UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10-Q/A~~10-Q

~~(Amendment No. 1)~~



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

For the quarterly period ended ~~August~~May 31, ~~2017~~2018



¨	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

~~Fort Worth, Texas~~
	~~76107~~
(Address of principal executive ~~offices)~~			~~(Zip Code)~~offices, including zip code)

(817) 810-0095

(Registrant’s telephone number, including area ~~code:~~code)

NONE

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

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 ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ý No ¨

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



Large accelerated filer	ý	Accelerated filer		¨	Non-accelerated filer	¨
~~Non-accelerated filer~~Smaller reporting company	¨	~~Smaller reporting~~Emerging growth 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 ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Title of each class:		Outstanding at ~~August~~May 31, ~~2017:~~2018:
Common Stock, $1.00 par value per share		~~25,961,323~~26,026,507

~~Explanatory Note~~

Amendment No. 1 on Form 10-Q/A (this “Form 10-Q/A") amends and restates certain items noted below in the Quarterly Report on Form 10-Q of AZZ Inc. (the “Company”) for the quarter ended August 31, 2017, as originally filed with the Securities and Exchange Commission on October 3, 2017 (the “Original Filing”). This Form 10-Q/A amends the Original Filing to reflect the correction of an error in the previously reported financial statements related to the Company’s revenue recognition practices within its Energy segment. See Note 2 to the Condensed Consolidated Financial Statements included in Item 1 for additional information and a reconciliation of the previously reported amounts to the restated amounts.

For the convenience of the reader, this form 10-Q/A sets forth the Original Filing, as amended, in its entirety; however, this Form 10-Q/A amends and restates only the following financial statements and disclosures that were impacted from the correction of the error:

~~Part I, Item 1 - Financial Statements~~

~~Part I, Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

~~Part I, Item 4 - Controls and Procedures~~

~~Part II, Item 6 - Exhibits~~

~~Signatures~~

This Form 10-Q/A also amends Part II, Item 1 - Legal Proceedings to reflect updated legal matters. In addition, the Company’s Chief Executive Officer and Chief Financial Officer have provided new certifications dated as of the date of this filing in connection with this Form 10-Q/A (Exhibits 31.1, 31.2, 32.1 and 32.2), and the Company has provided its revised audited consolidated financial statements formatted in Extensible Business Reporting Language (XBRL) in Exhibit 101.

Except as described above, no other changes have been made to the Original Filing. This Form 10-Q/A speaks as of the date of the Original Filing and does not reflect events that may have occurred after the date of the Original Filing, or modify or update any disclosures that may have been affected by subsequent events.

The Company is also concurrently filing an amended Annual Report for the fiscal year ended February 28, 2017 and an amended Quarterly Report for the quarterly period ended May 31, 2017 to restate the previously issued annual and interim financial statements due to the accounting error described above.

AZZ ~~Inc.~~INC.

INDEX



		PAGE NO.

	~~Explanatory Note~~	2

PART I.	FINANCIAL INFORMATION
Item 1.	Financial ~~Statements.~~Statements (Unaudited)
	~~Condensed Financial Statements~~
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of ~~Comprehensive Income~~Cash Flows	6
	~~Consolidated Statements of Cash Flows~~	7
	Condensed Consolidated Statement of Shareholders’ Equity	87
	Notes to Condensed Consolidated Financial Statements	98
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	1816
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	2322
Item 4.	Controls and Procedures.	2322

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings.	2523
Item 1A.	Risk Factors.	2523
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	2523
Item 3.	Defaults Upon Senior Securities.	2523
Item 4.	Mine Safety Disclosures.	2523
Item 5.	Other Information.	2523
Item 6.	Exhibits.	2624

	SIGNATURES	2725

	~~EXHIBIT INDEX~~	28

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AZZ INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)


	August 31, 2017			February 28, 2017
	(Restated)						May 31, 2018			February 28, 2018
Assets
Current assets:
Cash and cash equivalents	$	3,549		$	11,302		$	13,938		$	20,853
Accounts receivable (net of allowance for doubtful accounts of $391 as of August 31, 2017 and $347 as of February 28, 2017)	138,544			138,470
Accounts receivable (net of allowance for doubtful accounts of $2,320 as of May 31, 2018 and $569 as of February 28, 2018)							169,239			141,488
Inventories:
Raw material	89,138			80,169			102,105			98,475
Work-in-process	12,574			6,832			2,159			2,544
Finished goods	6,741			7,006			8,010			9,742
Costs and estimated earnings in excess of billings on uncompleted contracts	65,818			50,262
Deferred income taxes	—			249
Contract assets							69,717			51,787
Prepaid expenses and other	6,824			2,762			10,202			4,265
Total current assets	323,188			297,052			375,370			329,154
Deferred income taxes	215			—
Property, plant and equipment, net	230,314			228,610			214,341			216,855
Goodwill	310,032			306,579			323,965			321,307
Intangibles and other assets, net	145,833			146,113			156,508			160,893
	$	1,009,582		$	978,354
Total assets							$	1,070,184		$	1,028,209
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	43,698		$	49,816		$	59,232		$	54,162
Income tax payable	1,357			778			1,981			144
Accrued salaries and wages	14,188			23,429			18,609			19,011
Other accrued liabilities	21,590			24,042			23,959			19,622
Customer deposits	1,606			1,459			1,281			1,816
Billings in excess of costs and estimated earnings on uncompleted contracts	21,687			20,617
Contract liabilities							21,838			22,698
Debt due within one year	14,286			16,629			—			14,286
Total current liabilities	118,412			136,770			126,900			131,739
Debt due after one year, net	287,522			254,800			322,146			286,609
Other long-term liabilities							11,180			11,696
Deferred income taxes	54,559			53,648			33,558			32,962
Total liabilities	460,493			445,218			493,784			463,006
Commitments and contingencies
Shareholders’ equity:
Common stock, $1 par, shares authorized 100,000; 25,961 shares issued and outstanding at August 31, 2017 and 25,964 shares issued and outstanding at February 28, 2017	25,961			25,964
Common stock, $1 par, shares authorized 100,000; 26,027 shares issued and outstanding at May 31, 2018 and 25,959 shares issued and outstanding at February 28, 2018							26,027			25,959
Capital in excess of par value	36,391			37,739			40,545			38,446
Retained earnings	511,530			498,527			537,318			526,018
Accumulated other comprehensive loss	(24,793		)	(29,094		)	(27,490		)	(25,220		)
Total shareholders’ equity	549,089			533,136			576,400			565,203
	$	1,009,582		$	978,354
Total liabilities and shareholders' equity							$	1,070,184		$	1,028,209

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

AZZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

Three Months Ended August 31, Six Months Ended August 31,
2017 2016 2017 2016
(Restated) (Restated) (Restated) (Restated)
Net sales $ 196,329
$ 200,790
$ 401,612
$ 451,156
Cost of sales 152,529
158,686
310,430
343,924
Gross margin 43,800
42,104
91,182
107,232

Selling, general and administrative 26,413
26,997
53,772
55,816
Operating income 17,387
15,107
37,410
51,416

