convertible by the holder thereof at any time into shares of the Company's common stock at a price equal to a 25% premium to the volume-weighted average price of the Company's common stock over the trailing 30 trading days prior to the issuance date of the Convertible Notes. The Convertible Notes are exchangeable for 240,000 shares of the Company's 6.0% Series A Convertible Preferred Stock, subject to shareholder approval for the issuance of preferred shares. If exchanged, the Series A Preferred Stock will be convertible by the holder at any time into shares of the Company's common stock at a price equal to a 25% premium to the volume-weighted average price of the Company's common stock over the trailing 30 trading days, prior to the issuance date of the Convertible Notes. In addition, the Series A Preferred Stock will be subject to a minimum conversion threshold of 1,000 shares per conversion, and customary anti-dilution and dividend adjustments.

The Company used the proceeds of the Convertible Notes to fund the Company’s Precoat Acquisition.

The Company's debt agreements ~~require~~requires the Company to maintain certain ~~financial ratios, of which the most restrictive is a debt to EBITDA leverage ratio of at least 3.25 to 1.00.~~affirmative and negative covenants. As of May 31, ~~2021,~~2022, the Company was in compliance with all covenants orand other requirements set forth in the debt agreements.

8. Leases

The Company is a lessee under various ~~operating~~ leases for facilities and equipment. As of May 31, 2022, the Company was the lessee for 153 operating leases with terms of 12 months or more and 12 finance leases. Many of the operating leases either have renewal options of between one and five years or convert to month-to-month agreements at the end of the specified lease term.

The Company’s operating leases are primarily for (i) operating facilities, (ii) vehicles and equipment used in operations, (iii) facilities used for back-office functions and (iv) equipment used for back-office functions. The majority of the Company’s long-term lease expenses are at fixed prices.

Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company has a significant number of short-term leases, including month-to-month agreements, some of which continue in perpetuity until the lessor or the Company terminates the lease agreement. The Company's short-term lease agreements include expenses incurred hourly, daily, monthly and for other durations for a time period of one year or less.

The Company’s future lease commitments as of May 31, 2022 do not reflect all of the Company’s short-term lease commitments.

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The following table outlines the classification of the Company's right-of-use assets and lease liabilities in the consolidated balance sheets as of May 31, 2022 and fiscal year end 2022 (in thousands):


Balance Sheet	Classification	May 31, 2022		February 28, 2022
Assets
Right-of-use assets	Right-of-use assets	$	51,909	$	43,286
Liabilities
Operating lease liabilities ― ST	Lease liability - short-term	8,786		7,140
Operating lease liabilities ― LT	Lease liability - long-term	41,978		34,965
Finance lease liabilities ― ST	Lease liability - short-term	189		178
Finance lease liabilities ― LT	Lease liability - long-term	625		645

Supplemental information related to the Company's portfolio of operating leases was as follows ~~(dollars in~~(in thousands):


		Three Months Ended May 31,						Three Months Ended May 31,
		2021			2020					2022		2021
Operating cash flows from operating leases included in lease liabilities	Operating cash flows from operating leases included in lease liabilities	$	2,299		$	2,119			Operating cash flows from operating leases included in lease liabilities	$	2,419	$	2,299
Lease liabilities obtained from new ROU assets - operating	Lease liabilities obtained from new ROU assets - operating	12,661			204				Lease liabilities obtained from new ROU assets - operating	11,070		12,661
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	Operating and financing cash flows from financing leases included in lease liabilities	18			—				Operating and financing cash flows from financing leases included in lease liabilities	52		18
Lease liabilities obtained from new ROU assets - financing	Lease liabilities obtained from new ROU assets - financing	0			—				Lease liabilities obtained from new ROU assets - financing	38		—
Weighted-average remaining lease term - financing leases (years)		4.3			—
Weighted-average discount rate - financing leases		4.3		%	—		%


	May 31, 2022		February 28, 2022
Weighted-average remaining lease term - operating leases (years)	7.28		7.90
Weighted-average discount rate - operating leases	4.48	%	4.56	%
Weighted-average remaining lease term - financing leases (years)	4.48		4.73
Weighted-average discount rate - financing leases	2.99	%	2.95	%

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


		Three Months Ended May 31,					Three Months Ended May 31,
		2021		2020			2022		2021
Cost of sales	Cost of sales	$	2,546	$	3,225	Cost of sales	$	3,226	$	2,546
Selling, general and administrative	Selling, general and administrative	1,130		1,249		Selling, general and administrative	946		1,130
Total lease expense	Total lease expense	$	3,676	$	4,474	Total lease expense	$	4,172	$	3,676

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As of May 31, ~~2021,~~2022, maturities of the Company's lease liabilities were as follows ~~(dollars in~~(in thousands):

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

8.~~Income Taxes~~

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 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.


Fiscal year:	Operating Leases		Finance Leases		Total
2023	$	8,254	$	158	$	8,412
2024	10,144		211		10,355
2025	9,155		203		9,358
2026	7,608		139		7,747
2027	6,815		111		6,926
Thereafter	17,851		46		17,897
Total lease payments	59,827		868		60,695
Less imputed interest	(9,064)		(53)		(9,117)
Total	$	50,763	$	815	$	51,578

9. Income Taxes

The provision for income taxes reflects an effective tax rate of 23.9% for the three months ended May 31, 2022, compared to 25.5% for the three months ended May 31, ~~2021, as compared to 45.8% for the respective prior year comparable period.~~2021. The decrease in the effective tax rate was primarily attributable to ~~the~~ unfavorable ~~impact of COVID-19 on book earnings~~adjustments recorded in the prior year ~~quarter compared~~comparable period, related to 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 significantly lower in the prior year, the effectiveuncertain tax ~~rate was impacted more significantly by the discrete items.~~positions.