Interest expense 3,400
3,580
6,760
7,505
Net loss on sale of property, plant and equipment and insurance proceeds 654
192
554
82
Other income - net (394 ) (68 ) (479 ) (190 )
Income before income taxes 13,727
11,403
30,575
44,019
Income tax expense 3,941
1,244
8,727
11,671
Net income $ 9,786
$ 10,159
$ 21,848
$ 32,348
Earnings per common share
Basic earnings per share $ 0.38
$ 0.39
$ 0.84
$ 1.25
Diluted earnings per share $ 0.38
$ 0.39
$ 0.84
$ 1.24

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

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(In thousands)~~

~~(Unaudited)~~

Three Months Ended August 31, Six Months Ended August 31,
2017 2016 2017 2016
(Restated) (Restated) (Restated) (Restated)
Net income $ 9,786
$ 10,159
$ 21,848
$ 32,348
Other comprehensive income (loss):
Foreign currency translation adjustments
Unrealized translation gains 5,326
205
4,328
2,683
Interest rate swap, net of income tax of $7, $7, $15, and $15, respectively. (14 ) (14 ) (27 ) (27 )
Other comprehensive income 5,312
191
4,301
2,656
Comprehensive income $ 15,098
$ 10,350
$ 26,149
$ 35,004

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

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(In thousands)~~

~~(Unaudited)~~

Six Months Ended August 31,
2017 2016
(Restated) (Restated)
Cash Flows From Operating Activities:
Net income $ 21,848
$ 32,348
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts 47
11
Amortization and depreciation 24,984
25,370
Deferred income taxes 850
2,266
Net loss on disposition of property, plant & equipment due to realignment —
6,706
Net loss on sale of property, plant & equipment and insurance proceeds 554
82
Amortization of deferred borrowing costs 303
639
Share-based compensation expense 3,400
3,198
Effects of changes in assets & liabilities:
Accounts receivable 939
(3,247 )
Inventories (13,304 ) (3,267 )
Prepaid expenses and other (4,021 ) (3,040 )
Other assets (1,106 ) 141
Net change in billings related to costs and estimated earnings on uncompleted contracts (14,197 ) (1,874 )
Accounts payable (6,770 ) 1,656
Other accrued liabilities and income taxes payable (10,742 ) (10,961 )
Net cash provided by operating activities 2,785
50,028
Cash Flows From Investing Activities:
Proceeds from sale or insurance settlement of property, plant, and equipment 177
320
Purchase of property, plant and equipment (16,636 ) (19,760 )
Acquisition of subsidiaries, net of cash acquired (10,250 ) (22,679 )
Net cash used in investing activities (26,709 ) (42,119 )
Cash Flows From Financing Activities:
Proceeds from revolving loan 209,000
86,000
Payments on revolving loan (115,500 ) (92,000 )
Payments on long term debt (63,504 ) (18,505 )
Purchases of treasury shares (5,185 ) —
Payments of dividends (8,845 ) (7,787 )
Net cash provided by (used in) financing activities 15,966
(32,292 )
Effect of exchange rate changes on cash 205
106
Net decrease in cash & cash equivalents (7,753 ) (24,277 )
Cash & cash equivalents at beginning of period 11,302
40,191
Cash & cash equivalents at end of period $ 3,549
$ 15,914
Supplemental disclosures
Cash paid for interest $ 7,020
$ 7,230
Cash paid for income taxes $ 7,605
$ 9,764

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

~~CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY~~

~~(In thousands)~~

~~(Unaudited)~~

Common Stock
Capital in
Excess of
Par Value

Retained
Earnings

(Restated)

Accumulated
Other
Comprehensive
Income (Loss)

Total

(Restated)

Shares Amount
Balance at February 28, 2017 25,964
$ 25,964
$ 37,739
$ 498,527
$ (29,094 ) $ 533,136
Stock compensation 16
16
3,384
—
—
3,400
Restricted stock units 42
42
(1,240 ) —
—
(1,198 )
Stock issued for SARs 1
1
(1 ) —
—
—
Employee stock purchase plan 35
35
1,597
—
—
1,632
Retirement of treasury shares (97 ) (97 ) (5,088 ) —
—
(5,185 )
Cash dividends paid —
—
—
(8,845 ) —
(8,845 )
Net income, as restated —
—
—
21,848
—
21,848
Foreign currency translation —
—
—
—
4,328
4,328
Interest rate swap, net of $15 income tax —
—
—
—
(27 ) (27 )
Balance at August 31, 2017, as restated 25,961
$ 25,961
$ 36,391
$ 511,530
$ (24,793 ) $ 549,089



	Three Months Ended May 31,
	2018			2017

Net sales	$	262,236		$	205,283
Cost of sales	203,531			157,901
Gross margin	58,705			47,382

Selling, general and administrative	35,009			27,359
Operating income	23,696			20,023

Interest expense	3,838			3,360
Other income, net	(291		)	(185		)
Income before income taxes	20,149			16,848
Income tax expense	4,431			4,786
Net income	$	15,718		$	12,062
Earnings per common share
Basic earnings per share	$	0.60		$	0.46
Diluted earnings per share	$	0.60		$	0.46

Cash dividends declared per common share	$	0.17		$	0.17

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

AZZ ~~Inc.~~INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)



	Three Months Ended May 31,
	2018			2017

Net income	$	15,718		$	12,062
Other comprehensive income (loss):
Foreign currency translation adjustments, net of income tax of $0	(2,256		)	(997		)
Interest rate swap, net of income tax of $7 and $7, respectively.	(14		)	(14		)
Other comprehensive loss	(2,270		)	(1,011		)
Comprehensive income	$	13,448		$	11,051

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

AZZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Three Months Ended May 31,
	2018			2017

Cash Flows From Operating Activities
Net income	$	15,718		$	12,062
Adjustments to reconcile net income to net cash used in operating activities:
Provision for doubtful accounts	1,815			63
Amortization and depreciation	13,071			12,423
Deferred income taxes	639			261
Net loss (gain) on sale of property, plant and equipment	212			(100		)
Amortization of deferred borrowing costs	138			154
Share-based compensation expense	1,358			1,194
Effects of changes in assets and liabilities:
Accounts receivable	(29,577		)	(14,114		)
Inventories	(1,362		)	(6,976		)
Prepaid expenses and other	(5,927		)	(5,619		)
Other assets	(1,148		)	(1,019		)
Net change in contract assets and liabilities	(20,438		)	(4,940		)
Accounts payable	5,576			(2,405		)
Other accrued liabilities and income taxes payable	7,559			(6,788		)
Net cash used in operating activities	(12,366		)	(15,804		)
Cash Flows From Investing Activities
Proceeds from sale of property, plant and equipment	—			171
Purchase of property, plant and equipment	(2,847		)	(10,141		)
Acquisition of subsidiaries, net of cash acquired	(8,000		)	—
Net cash used in investing activities	(10,847		)	(9,970		)
Cash Flows From Financing Activities
Proceeds from revolving loan	102,500			128,000
Payments on revolving loan	(67,000		)	(36,500		)
Payments on long term debt	(14,286		)	(63,504		)
Purchases of treasury shares	—			(2,683		)
Payments of dividends	(4,418		)	(4,423		)
Net cash provided by financing activities	16,796			20,890
Effect of exchange rate changes on cash	(498		)	(81		)
Net decrease in cash and cash equivalents	(6,915		)	(4,965		)
Cash and cash equivalents at beginning of period	20,853			11,302
Cash and cash equivalents at end of period	$	13,938		$	6,337

Supplemental disclosures
Cash paid for interest	$	2,465		$	2,286
Cash paid for income taxes	$	670		$	7,097

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

AZZ INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)



				Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
	Common Stock
	Shares	Amount
Balance at February 28, 2018	25,959	$	25,959	$	38,446		$	526,018		$	(25,220	)	$	565,203
Share-based compensation	—	—		1,358			—			—			1,358
Restricted stock units	30	30		(549		)	—			—			(519		)
Stock issued for SARs	1	1		—			—			—			1
Employee stock purchase plan	37	37		1,290			—			—			1,327
Retirement of treasury shares	—	—		—			—			—			—
Cash dividends paid	—	—		—			(4,418		)	—			(4,418		)
Net income	—	—		—			15,718			—			15,718
Foreign currency translation	—	—		—			—			(2,256		)	(2,256		)
Interest rate swap	—	—		—			—			(14		)	(14		)
Balance at May 31, 2018	26,027	$	26,027	$	40,545		$	537,318		$	(27,490	)	$	576,400

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

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~~state of Texas. We are a global provider of ~~galvanizing~~metal coating services, welding solutions, specialty electrical equipment and highly engineered services to the power generation, transmission, distribution, refining and industrial markets. We have two distinct operating segments: the Energy Segment and Metal Coatings Segment. ~~AZZ Metal Coatings is a leading provider of metal finishing solutions for corrosion protection, including hot dip galvanizing to the North American steel fabrication industry.~~ AZZ Energy is dedicated to delivering safe and reliable transmission of power from generation sources to end customers, and automated weld overlay solutions for corrosion and erosion mitigation to critical infrastructure in the energy markets worldwide.

As AZZ Metal Coatings is a leading provider of ~~March 1, 2017, our Galvanizing Segment was rebranded~~metal finishing solutions for corrosion protection, including hot dip galvanizing to the Metal Coatings Segment to more closely align the description of the segment with its current offerings and served markets. There have been no changes to the underlying information reported under this operating segment for prior periods, however, the new description will be included in the operating results for future filings and include the new powder coating offerings for the current and future periods.

North American steel fabrication industry.

Presentation

The accompanying condensed consolidated balance sheet as of February 28, ~~2017,~~2018, which was derived from audited ~~restated~~ 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, ~~2017,~~2018, included in the Company’s Annual Report on Form ~~10-K/A~~10-K covering such period.

Our 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 ended February 28, ~~2018~~2019 is referred to as fiscal ~~2018.~~2019.

In the opinion of management, the accompanying unaudited 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 ~~August~~May 31, ~~2017~~,2018, the results of its operations for the three ~~and six~~ months ended ~~August~~May 31, ~~2017~~2018 and ~~2016,~~2017, and cash flows for the ~~six~~three months ended ~~August~~May 31, ~~2017~~2018 and ~~2016.~~2017. These interim results are not necessarily indicative of results for a full year.

Accounting Standards Recently Adopted

On March 1, 2018, the Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) and the related amendments ("ASC 606") using the modified retrospective method applied to those contracts which were not completed as of February 28, 2018. Results for operating periods beginning on or after March 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with the accounting standards in effect for those periods. However, for the three months ended May 31, 2018, the impact of applying ASC 606 as opposed to applying legacy accounting guidance did not result in a significant change to reported revenues or costs of revenues. Accordingly, no reconciliation has been provided to show the difference between applying ASC 606 and legacy guidance for the three months ended May 31, 2018. In ~~November 2015,~~addition, there was no cumulative effect adjustment to the beginning retained earnings on March 1, 2018 related to the adoption. See Note 2 for a description of the Company's accounting policy resulting from the adoption of ASC 606.

On March 1, 2018, the Company adopted ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. The adoption did not have a material impact on the Company's consolidated statements of cash flows.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued ~~Accounting Standards Update ("ASU") 2015-17, “Income Taxes~~ASU 2016-02, Leases (Topic ~~740): Balance Sheet Classification~~842). Under the new guidance, a lessee will be required to recognize assets and liabilities for all leases with lease terms of ~~Deferred Taxes.” ASU 2015-17 simplifies~~more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of ~~deferred taxes in~~expenses and cash flows arising from a ~~classified statement of financial position and was adopted~~lease by a lessee primarily will depend on its classification as finance or operating lease. This ASU will be effective for the Company ~~on March 1, 2017. As a result~~in the first quarter of ~~the~~its fiscal year 2020 and early adoption ~~the Company~~ is required to offset deferred tax liabilities and assets, as well as any related valuation allowance, and present as a single non-current amount. However, the Company shall not offset deferred tax liabilities and assets attributable to different tax-paying components of the entity or to different tax jurisdictions. The adoption was on a prospective basis and therefore had no impact on prior year.

~~New Accounting Pronouncements~~

In February 2016, the FASB issued ASU 2016-02, "Leases." The standard requires a lessee to recognize a liability to make lease payments and a right-of-use asset representing a right to use the underlying asset for the lease term on the balance sheet.permitted. The ASU ~~is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with~~requires adoption based upon a modified retrospective transition approach. The Company has not yet determined whether it will elect early adoption ~~permitted. We are~~and is currently evaluating the impact ~~that~~of the adoption of this standard ~~will have~~ on ~~our~~its consolidated financial ~~statements.~~statements and related disclosures.

~~In May 2014,~~


2.	Summary of Significant Accounting Policies

The Company’s significant accounting policies are detailed in Note 1 of its Annual Report on Form 10-K for the ~~FASB issued ASU 2014-09, "Revenue from Contracts with Customers", issued as a new Topic, Accounting Standards Codification (ASC) Topic 606 ("ASU 2014-09").~~year ended February 28, 2018. The ~~new~~following section includes revised accounting policies related to the adoption of ASC 606.

Revenue recognition

The Company determines revenue recognition ~~standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The premise~~through the following steps:

1)Identification of the ~~guidance~~contract with a customer,

2)Identification of the performance obligations in the contract,

3)Determination of the transaction price,

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

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

Revenue is ~~that a Company should recognize revenue to depict~~recognized when control of the ~~transfer of~~ promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration ~~to which the entity~~that it expects to be entitled to in exchange for those goods or services. ~~ASU 2014-09 can be adopted~~The amount and timing of revenue recognition varies by segment based on the nature of the goods or services provided and the terms and conditions of the customer contract.