9.10. Equity

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 Authorization”). Repurchases under the 2020 Share 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 three months ended May 31, 2022, to prioritize repayments of debt, including debt incurred to finance the Precoat Acquisition, the Company did not repurchase shares of common stock under the 2020 Share Authorization. During the three months ended May 31, 2021, the Company repurchased 125,770 shares of ~~its~~ common ~~shares~~stock for $6.3 million, or $49.80 per share.

11. Defined Benefit Pension Plan

In the Company's Precoat Metals segment, certain employees of the Company participate in a defined benefit pension plan sponsored and administered by the Company. The pension plan calls for benefits to be paid to eligible employees at retirement, based primarily upon years of service and compensation rates near retirement. In conjunction with the acquisition of Precoat Metals, the Company assumed an accumulated benefit obligation in excess of related plan assets associated with the defined benefit pension plan of $44.9 million, which is included in "Other long-term liabilities" in the ~~amount~~consolidated balance sheets. See Note 2 for a discussion of ~~$6.3 million at an average purchase price~~the acquisition of ~~$49.80 under the 2020 Share Authorization.~~Precoat Metals.

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~~10.~~12. Assets Held for Sale

The Company has been executing aon its plan to divest certain non-core businesses. The strategic decision to divest of these businesses reflects the Company's long-term strategy to become a ~~more focused~~predominantly metal coatings focused company. The historical annual sales, operating profit and net assets of these businesses were not significant enough to qualify as discontinued operations.

As of May 31, 2022, one non-operating location in our Metal Coatings segment remains classified as held for sale. The assets of the business include property, plant and equipment of $0.2 million. The assets of the business are expected to be disposed of within the next twelve months and are included in "Assets held for sale" in the accompanying consolidated balance sheets.

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


	~~As of May 31, 2021~~
~~Assets~~
~~Accounts receivable~~	$	~~4,715~~
~~Inventories~~	~~2,600~~
~~Contract assets~~	~~2,204~~
~~Other current assets~~	~~186~~
~~Property, plant and equipment~~	~~1,348~~
~~Other assets~~	43
~~Goodwill~~	~~1,693~~

~~Liabilities~~
~~Accounts payable~~	~~856~~
~~Contract liabilities~~	~~1,926~~
~~Other accrued liabilities~~	~~877~~
~~Lease liability – long term~~	12
~~Total carrying value~~	~~9,118~~
~~Less: Impairment of carrying value of remaining assets held for sale to estimated sales price~~	~~(3,490)~~
~~Fair value of disposal group~~	$	~~5,628~~

~~11.~~

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13. Commitments and Contingencies

Legal

The Company and its subsidiaries are named defendants and plaintiffs in various routine lawsuits incidental to ~~our~~its 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~~of which arise in the normal course of conducting 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 way to resolve the disputes prior to trial. As the pending cases progress through additional discovery, including expert testimony and ~~potential~~ mediation, our assessment of the likelihood of an unfavorable outcome on one or more of the pending lawsuits may change. ~~Although the~~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,~~time. Management, after consultation with legal counsel, believes it has strong defenses to all of these matters and does not expect liabilities, if any, from these claims or proceedings, either individually or in the aggregate, to have a material effect on the Company’s financial position, results of operations or cash flows.

Environmental

~~12.~~The Company assumed certain environmental liabilities as part of the Precoat Acquisition described in Note 2. The preliminary estimated fair value of these liabilities was $22.2 million, of which $1.7 million is classified as current. Environmental remediation liabilities include costs directly associated with site investigation and clean up, such as materials, external contractor costs, legal and consulting expenses and incremental internal costs directly related to the remedy. Estimates used to record environmental remediation liabilities are based on the Company's best estimate of probable future costs based on site-specific facts and circumstances known at the time of the estimate and these estimates are updated on a quarterly basis. Estimates of the cost for the likely remedy are developed using internal resources or by third-party environmental engineers or other service providers. The Company records the environmental remediation liabilities that represent the points in the range of estimates that are most probable, or the minimum amount when no amount within the range is a better estimate than any other amount.

The Company accrues the anticipated cost of environmental remediation when the obligation is probable and can be reasonably estimated. While any revisions could be material to the operating results of any fiscal quarter or fiscal year, the Company does not expect such additional expenses would have a material adverse effect on its liquidity or financial condition.