Energy Segment

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

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

For services and custom built products, the Company recognizes revenues over time using a cost-to-cost input measure. This requires the Company to estimate the total contract revenues, costs and margin, which can involve significant management judgment. As a significant change in one or more of these estimates could affect the profitability of the Company’s contracts, management reviews and updates its contract related estimates regularly. The Company recognizes adjustments in estimated margin on contracts under a cumulative catch-up basis and subsequent revenues are recognized using the adjusted estimate. If the estimate of contract margin indicates an anticipated loss on the contract, the Company recognizes the total estimated loss in the period it is identified.

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

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

Metal Coatings Segment

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

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

Contract Assets and Liabilities

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

For the three months ended May 31, 2018, the Company recognized $17.3 million of revenues from amounts that were included in contract liabilities at February 28, 2018. The Company did not record any revenues for the three months ended May 31, 2018 related to performance obligations satisfied in prior periods. The Company expects to recognize revenues of approximately $19.2 million, $0.5 million and $2.1 million in fiscal 2019, 2020 and 2021, respectively, related to the $21.8 million balance of contract liabilities as of May 31, 2018.

The increases or decreases in accounts receivable, contract assets and contract liabilities during the three months ended May 31, 2018 were due primarily to normal timing differences between the Company’s performance and customer payments. The Lectrus acquisition described in Note 8 had no impact on contract assets or liabilities as of the date of ~~adoption. This ASU~~acquisition.

Other

No general rights of return exist for customers and the Company establishes provisions for estimated warranties. The Company generally does not sell extended warranties. Revenue is ~~effective~~recognized net of applicable sales and other taxes. The Company does not adjust the contract price for ~~public entities~~the effects of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a good or service to a customer and when the customer pays for ~~reporting periods beginning after December 15, 2017. This standard~~that good or service will be ~~effective for~~one year or less, which is generally the Company beginning in fiscal 2019. The Company is planning on adopting this standard retrospectively. We believe this standard will impact the timing of revenue recognition for contracts which contain multiple performance obligations with revenuecase. Sales commissions are deferred and recognized over ~~time, however~~ the ~~overall impact to~~same period as the ~~prior year financial results~~related revenues. Shipping and handling is ~~still under review.~~


2.	~~Restatement of Previously Issued Financial Statements~~

As previously disclosed, the Company determined that for certain contracts within its Energy Segment for which revenue was historically recognized upon contract completion and transfer of title, the Company instead should have applied the percentage-of-completion method in accordance with the FASB’s Accounting Standards Codification No. 605-35, ~~Construction-Type and Production-Type Contracts. In general, the percentage-of-completion method results in a revenue recognition pattern over time~~treated as a ~~project progresses~~fulfillment obligation instead of a separate performance obligation and such costs are expensed as ~~opposed to deferring revenues until contract completion.~~incurred.

~~The Company concluded that~~Disaggregated Revenue

Revenue by segment and geography is disclosed in Note 5. In addition, the ~~impact of applying the percentage-of-completion method to its~~following table presents disaggregated revenue contracts was materially different from its previously reported results under its historical practice. As a result, the Company is restating its condensed consolidated financial statements for the periods impacted. The following financial tables reconcile the previously reported amounts to the restated amounts for each condensed consolidated financial statement.

~~The table below sets forth the condensed consolidated balance sheet, including the balances originally reported, corrections and the as restated balances for each restated period~~by customer industry (in thousands):

August 31, 2017

As
Reported
Correction
As
Restated
Assets
Inventories - net $ 144,008
$ (35,555 ) $ 108,453
Costs and estimated earnings in excess of billings on uncompleted contracts 32,082
33,736
65,818
Total current assets 325,007
(1,819 ) 323,188
Total assets $ 1,011,401
$ (1,819 ) $ 1,009,582
Liabilities and Shareholders’ Equity
Other accrued liabilities $ 20,085
$ 1,505
$ 21,590
Customer deposits 25,951
(24,345 ) 1,606
Billings in excess of costs and estimated earnings on uncompleted contracts 6,708
14,979
21,687
Total current liabilities 126,273
(7,861 ) 118,412
Deferred income tax liabilities 52,293
2,266
54,559
Total liabilities 466,088
(5,595 ) 460,493
Shareholders’ equity:
Retained earnings 507,754
3,776
511,530
Total shareholders’ equity 545,313
3,776
549,089
Total liabilities and shareholders' equity $ 1,011,401
$ (1,819 ) $ 1,009,582



	Three Months Ended May 31,
	2018		2017

Net sales:
Industrial - oil and gas, construction, and general	$	141,607	$	117,011
Transmission and distribution	78,671		45,162
Power generation	41,958		43,110
Total net sales	$	262,236	$	205,283

The table below sets forth the condensed consolidated statements of income, including the balances originally reported, corrections and the as restated balances for each restated period (in thousands, except per share data):

Three Months Ended August 31,
2017 2016

As
Reported
Correction
As
Restated

As
Reported
Correction
As
Restated
Net Sales $ 190,407
$ 5,922
$ 196,329
$ 195,045
$ 5,745
$ 200,790
Cost of Sales 148,938
3,591
152,529
153,159
5,527
158,686
Gross Profit 41,469
2,331
43,800
41,886
218
42,104

Operating Income 15,056
2,331
17,387
14,889
218
15,107

Income Before Income Taxes 11,396
2,331
13,727
11,185
218
11,403
Income Tax Expense 3,067
874
3,941
1,162
82
1,244
Net Income $ 8,329
$ 1,457
$ 9,786
$ 10,023
$ 136
$ 10,159
Earnings Per Common Share
Basic Earnings Per Share $ 0.32
$ 0.06
$ 0.38
$ 0.39
$ —
$ 0.39
Diluted Earnings Per Share $ 0.32
$ 0.06
$ 0.38
$ 0.38
$ 0.01
$ 0.39

Six Months Ended August 31,
2017 2016

As
Reported
Correction
As
Restated

As
Reported
Correction
As
Restated
Net Sales $ 398,958
$ 2,654
$ 401,612
$ 437,712
$ 13,444
$ 451,156
Cost of Sales 308,223
2,207
310,430
332,499
11,425
343,924
Gross Profit 90,735
447
91,182
105,213
2,019
107,232

Operating Income 36,963
447
37,410
49,397
2,019
51,416

Income Before Income Taxes 30,128
447
30,575
42,000
2,019
44,019
Income Tax Expense 8,559
168
8,727
10,914
757
11,671
Net Income $ 21,569
$ 279
$ 21,848
$ 31,086
$ 1,262
$ 32,348
Earnings Per Common Share
Basic Earnings Per Share $ 0.83
$ 0.01
$ 0.84
$ 1.20
$ 0.05
$ 1.25
Diluted Earnings Per Share $ 0.83
$ 0.01
$ 0.84
$ 1.19
$ 0.05
$ 1.24

The table below sets forth the condensed consolidated statements of comprehensive income, including the balances originally reported, corrections and the as restated balances for each restated period (in thousands):

Three Months Ended August 31,
2017 2016

As
Reported
Correction
As
Restated

As
Reported
Correction
As
Restated
Net Income $ 8,329
$ 1,457
$ 9,786
$ 10,023
$ 136
$ 10,159
Comprehensive Income 13,641
1,457
15,098
10,214
136
10,350

Six Months Ended August 31,
2017 2016

As
Reported
Correction
As
Restated

As
Reported
Correction
As
Restated
Net Income $ 21,569
$ 279
$ 21,848
$ 31,086
$ 1,262
$ 32,348
Comprehensive Income 25,870
279
26,149
33,742
1,262
35,004

The table below sets forth the condensed consolidated statements of cash flows from operating activities, including the balances originally reported, corrections and the as restated balances for each restated period (in thousands):

Six Months Ended August 31,
2017 2016

As
Reported
Correction
As
Restated

As
Reported
Correction
As
Restated
Cash flows from operating activities:
Net income $ 21,569
$ 279
$ 21,848
$ 31,086
$ 1,262
$ 32,348
Deferred income taxes 682
168
850
1,509
757
2,266
Inventories (19,658 ) 6,354
(13,304 ) (15,832 ) 12,565
(3,267 )
Net change in billings related to costs and estimated earnings on uncompleted contracts (16,487 ) 2,290
(14,197 ) 8,028
(9,902 ) (1,874 )
Other accrued liabilities and income taxes payable (1,651 ) (9,091 ) (10,742 ) (6,279 ) (4,682 ) (10,961 )
Net cash provided by operating activities: $ 2,785
$ —
$ 2,785
$ 50,028
$ —
$ 50,028

~~The restatement had no impact on cash flows from investing activities or financing activities.~~

The table below sets forth the condensed consolidated statement of shareholders' equity, including the balances originally reported, corrections and the as restated balances for each restated period (in thousands):

Retained
Earnings
Total Stockholders' Equity
Balance at August 31, 2017, as reported $ 507,754
$ 545,313
Correction 3,776
3,776
Balance at August 31, 2017, as restated $ 511,530
$ 549,089

~~In addition to the restated consolidated financial statements, the information contained in Notes 3 and 5 has been restated.~~


3.	Earnings Per Share

Earnings per share is based on the weighted average number of shares outstanding during each period, adjusted for the dilutive effect of stock awards.

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


	Three Months Ended August 31,				Six Months Ended August 31,
	2017		2016		2017		2016		Three Months Ended May 31,
	(Restated)		(Restated)		(Restated)		(Restated)		2018		2017
Numerator:
Net income for basic and diluted earnings per common share	$	9,786	$	10,159	$	21,848	$	32,348	$	15,718	$	12,062
Denominator:
Denominator for basic earnings per common share–weighted average shares	25,970		25,987		25,991		25,950		25,984		26,012
Effect of dilutive securities:
Employee and director stock awards	66		132		74		131		50		81
Denominator for diluted earnings per common share	26,036		26,119		26,065		26,081		26,034		26,093
Earnings per share basic and diluted:
Basic earnings per common share	$	0.38	$	0.39	$	0.84	$	1.25	$	0.60	$	0.46
Diluted earnings per common share	$	0.38	$	0.39	$	0.84	$	1.24	$	0.60	$	0.46


4.	Share-based Compensation

The Company has one share-based compensation plan, the 2014 Long Term Incentive Plan (the “Plan”). The purpose of the Plan is to promote the growth and prosperity of the Company by permitting the Company to grant to its employees, directors and advisors various types of restricted stock unit awards, performance share units, stock options, and stock appreciation rights to purchase common stock of the Company. The maximum number of shares that may be issued under the Plan is 1,500,000 shares. As of ~~August~~May 31, ~~2017,~~2018, the Company has approximately ~~1,305,632~~1,264,299 shares available for future issuance under the Plan.

Restricted Stock Unit Awards

Restricted stock unit awards are valued at the market price of our common stock on the grant date. Awards issued prior to fiscal 2015 generally have a three year cliff vesting schedule and awards issued subsequent to fiscal 2015 generally vest ratably over a period of three years but these awards may vest early in accordance with the Plan’s accelerated vesting provisions.

The activity of our non-vested restricted stock unit awards for the ~~six month period~~three months ended~~August~~ May 31, ~~2017~~2018 is as follows:


	Restricted Stock Units		Weighted Average Grant Date Fair Value		Restricted Stock Units		Weighted Average Grant Date Fair Value
Non-Vested Balance as of February 28, 2017	134,547		$	51.10
Non-vested balance as of February 28, 2018					109,777		$	56.62
Granted	45,613		60.00		82,371		42.00
Vested	(61,361	)	47.09		(36,730	)	54.64
Forfeited	(4,021	)	55.50		(5,228	)	57.19
Non-Vested Balance as of August 31, 2017	114,778		$	56.63
Non-vested balance as of May 31, 2018					150,190		$	49.07

Performance Share Unit Awards

Performance share unit awards are valued at the market price of our common stock on the grant date. These awards have a three year performance cycle and will vest and become payable, if at all, on the third anniversary of the award date. The awards are subject to the Company’s degree of achievement of a target annual average adjusted return on assets during these ~~three year~~three-year periods. In addition, a multiplier may be applied to the total awards granted which is based on the Company’s total shareholder return during such ~~three year~~three-year period in comparison to a defined specific industry peer group as set forth in the plan.The activity of our non-vested performance share unit awards for the ~~six month period~~three months ended ~~August~~May 31, ~~2017~~2018 is as follows:


	Performance Stock Units		Weighted Average Grant Date Fair Value		Performance Stock Units		Weighted Average Grant Date Fair Value
Non-Vested Balance as of February 28, 2017	51,426		$	51.70
Non-vested balance as of February 28, 2018					70,030		$	54.59
Granted	25,634		60.20		46,183		42.00
Vested	—		—		(3,378	)	46.65
Forfeited	(2,631	)	27.25		(27,109	)	49.28
Non-Vested Balance as of August 31, 2017	74,429		$	54.53
Non-vested balance as of May 31, 2018					85,726		$	49.80

Stock Appreciation Rights

Stock appreciation rights are granted with an exercise price equal to the market value of our common stock on the date of grant. These awards generally have a contractual term of 7 years and vest ratably over a period of three years although some may vest immediately on issuance. These awards are valued using the Black-Scholes ~~option pricing~~option-pricing model.

A summary of the Company’s stock appreciation rights activity for the ~~six month period~~three months ended~~August~~ May 31, ~~2017~~2018 is as follows:


	SAR’s		Weighted Average Exercise Price		SARs		Weighted Average Exercise Price
Outstanding as of February 28, 2017	170,139		$	42.02
Outstanding as of February 28, 2018					148,513		$	43.29
Granted	—		—		—		—
Exercised	(4,479	)	42.54		(4,078	)	44.42
Forfeited	(2,145	)	45.36		—		—
Outstanding as of August 31, 2017	163,515		$	41.96
Exercisable as of August 31, 2017	153,515		$	41.75
Outstanding as of May 31, 2018					144,435		$	43.26
Exercisable as of May 31, 2018					144,435		$	43.26

The average remaining contractual term for those stock appreciation rights outstanding at ~~August~~May 31, ~~2017~~2018 is ~~3.02~~2.43 years, with an aggregate intrinsic value of ~~$1.1 million~~.$0.2 million. The average remaining contractual terms for those stock appreciation rights that are exercisable as of ~~August~~May 31, ~~2017~~2018 is ~~3.01~~2.43 years, with an aggregate intrinsic value of ~~$1.1 million~~.$0.2 million.