14. Subsequent Event

On ~~July 8, 2021,~~June 23, 2022, The Company and Fernweh Group LLC ("Fernweh"), jointly entered into a definitive agreement whereby AZZ will contribute its AZZ Infrastructure Solutions Segment (“AIS”) to AIS Investment Holdings LLC (the “AIS JV”), and sell a 60% interest in the AIS JV to Fernweh at an implied enterprise value of AIS of $300.0 million. The sale is expected to result in cash proceeds to AZZ of approximately $228.0 million, subject to certain customary purchase price adjustments. As part of recognizing the AIS as held for sale in accordance with GAAP, the Company ~~refinanced~~is required to measure AIS at the lower of its ~~current un-secured revolving credit facility, which was scheduled~~carrying amount or fair value less cost to ~~mature~~sell. The Company will complete this assessment during its second quarter of fiscal year 2023. The Company expects the assessment will result 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~~non-cash loss on disposal of approximately $35 to $65 million. The loss on disposal will be recorded as part of discontinued operations in the Company’s financial statements. Following the close of the transaction, the Company ~~borrower, Citibank, N.A., as administrative agent~~anticipates that the AIS JV will be deconsolidated and the ~~other agents and lender parties thereto (the “2021 Credit Agreement”).~~Company's 40% joint venture investment will be accounted for under the equity method of accounting. The ~~2021 Credit Agreement matures in July 2026 and includes~~transaction, which is subject to certain closing conditions, is expected to close before the ~~following significant terms;~~

i.~~provides for a senior un-secured revolving credit facility with a principal amount~~end 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,~~fiscal 2023.

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

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

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

~~The 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.

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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,~~"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 Quarterly Report may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand for our products and services, including demand by ~~the metal coatings market,~~ power generation markets, electrical transmission and distribution markets, the industrial markets and the ~~industrial~~metal coatings markets. In addition, within each of the markets we serve, our customers and our operations could potentially continue to be adversely impacted by the ongoing coronavirus ("COVID-19") ~~pandemic.~~pandemic, including governmental issued mandates regarding the same in the jurisdictions in which we operate, sell to, or from whom we purchase. We could also experience ~~fluctuations~~additional increases in ~~prices~~labor costs, components and raw ~~material cost,~~materials, including zinc, ~~and~~which is used in our hot-dip galvanizing process, natural gas, which ~~are~~is used in ~~the hot dip~~our hot-dip galvanizing ~~process;~~and coil coating processes; supply-chain ~~vendor~~ delays; customer requested delays of our products or services; ~~delays in 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; 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 28, ~~2021~~2022 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 inwhen 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 28, ~~2021,~~2022, and with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

~~Results of Operations~~

RESULTS OF OPERATIONS

Strategy

We have a developed strategy and periodically review our ~~strategy against our~~ performance, opportunities, market conditions and competitive threats. ~~During~~On May 13, 2022, the ~~third quarter~~Company completed the acquisition of ~~fiscal 2021, we publicly announced strategic~~the Precoat Metals business division (“Precoat”) of Sequa Corporation (“Sequa”), a portfolio company of global investment firm Carlyle, for a purchase price of approximately $1.3 billion (the "Precoat Acquisition"). As part of the Precoat Acquisition, the Company acquired the Precoat Metals division from the Seller, which engages in the business of applying protective and ~~financial initiatives to enhance shareholder value. These initiatives include a comprehensive Board-led review of~~decorative coatings and films for continuous steel and aluminum coil and performing ancillary services related thereto. The Precoat Acquisition advances our portfolio and capital allocation and 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~~predominantly metal coatings focused company, which we believe will more rapidly enhance shareholder value. See Note 2 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for more information about the Precoat Acquisition.

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Coronavirus (COVID-19)

The continued uncertainty associated with COVID-19, and any of the ongoing variants, did not have a material adverse effect on our results of operations for the three months ended May 31, ~~2021.~~2022. While we continue to support our customers, there remains uncertainties regarding the duration and, to what extent, if any, that the COVID-19 pandemic, or newly identified variants, or additional regulatory requirements, will ultimately have on the demand for our products and services or with our supply ~~chain. We continue~~chain or our employees.

The impact of COVID-19 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").

~~Our operations remain open globally and the impact to our~~Company's 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.~~limited. During the first

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quarter of fiscal ~~2022, we~~2023, the Company continued to see improvement in sales and operating income in ~~both of our~~its Metal Coatings and Infrastructure Solutions operating segments. ~~While governments~~In addition, the Precoat Metals segment, which was acquired in the first quarter of fiscal 2023, was not materially impacted by COVID-19. However, labor market and supply chain challenges have taken actions, including the approval of vaccines to limit the impacts of COVID-19, we cannot reasonably estimate the length or severity of this pandemic, or the extent to which the disruption may materially impact our consolidated balance sheet, statements of income or statements of cash flows for fiscal year 2022.

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 workincreased during the ~~COVID-19 pandemic~~current quarter, resulting in increased operating expenses as the constrained labor market and ~~options to defer payroll tax payments. Based on an evaluation~~supply chain disruptions impacted the availability and cost of ~~the CARES Act, we qualified for the deferral of payroll~~labor and ~~other tax payments.~~materials.

Overview

We have ~~two~~three distinct operating segments, the Metal Coatings segment, the Precoat Metals segment and the Infrastructure Solutions 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 the performance of our segments. Segment operating income consists of sales less cost of sales and selling, general and administrative expenses that are specifically identifiable to a segment. For a reconciliation of segment operating income to consolidated operating income, see Note 45 to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

During the three months ended May 31, 2021, we continue to execute a plan to divest certain non-core businesses, which was approved by the board of directors in fiscal 2021. As of May 31, 2021, one business in our Infrastructure Solutions segment is classified as held for sale. In addition, one non-operating location in our Metal Coatings segment is classified as held for sale. The assets and liabilities of 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.