Employee Stock Purchase Plan

The Company also has an employee stock purchase plan, which allows employees of the Company to purchase common stock of the Company through accumulated payroll deductions. Offerings under this plan have a duration of 24 months (the "offering period"). On the first day of an offering period (the “enrollment date”) the participant is granted the option to purchase shares on each exercise date at the lower of 85% of the market value of a share of our common stock on the enrollment date or the exercise date. The participant’s right to purchase common stock under the plan is restricted to no more than ~~$25,000~~$25,000 per calendar year and the participant may not purchase more than 5,000 shares during any offering period. Participants may terminate their interest in a given offering or a given exercise period by withdrawing all of their accumulated payroll deductions at any time prior to the end of the offering period. The fair value of the estimated number of shares to be issued under each offering is determined using the Black-Scholes ~~option pricing~~option-pricing model. For the ~~six month period~~three months ended~~August~~ May 31, ~~2017~~,2018, the Company issued ~~35,447~~37,224 shares under the Employee Stock Purchase Plan.

Share-based Compensation Expense

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

Six months ended August 31, 2017 2016
Compensation Expense $ 3,400
$ 3,198
Income tax benefits $ 1,088
$ 1,023



	Three Months Ended May 31,
	2018		2017
Compensation expense	$	1,358	$	1,194
Income tax benefits	$	306	$	382

Unrecognized compensation cost related to restricted stock units, performance share unit awards, stock appreciation rights, and the employee stock purchase plan at ~~August~~May 31, ~~2017~~2018 totals ~~$8.6 million~~.$10.4 million.

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


5.	Segments

Segment Information

~~Information regarding operations~~Net sales and ~~assets~~operating income by segment ~~was~~for each period were as follows (in thousands):


	Three Months Ended August 31,						Six Months Ended August 31,						Three Months Ended May 31,
	2017			2016			2017			2016			2018			2017
	(Restated)			(Restated)			(Restated)			(Restated)
Net Sales:
Net sales:
Energy	$	97,299		$	103,346		$	210,504		$	249,147		$	146,986		$	113,206
Metal Coatings	99,030			97,444			191,108			202,009			115,250			92,077
Total net sales	196,329			200,790			401,612			451,156			262,236			205,283

Operating Income:
Operating income (loss):
Energy	2,363			8,413			9,074			28,967			$	9,958		$	6,711
Metal Coatings	23,409			15,032			44,651			39,334			25,184			21,242
Corporate	(8,385		)	(8,338		)	(16,315		)	(16,885		)	(11,446		)	(7,930		)
Total operating income	17,387			15,107			37,410			51,416			$	23,696		$	20,023

Interest expense	3,400			3,580			6,760			7,505
Net loss on sale of property, plant and equipment and insurance proceeds	654			192			554			82
Other income, net	(394		)	(68		)	(479		)	(190		)
Income before income taxes	$	13,727		$	11,403		$	30,575		$	44,019

	As of
	August 31, 2017			February 28, 2017
	(Restated)
Total Assets:
Energy	$	549,216		$	536,557
Metal Coatings	449,228			428,330
Corporate	11,138			13,467
	$	1,009,582		$	978,354

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



	May 31, 2018		February 28, 2018
Total assets:
Energy	$	597,143	$	554,866
Metal Coatings	459,708		460,575
Corporate	13,333		12,768
Total	$	1,070,184	$	1,028,209

Financial Information About Geographical Areas

~~Below is a breakdown of selected financial information~~The following table presents revenue by ~~geographical area~~geographic region for each period (in thousands):

Three Months Ended August 31, Six Months Ended August 31,
2017 2016 2017 2016
(Restated) (Restated) (Restated) (Restated)
Net Sales:
U.S. $ 162,594
$ 146,783
$ 329,323
$ 308,881
International 33,839
54,163
72,393
142,970
Eliminations (104 ) (156 ) (104 ) (695 )
Total Net Sales $ 196,329
$ 200,790
$ 401,612
$ 451,156



	Three Months Ended May 31,
	2018		2017

Net sales:
United States	$	213,606	$	166,730
International	48,630		38,553
Total	$	262,236	$	205,283

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

August 31, 2017 February 28, 2017
Property, Plant and Equipment, Net:

U.S. $ 206,298
$ 205,079
Canada 18,169
18,002
Other Countries 5,847
5,529
Total Property, Plant and Equipment, Net $ 230,314
$ 228,610



	May 31, 2018		February 28, 2018
Property, plant and equipment, net:
United States	$	192,748	$	194,418
Canada	17,574		18,254
Other countries	4,019		4,183
Total	$	214,341	$	216,855


6.	Warranty Reserves

A reserve has been established to provide for the estimated future cost of warranties on a portion of the Company’s delivered products and is classified within other accrued liabilities on the consolidated balance sheet. Management periodically reviews the reserves and makes adjustments accordingly. Warranties cover such factors as non-conformance to specifications and defects in material and workmanship. The following table shows changes in the warranty reserves since the end of fiscal ~~2017~~2018 (in thousands):


	Warranty Reserve			Warranty Reserve
Balance at February 28, 2017	$	2,098
Balance at February 28, 2018				$	2,013
Warranty costs incurred	(993		)	(577		)
Additions charged to income	695			675
Balance at August 31, 2017	$	1,800
Balance at May 31, 2018				$	2,111


7.	Debt

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

As of
August 31, 2017 February 28, 2017
Senior Notes, due in balloon payment in January 2021 $ 125,000
$ 125,000
Senior Notes, due in annual installments of $14,286 beginning in March 2012 through March 2018 14,286
28,571
Term Note, due in quarterly installments beginning in June 2013 through March 2018 —
49,219
Revolving line of credit with bank 163,000
69,500
Total debt 302,286
272,290
Unamortized debt issuance costs for Senior Notes and Term Note (478 ) (861 )
Total debt, net 301,808
271,429
Less amount due within one year (14,286 ) (16,629 )
Debt due after one year, net $ 287,522
$ 254,800



	May 31, 2018			February 28, 2018
2011 Senior Notes	$	125,000		$	125,000
2008 Senior Notes	—			14,286
2017 Revolving Credit Facility	197,500			162,000
Total debt	322,500			301,286
Unamortized debt issuance costs for Senior Notes	(354		)	(391		)
Total debt, net	322,146			300,895
Less amount due within one year	—			(14,286		)
Debt due after one year, net	$	322,146		$	286,609

On March ~~21, 2017, we executed~~31, 2018, the ~~Amended and Restated Credit Agreement (the “2017 Credit Agreement”) with Bank~~Company made the final principal payment of ~~America and other lenders. The 2017 Credit Agreement amended~~$14.3 million to fully settle the Credit Agreement entered into on March 27, 2013 by the following: (i) extending the maturity date until March 21, 2022, (ii) providing for a senior revolving credit facility in a principal amount of up to $450 million, with an additional $150 million accordion, (iii) including a $75 million sublimit for the issuance of standby and commercial letters of credit, (iv) including a $30 million sublimit for swing line loans, (v) restricting indebtedness incurred in respect of capital leases, synthetic lease obligations and purchase money obligations not to exceed $20 million, (vi) restricting investments in any foreign subsidiaries not to exceed $50 million in the aggregate, and (vii) including various financial covenants and certain restricted payments relating to dividends and share repurchases as specifically set forth in the 2017 Credit Agreement. The balance due2008 Senior Notes on the $75.0 million term facility under the previous Credit Agreement was paid in full as a result of the execution of the 2017 Credit Agreement. The financial covenants, as defined in the 2017 Credit Agreement, require us to maintain on a consolidated basis a Leverage Ratio not to exceed 3.25:1.0 and an Interest Coverage Ratio of at least 3.00:1.0. The 2017 Credit Agreement will be used to finance working capital needs, capital improvements, dividends, future acquisitions, letter of credit needs and share repurchases.

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

scheduled maturity date.


8.	Acquisitions

On March 22, 2018, the Company purchased certain assets through a bankruptcy sales process from Lectrus Corporation, a privately-held corporation based in Chattanooga, Tennessee. Lectrus designs and manufactures custom metal enclosures and provides electrical and mechanical integration. The acquisition will complement AZZ's current metal enclosure and switchgear businesses.

~~On June 30, 2017, we completed the~~This acquisition was not significant. Accordingly, disclosures of the ~~assets~~purchase price allocation and unaudited pro forma results of Enhanced Powder Coating Ltd., (“EPC”), a privately held, high specification, National Aerospace and Defense Contractors Accreditation Program, ("NADCAP"), certified provider of powder coating, plating and anodizing services based in Gainesville, Texas. EPC, founded in 2003, offers a full spectrum of finish technology including powder coating, abrasive blasting and plating for heavy industrial, transportation, aerospace and light commercial industries. The acquisition of EPC is consistent with our strategic initiative to grow our Metal Coatings segment with products and services that complement our industry-leading galvanizing business.operations have not been provided.


9.	~~Subsequent Events~~

On September 6, 2017, we completed the acquisition of all the assets and outsanding shares of Powergrid Solutions, Inc. ("PSI"), a privately held company, based in Oshkosh, Wisconsin. PSI designs, engineers and manufactures customized low and medium-voltage power quality, power generation and distribution equipment. PSI’s product portfolio includes metal-enclosed, metal-clad and padmount switchgear, serving the utility, commercial, industrial and renewable energy markets since 1982. The acquisition of PSI is a key addition to our electrical switchgear portfolio. The addition of PSI’s low-voltage and padmount switchgear allows AZZ to offer a comprehensive portfolio of customized switchgear solutions to both existing and new customers in a diverse set of industries.

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

FORWARD LOOKING STATEMENTS

Certain statements herein about our expectations of future events or results constitute forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” 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 on Form ~~10-Q/A~~10-Q may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand and response to products and services offered by AZZ, including demand by the power generation markets, electrical transmission and distribution markets, the industrial markets, and the hot dip galvanizing markets; prices and raw material cost, including zinc and natural gas which are used in the hot dip galvanizing process; changes in the political stability and economic conditions of the various markets that AZZ serves, foreign and domestic, customer requested delays of shipments, acquisition opportunities, currency exchange rates, adequacy of financing, and availability of experienced management and employees to implement AZZ’s continued growth strategy; a downturn in market conditions in any industry relating to the products we inventory or sell or the services that we provide; the continuing economic volatility in the U.S. and other markets in which we operate; acts of war or terrorism inside the United States or abroad; natural disasters in the countries in which we operate; 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/A~~10-K for the fiscal year ended February 28, ~~2017~~2018 and other filings with the SEC, available for viewing on AZZ’s website at www.azz.com and on the SEC’s website at www.sec.gov.

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

The following discussion should be read in conjunction with management’s discussion and analysis contained in our Annual Report on Form ~~10-K/A~~10-K for the fiscal year ended February 28, ~~2017,~~2018, and with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form ~~10-Q/A.~~10-Q.

~~Restatement~~Adoption of ~~Previously Issued Financial Statements~~Revenue Recognition Standard

~~As previously disclosed,~~On March 1, 2018, we ~~determined that~~adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) and the related amendments ("ASC 606") using the modified retrospective method applied to those contracts which were not completed as of February 28, 2018. Results for ~~certain contracts within our Energy Segment for which revenue was historically recognized upon contract completion~~operating periods beginning on or after March 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted and ~~transfer of title, we instead should have applied the percentage-of-completion method~~continue to be reported in accordance with the ~~FASB’s Accounting Standards Codification No. 605-35,~~ ~~Construction-Type and Production-Type Contracts. In general,~~accounting standards in effect for those periods. However, for the ~~percentage-of-completion method results in a revenue recognition pattern over time as a project progresses as opposed to deferring revenues until contract completion.~~

~~We concluded that~~three months ended May 31, 2018, the impact of applying ASC 606 as opposed to applying legacy accounting guidance did not result in a significant change to reported revenues or costs of revenues. Accordingly, no reconciliation has been provided to show the percentage-of-completion method to our revenue contracts was materially different from its previously reported results under our historical practice. As a result, we are restating our consolidated financial statementsdifference between applying ASC 606 and legacy guidance for the ~~periods impacted.~~three months ended May 31, 2018. In addition, there was no cumulative effect adjustment to the beginning retained earnings on March 1, 2018 related to the adoption. See Note 2 to the ~~Condensed Consolidated Financial Statements within Item 1~~condensed consolidated financial statements included herein for ~~additional information and~~ a ~~reconciliation~~description of our accounting policy resulting from the ~~previously reported amounts to the restated amounts.~~adoption of ASC 606.

RESULTS OF OPERATIONS

We have two distinct operating segments, the Energy Segment and the Metal Coatings Segment, as defined in our Annual Report on Form ~~10-K/A~~10-K for the fiscal year ended February 28, ~~2017~~.2018. Management believes that the most meaningful analysis of our results of operations is to analyze our performance by segment. We use revenue and operating income by segment to evaluate our segments. Segment operating income consists of net 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, ~~before income taxes,~~ see Note 5 to our quarterly consolidated financial statements included in this Quarterly Report on Form ~~10-Q/A.~~

10-Q.