Orders and Backlog

Our backlog relates entirely to our Infrastructure Solutions segment and excludes transaction taxes for certain foreign subsidiaries. As of May 31, ~~2021,~~2022, backlog ~~remained flat to~~increased $2.9 million from February 28, ~~2021, at $186.1~~2022, to $307.4 million. Our backlog ~~decreased $19.3~~increased $121.3 million, or ~~9.4%~~65.2%, as compared to ~~$205.4~~$186.1 million for the same period in the prior fiscal year. The ~~decrease~~increase in backlog is primarily due to ~~the~~an increase in backlog in our Electrical platform, partially offset by a continued ~~impact~~reduction of ~~COVID-19, which resulted in a decrease in bookings and sales over the past 12 months, and,~~international backlog, including China, related to ~~a lesser extent, divestitures that occurred in fiscal 2021.~~several non-recurring contracts. For the three months ended May 31, ~~2021, backlog was favorably impacted by an increase in our incoming~~2022, net bookings ~~of $54.9~~increased $87.5 million, or ~~31.4%~~38.1%, to $317.3 million, compared to same period of fiscal ~~2021, due to~~2022, as a ~~decrease~~result of strong bookings in ~~some COVID-19 related restrictions during the quarter.~~our Electrical platform and continued strong sales in our Metal Coatings segment. The ~~decrease in restrictions also favorably impacted our~~ book-to-sales ratio ~~which~~ increased to ~~1.00,~~1.01, from 0.82. The decrease in backlog was also due to an increase in sales recognized in the current quarter compared to the prior quarter, primarily related to sales recognized in the current quarter for certain large international projects for which bookings were recorded in prior years.1.00.

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


		Period Ended			Period Ended				Period Ended			Period Ended
Backlog	Backlog	2/28/2021	$	186,119	2/28/2020	$	243,799	Backlog	2/28/22	$	304,522	2/28/2021	$	186,119
Net bookings	Net bookings		229,805			174,865		Net bookings		317,302			229,805

Sales recognized	Sales recognized		(229,826)			(213,293)		Sales recognized		(314,398)			(229,826)
Backlog	Backlog	5/31/2021	$	186,098	5/31/2020	$	205,371	Backlog	5/31/2022	$	307,426	5/31/2021	$	186,098
Book to sales ratio	Book to sales ratio		1.00			0.82		Book to sales ratio		1.01			1.00

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QUARTER ENDED MAY 31, 2022 COMPARED TO THE QUARTER ENDED MAY 31, 2021

Segment Sales

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


		Three Months Ended May 31,				Three Months Ended May 31,
		2021		2020				2022		2021
Sales:	Sales:						Sales:
Metal Coatings	Metal Coatings	$	127,735	$	118,991		Metal Coatings	$	160,846	$	127,735
Precoat Metals							Precoat Metals	43,691		—
Infrastructure Solutions	Infrastructure Solutions	102,091		94,302			Infrastructure Solutions	109,861		102,091
Total sales		$	229,826	$	213,293
Total Sales							Total Sales	$	314,398	$	229,826

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For the three months ended May 31, ~~2021,~~2022 (the "current quarter"), consolidated sales increased ~~$16.5~~$84.6 million, or ~~7.8%~~36.8%, as compared to the ~~same period in fiscal 2021.~~three months ended May 31, 2021 (the "prior year quarter"). Sales for the Metal Coatings segment increased ~~$8.7~~$33.1 million, or ~~7.3%~~25.9%, for the ~~three months ended May 31, 2021, as~~current quarter, compared to the ~~same period in fiscal 2021.~~prior year quarter. The increase was primarily due to improved price realization for our superior quality and service, ~~the acquisition of a metal coatings facility~~and an increase in the ~~fourth quarter of fiscal 2021 and the improved performance of our surface technology offerings. The~~ volume of steel ~~processed remained steady in~~galvanized.

Sales for the Precoat Metals segment, which was acquired on May 13, 2022, were $43.7 million for the current ~~quarter, compared to the prior year~~ quarter.

Sales for the Infrastructure Solutions segment increased $7.8 million, or ~~8.3%~~7.6%, for the three months ended May 31, 2021 as compared to the same period in fiscal 2020. The increase was primarily related to an improvement in the spring turnaround season in the Industrial platform (as the prior year was significantly impacted by COVID-19), partially offset by a decrease related to a divestiture in the thirdcurrent quarter, ~~of fiscal 2021. In the Electrical platform, sales decreased~~ compared to the prior year quarter. In the Electrical platform, the increase in sales was primarily due to increased demand for most of our products, partially offset by lower sales for our high voltage bus systems. The increase was partially offset by decreased sales in ~~China as projects near completion,~~our Industrial platform, primarily due to net sales decreases in our international operations, partially offset by an increase in ~~backlog and sales for switchgear and enclosure products in~~ our domestic ~~operations.~~sales.

Segment Operating Income

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


		Three Months Ended May 31, 2021								Three Months Ended May 31, 2020									Three Months Ended May 31, 2022										Three Months Ended May 31, 2021
		Metal Coatings		Infra- structure Solutions		Corporate		Total		Metal Coatings		Infra- structure Solutions		Corporate		Total			Metal Coatings		Precoat Metals		Infra- structure Solutions		Corporate		Total		Metal Coatings		Precoat Metals		Infra- structure Solutions		Corporate		Total
Operating income (loss):	Operating income (loss):																	Operating income (loss):
Sales	Sales	$	127,735	$	102,091	$	—	$	229,826	$	118,991	$	94,302	$	—	$	213,293	Sales	$	160,846	$	43,691	$	109,861	$	—	$	314,398	$	127,735	$	—	$	102,091	$	—	$	229,826
Cost of sales	Cost of sales	92,078		79,821		—		171,899		89,339		81,746		—		171,085		Cost of sales	111,999		33,501		84,442		—		229,942		92,078		—		79,821		—		171,899
Gross margin	Gross margin	35,657		22,270		—		57,927		29,652		12,556		—		42,208		Gross margin	48,847		10,190		25,419		—		84,456		35,657		—		22,270		—		57,927
Selling, general and administrative	Selling, general and administrative	4,081		12,646		10,488		27,215		4,567		13,604		9,719		27,890		Selling, general and administrative	4,412		3,542		12,568		24,024		44,546		4,081		—		12,646		10,488		27,215

Total operating income		$	31,576	$	9,624	$	(10,488)	$	30,712	$	25,085	$	(1,048)	$	(9,719)	$	14,318
Total operating income (loss)																		Total operating income (loss)	$	44,435	$	6,648	$	12,851	$	(24,024)	$	39,910	$	31,576	$	—	$	9,624	$	(10,488)	$	30,712

Operating income for the Metal Coatings segment increased ~~$6.5~~$12.9 million, or ~~25.9%~~40.7%, for the ~~three months ended May 31, 2021, as~~current quarter, compared to the ~~same period in fiscal 2021.~~prior year quarter. The current quarter increase was ~~primarily~~ due to ~~the increase in~~improved sales as described above ~~a decrease in the cost of zinc in the kettles~~ and the achievement of operational efficiencies in our ~~surface technologies~~Surface Technologies platform.

Operating income for the Precoat Metals segment, which was acquired on May 13, 2022, was $6.6 million for the current quarter.

Operating income for the Infrastructure Solutions segment increased by ~~$10.7~~$3.2 million, or ~~1,018.3%~~33.5%, for the ~~three months ended May 31, 2021 as~~current quarter, compared to the ~~same period in fiscal 2021.~~prior year quarter. In the Electrical platform, operating income increased for our enclosures, bus systems and tubing products. The increase was ~~primarily related to~~partially offset by a decrease in operating income for our switchgear products. In the ~~increase~~

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Industrial platform, operating income increased for our domestic operations, partially offset by a decrease in ~~sales as noted above and cost controls implemented~~operating income in ~~fiscal 2021 across the platform to mitigate disrupted markets.~~our international operations.

Corporate expenses increased ~~$0.8~~$13.5 million, or ~~7.9%~~129.1%, for the ~~three months ended May 31, 2021, as~~current quarter, compared to the ~~same period in fiscal 2021.~~prior year quarter. The increase is primarily due to ~~increases in administrative~~acquisition costs ~~associated with~~related to the ~~previously announced strategic review.~~Precoat Acquisition.

Other (income) expense, net

Other expense was $0.8 million for the current quarter, compared to other income ~~was~~of $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.~~prior year quarter. The increase was primarily due to ~~favorable~~unfavorable foreign exchange transaction adjustments in the current year.

Interest Expense

Interest expense for the ~~three months ended May 31, 2021 decreased $0.9~~current quarter increased $5.8 million, or ~~35.6%~~340.4%, to $7.5 million, compared to $1.7 million ~~as compared to $2.6 million~~ for the ~~respective~~ prior ~~period.~~year quarter. The ~~decrease~~increase in interest expense was primarily attributable to ~~Company's 2020 Senior~~the additional debt that was obtained in conjunction with the Precoat Acquisition, including the Term Loan B of $1.3 billion and the Convertible Notes ~~which were funded in late fiscal 2021, and carry lower interest rates than the Company's previous senior notes.~~of $240.0 million.

Income Taxes

The provision for income taxes reflects an effective tax rate of 23.9% for the current quarter, compared to 25.5% for the ~~three months ended May 31, 2021, as compared to 45.8% for the respective~~ prior year ~~comparable period.~~quarter. The decrease in the effective tax rate was primarily attributable to ~~the~~ unfavorable ~~impact of COVID-19 on book earnings~~adjustments recorded in the prior year quarter, ~~compared~~related to 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 significantly lower in the prior year, the effectiveuncertain tax ~~rate was impacted more significantly by the discrete items.~~

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positions.

~~Liquidity and Capital Resources~~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 and working capital for the periods presented ~~(dollars in~~(in thousands):

Three Months Ended May 31,
2021 2020
Net cash provided by (used in) operating activities $ 11,060 $ (11,184)
Net cash used in investing activities (7,466) (10,847)
Net cash (used in) provided by financing activities (5,610) 11,036


	Three Months Ended May 31,
	2022		2021
Net cash provided by operating activities	$	23,314	$	11,060
Net cash used in investing activities	(1,306,289)		(7,466)
Net cash provided by (used in) financing activities	1,368,940		(5,610)
Working Capital	385,983		236,002

Net cash provided by operating activities for the ~~three months ended May 31, 2021~~current quarter was ~~$11.1~~$23.3 million, compared to ~~net cash used in operating activities of $11.2~~$11.1 million for the prior year quarter. The increase in cash provided by operating activities ~~for the current quarter~~ is primarily attributable to ~~increased net income.~~increases in working capital from higher quarter-end accounts payable primarily offsetting increases in accounts receivable, inventories, and prepaid assets.

Net cash used in 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 decrease in cash used for investing activities for the~~ current quarter was ~~primarily attributable to decreased capital expenditures.~~

~~Net cash used in financing activities for the three months ended May 31, 2021 was $5.6 million,~~$1.3 billion, compared to ~~$11.0~~$7.5 million ~~of cash provided by investing activities~~ for the prior year quarter. The increase in cash used in investing activities for the current quarter was attributable to the Precoat Acquisition completed in the current quarter.

Net cash provided by financing activities for the current quarter was $1.4 billion, compared to net cash used in financing activities of $5.6 million for the prior year quarter. The increase in cash used in financing activities during the current quarter was primarily attributable to an increase in ~~net payments on the revolver,~~proceeds from long-term debt. See “Financing and ~~repurchases of shares of Company common stock. See “Share Repurchases” sections~~Capital” section below for additional information.

~~Our working capital was $203.7 million as~~

Table of ~~May 31, 2021, as compared to $189.6 million as of February 28, 2021.~~Contents

Financing and Capital

~~On October 9, 2020, we completed a private placement transaction and entered into a Note Purchase~~2021 Credit Agreement ~~whereby we agreed to borrow $150.0 million of senior unsecured notes (the “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 was funded in January 2021. The proceeds were used to repay the existing $125.0 million 5.42% Senior Notes maturing on January 20, 2021, as well as for general corporate purposes. Interest on the outstanding 2020 Senior Notes is paid semi-annually, in January and July.

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

On July 8, 2021, the Company ~~refinanced its current un-secured revolving credit facility, which was scheduled to mature in March 2022, with~~entered into a ~~new~~ five-year ~~un-secured~~unsecured revolving credit facility under ~~that certain~~a credit agreement, ~~dated July 8, 2021~~ by and among the Company, borrower, Citibank, N.A., as administrative agent and the other agents and lender parties thereto (the “2021 Credit Agreement”). The 2021 Credit Agreement matures in July 2026 and includes the following significant terms;

~~Table of~~ ~~Contents~~

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

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~~On May 13, 2022, the ~~loans~~Revolving Credit Facility under the 2021 Credit Agreement was repaid with proceeds from the 2022 Credit Agreement, which is further described below.

2022 Credit Agreement and Term Loan B

On May 13, 2022, the Company replaced its 2021 Credit Agreement with a new Credit Agreement (the "2022 Credit Agreement") by and among the Company, borrower, Citibank, N.A., as administrative and collateral agent, and the other agents and lender parties thereto the 2022 Credit Agreement. The 2022 Credit Agreement includes the following significant terms;

ii.provides for a senior secured revolving credit facility in the aggregate principal amount of $400.0 million (the "Revolving Credit Facility"), due May 13, 2027;

iii.includes a letter of credit sub-facility of up to $100.0 million, which is part of, and not in addition to, the Revolving Credit Facility;

iv.borrowings under the Term Loan B and the Revolving Credit Facility each bear an interest rate of Secured Overnight Financing Rate ("SOFR") plus 4.25%;

vi.includes a maximum quarterly leverage ratio financial covenant and an interest coverage ratio financial covenant,

The proceeds of the advances under the Revolving Credit Facility will be ~~used~~utilized primarily to finance working capital needs, capital improvements, dividends, ~~future~~ acquisitions and for general corporate purposes. The proceeds of the Term Loan B were used to finance a portion of the Precoat Acquisition, pay transaction-related costs owed under the Securities Purchase Agreement (defined below) and refinance certain prior indebtedness, including the repayment of outstanding borrowings under the 2021 Credit Agreement. The proceeds were utilized to redeem 100% of the Company’s 2020 Senior Notes on June 6, 2022.

The effective interest rate for the 2022 Credit Facility and the Term Loan B was 4.91% at May 31, 2022.

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Convertible Subordinated Notes

The ~~foregoing summary of certain terms and provisions~~Convertible Notes are convertible by the holder thereof at any time into shares of the ~~2021 Credit Agreement does not purport~~Company's common stock at a price equal to ~~be complete and is qualified in its entirety by reference~~a 25% premium to the ~~2021 Credit Agreement,~~volume-weighted average price of the Company's common stock over the trailing 30 trading days prior to the issuance date of the Convertible Notes. The Convertible Notes are exchangeable for 240,000 shares of the Company's 6.0% Series A Convertible Preferred Stock, subject to shareholder approval for the issuance of preferred shares. If exchanged, the Series A Preferred Stock will be convertible by the holder at any time into shares of the Company's common stock at a ~~copy~~price equal to a 25% premium to the volume-weighted average price of ~~which is attached hereto as Exhibit 10.3~~the Company's common stock over the trailing 30 trading days, prior to ~~this Form 10-Q~~the issuance date of the Convertible Notes. In addition, the Series A Preferred Stock will be subject to a minimum conversion threshold of 1,000 shares per conversion, and ~~is incorporated herein by reference.~~customary anti-dilution and dividend adjustments.

The Company used the proceeds of the Convertible Notes to fund the Company’s Precoat Acquisition.

The Company's debt agreements requires the Company to maintain certain affirmative and negative covenants. As of May 31, 2022, the Company was in compliance with all covenants and other requirements set forth in the debt agreements.

Share Repurchase Program

During the three months ended May 31, ~~2021,~~2022, the Company ~~repurchased 125,770~~did not purchase any shares of ~~its~~ common ~~shares in the amount of $6.3 million at an average purchase price of $49.80~~stock under the 2020 Share Authorization. The Company has $84.0 million that may be used to purchase shares. 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~~all three of our ~~business,~~operating segments, primarily copper, aluminum, steel and ~~nickel based~~nickel-based alloys in the Infrastructure Solutions segment, ~~and~~ zinc, ~~and~~ natural gas in the Metal Coatings segment, and natural gas, steel and aluminum in the Precoat Metals segment. We attempt to minimize these increases through escalation clauses in customer contracts for copper, aluminum, steel and ~~nickel based~~nickel-based alloys, when market conditions allow and through fixed cost contract purchases on ~~zinc.~~zinc and natural gas. 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 May 31, ~~2021,~~2022, 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.

As of May 31, ~~2021,~~2022, we had outstanding letters of credit in the amount of ~~$25.5~~$28.9 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.~~periods, the bulk of the issued letters of credit are associated with our Infrastructure Solutions segment.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. ~~On an ongoing basis, we~~We continuously evaluate our estimates and ~~assumptions. These estimates and~~ assumptions ~~are~~ based onupon 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~~Except as noted below, during the ~~three months ended May 31, 2021,~~current quarter, 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

~~Table of~~ ~~Contents~~

and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended February 28, ~~2021.~~2022.

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Environmental Remediation Liabilities

The Company assumed certain environmental liabilities as part of the Precoat Acquisition. The Company's accounting policy for the recognition of environmental liabilities requires significant judgements and estimates by management and may be impacted by changing regulations and approaches to remediation plans. Any revisions to these estimates could have a material impact on the Company's financial condition or results of operations.

Environmental remediation liabilities include costs directly associated with site investigation and clean up, such as materials, external contractor costs, legal and consulting expenses and incremental internal costs directly related to the remedy. Estimates used to record environmental remediation liabilities are based on the Company's best estimate of probable future costs based on site-specific facts and circumstances known at the time of the estimate and these estimates are updated on a quarterly basis. Estimates of the cost for the likely remedy are developed using internal resources or by third-party environmental engineers or other service providers. The Company records the environmental remediation liabilities that represent the points in the range of estimates that are most probable, or the minimum amount when no amount within the range is a better estimate than any other amount.

Business Combinations

Assets acquired and liabilities assumed as part of a business acquisition are generally recorded at their fair value at the date of acquisition. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Determining fair value of identifiable assets, particularly intangibles, and liabilities acquired also requires management to utilize assumptions and estimates, which are based upon available information that may be subject to further refinement over the purchase accounting period of one year.

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.

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Non-GAAP Disclosures

In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”), we provided adjusted earnings and adjusted earnings per share (collectively, the “Adjusted Earnings Measures”), which are non-GAAP measures. Management believes that the presentation of these measures provides investors with greater transparency when comparing operating results across a broad spectrum of companies, which provides a more complete understanding of our financial performance, competitive position and prospects for the future. Management also believes that investors regularly rely on non-GAAP financial measures, such as adjusted operating income, adjusted earnings and adjusted earnings per share, to assess operating performance and that such measures may highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP.

The following tables provide a reconciliation for the three months ended May 31, 2022 and 2021 between the various measures calculated in accordance with GAAP to the Adjusted Earnings Measures (in thousands, except per share data):


	Three Months Ended
	May 31, 2022
	Amount		Per Diluted Share(1)
Net income and diluted earnings per share	$	24,077
Impact of after-tax interest expense for Convertible Notes	547
Net income for diluted earnings per share	$	24,624	$	0.96
Adjustments:




Acquisition and transaction related expenditures(2)	12,614		0.49
Increase in interest expense due to Precoat Acquisition	5,776		0.22
Depreciation and amortization - Precoat Metals	3,181		0.12
Precoat Metals segment contribution	(6,666)		(0.26)
Subtotal	14,905		0.58
Tax benefit(3)	(3,577)		(0.14)
Total adjustments	11,328		0.44
Adjusted earnings and adjusted earnings per share	$	35,952	$	1.40

(1) Earnings per share amounts included in the table above may not sum due to rounding differences.
(2) Includes expenses related to the Precoat acquisition as well as the divestiture of the Infrastructure Solutions business.
(3) Tax benefit consists of 21% federal statutory rate and 3% blended state tax rate.

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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~~ three months ~~of fiscal~~ended May 31, 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 28, ~~2021.~~2022.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

During the three months ended May 31, 2022, the Company closed the Precoat Acquisition, as discussed in Note 2 in the accompanying notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. As such, the scope of its assessment of the effectiveness of our disclosure controls and procedures did not include internal controls over financial reporting at Precoat Metals. Precoat Metals' assets and revenues represented approximately 55.3% of the Company's total assets and 13.9% of its total revenues as of and for the three months ended May 31, 2022. This exclusion is consistent with the Securities and Exchange Commission (the “SEC”) staff's guidance that an assessment of a recently acquired business may be omitted from the scope of our assessment of the effectiveness of disclosure controls and procedures that are also part of internal controls over financial reporting in the year of acquisition.

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

Changes in Internal Controls Over Financial Reporting

~~There~~On May 13, 2022, the Company completed its previously announced acquisition of the Precoat Metals business division of Sequa Corporation. During the first quarter of 2022, management commenced an evaluation of the design and operating effectiveness of internal controls over financial reporting related to the acquisition of Precoat Metals. The evaluation of changes to processes, technology systems, and other components of internal controls over financial reporting related to the acquisition of the Precoat Metals business division is ongoing. This process may result in additions or changes to our internal controls over financial reporting.

Except for the changes made in connection with the Precoat Acquisition, there have been no significant changes in the Company's internal ~~control~~controls over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, its internal ~~control~~controls over financial reporting.

2229

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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~~its 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~~of which arise in the normal course of conducting business. ~~Although~~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 way to resolve the disputes prior to trial. As the pending cases progress through additional discovery, including expert testimony and mediation, our assessment of the likelihood of an unfavorable outcome on one or more of the pending lawsuits may change. 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,~~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,~~position, 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.

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 28, ~~2021.~~2022.

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

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~~"2020 Share ~~Authorization”~~Authorization"). Repurchases under the 2020 Share 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 ~~following table provides information with respect to purchases~~Company did not purchase any shares of common stock ofunder the ~~Company made~~2020 Share Authorization during the three months ended May 31, ~~2021, by the~~2022. 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 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
has $84.0 million that may be used to purchase shares.

Item 5.Other Information.

~~Change in Control Agreement~~

The Company’s Compensation Committee of the Board of Directors, in consultation with its independent compensation advisor, Meridian Compensation Partners, LLC (“Meridian”), conducted a review of the existing change in control severance benefits being provided to the Company’s executive officers (the “Executive Officers”). Based upon the review and adviceNone.

~~Table of~~ ~~Contents~~

provided to the Compensation Committee by Meridian, the Company’s Board of Directors approved certain modifications to its existing change in control severance benefits to ensure uniformity of terms and conditions among its Executive Officers and to align severance benefits with the market practices of the Company’s industry peer companies. Effective July 8, 2021, the Company entered into a standardized change in control form agreement (the “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. The material terms of the standardized form CIC Agreement states that if an Executive Officer is terminated (i) during the Change in Control 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), the Executive Officers will 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 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 for the Executive Officer immediately prior to the date of such termination.

2430

Table of Contents

Item 6. Exhibits


2.1**						Securities Purchase Agreement dated as of March 7, 2022 by and between Sequa Corporation and AZZ Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by the Registrant on March 8, 2022).

2.2						First Amendment to Securities Purchase Agreement, dated as of May 6, 2022, by and between Sequa Corporation and AZZ Inc. (incorporated by reference to Exhibit 2.1 the Current Report on Form 8-K filed by the Registrant on May 9, 2022).

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 Quarterly Report on Form 10-Q filed by the Registrant on October 12, 2021).

4.1						Indenture, dated as of May 13, 2022, by and between AZZ Inc. and UMB Bank, N.A. (incorporated by reference to Exhibit ~~3.2~~4.1 to the Current Report on Form 8-K filed by the Registrant on ~~January 23, 2017)~~May 16, 2022).

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~~Credit Agreement, dated as of ~~January 20, 2011,~~May 13, 2022, by and among AZZ ~~incorporated~~Inc., the Guarantors, the Lenders, the L/C Issuers and ~~the purchasers identified therein~~Citibank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on ~~January 21, 2011)~~May 16, 2022).

~~10.3~~						~~Credit Agreement by and between AZZ Inc. as borrower, CitiBank,CitiBank, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer, and the other Lender's party hereto.~~ ~~Filed Herewith.~~

10.410.2*						~~AZZ incorporated 2014 Long Term Incentive Plan~~ ~~(incorporated~~Securities Purchase Agreement, dated as of May 13,2022, by ~~reference to Appendix A to the Registrant’s Definitive Proxy Statement on Form DEFA filed May 29, 2014).~~

10.5*						~~First Amendment to~~and between AZZ Inc. ~~2014 Long Term Incentive Plan~~and BTO Pegasus Holdings DE L.P. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Registrant on ~~January 21, 2016.~~May 16, 2022).

~~10.6~~10.3						~~Note Purchase~~Registration Rights 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~~May 13, ~~2020).~~
10.7*						~~Form of Change in Control Agreement~~2022, by and between AZZ Inc. and ~~certain Executive Officers thereof.~~ ~~Filed Herewith.~~ BTO Pegasus Holdings DE L.P. (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by the Registrant on May 16, 2022)
~~31.1~~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~~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~~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~~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~~101.INS+						Inline 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~~101.SCH+						Inline XBRL Taxonomy Extension Schema Document

~~101.CAL~~101.CAL+						Inline XBRL Taxonomy Extension Calculation Linkbase Document


~~101.DEF~~101.DEF+						Inline XBRL Taxonomy Extension Definition Linkbase Document

~~101.LAB~~101.LAB+						Inline XBRL Taxonomy Extension Label Linkbase Document

~~101.PRE~~101.PRE+						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104+						Cover Page Interactive Date File (embedded with the Inline XBRL document).

** ~~Management contract, compensatory plan or arrangement~~Some schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K.The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.The Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedules and exhibits so furnished.

+ Filed herewith

++ Furnished herewith

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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:

July ~~9, 2021~~11, 2022

By:

/s/ Philip A. Schlom

Philip A. Schlom
Chief Financial Officer

2632


		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	1721
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2229
Item 4.	Controls and Procedures	2229

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	2330
Item 1A.	Risk Factors	2330
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2330
Item 5	Other Information	2330
Item 6.	Exhibits	2531

	SIGNATURES	2632


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