Orders and Backlog

Our entire backlog relates to our Energy Segment and was ~~$300.1~~$329.7 million as of ~~August~~May 31, ~~2017, a decrease~~2018, an increase of ~~$17.8~~$64.3 million, or ~~5.6%~~24.2%, as compared to ~~$317.9~~$265.4 million as of February 28, ~~2017~~.2018. Our backlog ~~decreased $15.4~~increased $23.3 million, or ~~4.9%~~7.6%, as compared to the same period in the prior fiscal year. Both of these ~~decreases~~increases were primarily the result of ~~a softer market in~~several large international orders and higher overall activity within the ~~first half of fiscal 2018.~~Energy Segment. For the three months ended ~~August~~May 31, ~~2017,~~2018, our ~~book-to-bill~~book-to-ship ratio increased to ~~0.97~~1.22 to 1 from ~~0.96~~0.94 to 1 when compared to same period of fiscal ~~2017~~2018 and our incoming net orders ~~decreased~~increased by ~~$3.7~~$126.8 million, or ~~1.9%~~65.4%.

The table below includes the progression of the ~~backlog:~~

~~Backlog Table~~

~~(in~~backlog (in thousands)~~(unaudited)~~

~~(Restated)~~:


	Period Ended			Period Ended			Period Ended				Period Ended
Backlog	2/28/2017	$	317,922	02/29/2016	$	310,623	2/28/2018	$	265,417		02/28/17	$	317,922
Bookings		193,754			250,479
Acquired Backlog		—			11,903
Net bookings								320,531				193,754
Acquired backlog								6,006				—
Shipments		205,283			250,366			(262,236		)		(205,283		)
Backlog	5/31/2017	306,393		5/31/2016	322,639		5/31/2018	329,718			5/31/2017	306,393
Book to Ship Ratio		0.94			1.00
Bookings		190,055			193,712
Shipments		196,329			200,790
Backlog	8/31/2017	300,119		8/31/2016	315,561
Book to Ship Ratio		0.97			0.96
Book to ship ratio								1.22				0.94

Segment Revenues

For the three ~~and six~~ months ended ~~August~~May 31, ~~2017,~~2018, consolidated revenues ~~decreased $4.5~~increased $57.0 million, or ~~2.2%~~27.7%, ~~and $49.5 million, or 11.0%~~ as compared to the same period in fiscal ~~2017.~~2018.

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


	Three Months Ended August 31,				Six Months Ended August 31,				Three Months Ended May 31,
	2017		2016		2017		2016		2018		2017
	(Restated)		(Restated)		(Restated)		(Restated)
	(In thousands)(unaudited)
Revenue:
Net sales:
Energy	$	97,299	$	103,346	$	210,504	$	249,147	$	146,986	$	113,206
Metal Coatings	99,030		97,444		191,108		202,009		115,250		92,077
Total Revenue	$	196,329	$	200,790	$	401,612	$	451,156
Total net sales									$	262,236	$	205,283

Revenues for the Energy Segment ~~decreased 5.9%~~increased 29.8% for the three months ended ~~August~~May 31, ~~2017,~~2018, to ~~$97.3~~$147.0 million as compared to the same period in fiscal ~~2017.~~2018. The ~~decrease~~increase in revenue ~~during the second quarter~~ was caused by several positive factors including ~~reduced~~increased turnarounds in the U.S. refinery market, increased international projects and an uptick in our electrical business. The increase was also attributable to incremental revenues from our acquisitions completed during the past twelve months and was partially offset by continued softness in the ~~petrochemical market, and delays in the release of several large projects in the U.S. and overseas.~~ nuclear market.

Revenues ~~decreased 15.5%~~ for the ~~six~~Metal Coatings Segment increased 25.2% for the three months ended ~~August~~May 31, ~~2017,~~2018, to ~~$210.5~~$115.3 million as compared to the same period in fiscal ~~2017,~~2018. The increase was a result of higher selling prices and higher volumes in steel processed during the period driven primarily onby improvements in various markets. The increase was also attributable to incremental revenues from our acquisitions completed during the ~~turnaround softness in~~past twelve months.

Segment Operating Income

The following table reflects the ~~first half~~breakdown of ~~the year and the effects of the nuclear market from the Westinghouse bankruptcy filed on March 29, 2017.~~operating income by segment (in thousands):

~~Revenues~~



	Three Months Ended May 31,
	2018			2017

Operating income (loss):
Energy	$	9,958		$	6,711
Metal Coatings	25,184			21,242
Corporate	(11,446		)	(7,930		)
Total operating income	$	23,696		$	20,023

Operating income for the ~~Metal Coatings~~Energy Segment increased ~~1.6%~~by $3.2 million, or 48.4%, to $10.0 million for the three months ended ~~August~~May 31, ~~2017, to $99.0 million~~2018 as compared to the same period in fiscal 2017. The increase was a result of slightly higher volumes in steel processed during the period. Revenues decreased 5.4% for the six months ended August 31, 2017, to $191.1 million as compared to the same period in fiscal 2017. The decline in revenue was a result of a volume decrease in steel processed caused by softness in the solar, petrochemical, and the oil and gas markets.

~~Segment~~2018. Operating ~~Income~~

~~Operating income for the Energy Segment decreased by $6.1 million, or 71.9%, to $2.4 million~~margins were 6.8% for the three months ended ~~August~~May 31, ~~2017~~2018 as compared to 5.9% for the ~~same period in fiscal 2017. This decrease is~~prior year comparable period. These increases were primarily attributable to the ~~reduction~~positive factors noted above and improvements in refinery turnarounds described above, which typically carry a higher margin, coupled with generally lower margin projects in the balance of the segment. Operating income decreased $19.9 million, or 68.7%, to $9.1 million for the six months ended August 31, 2017 as compared to the same period in fiscal 2017. This decrease is attributable to the same impact of the market as discussed for the quarterly comparison.project margins.

Operating income for the Metal Coatings Segment increased by ~~$8.4~~$3.9 million, or ~~55.7%~~18.6%, for the three months ended ~~August~~May 31, ~~2017~~2018 as compared to the same period in fiscal ~~2017 that included $7.3 million in realignment charges. Excluding the realignment charges, the remainder of the increase was attributable to higher volumes in the second quarter of fiscal~~ 2018. Operating ~~income increased by $5.3 million, or 13.5%,~~margins were 21.9% for the ~~six~~three months ended ~~August~~May 31, ~~2017~~2018 as compared to 23.1% for the ~~same period of fiscal 2017. Excluding the impact of the realignment charges taken~~prior year comparable period. The increase in ~~the second quarter of fiscal 2017, the decrease is~~operating income was primarily attributable to ~~lower~~the higher volumes and selling prices noted above, while the decline in ~~the first half~~operating margins was a result of ~~fiscal 2018.~~

increased zinc costs.

Corporate Expenses

Corporate expenses ~~were relatively flat~~increased by $3.5 million or 44.3% to $11.4 million for the three months ended ~~August~~May 31, ~~2017~~2018 as compared to the ~~same period in fiscal 2017. Corporate expenses decreased $0.6 million, or 3.4%, for the six months ended August 31, 2017 as compared to the same period in fiscal 2017. This decrease~~prior year comparable period. The increase is primarily attributable to ~~lower~~increased employee ~~performance based incentive~~ compensation, ~~costs in fiscal 2018.~~

outside professional services and general corporate marketing activities.

Interest Expense

Interest expense for the three ~~and six month periods~~months ended ~~August~~May 31, ~~2017~~2018 was $3.8 million as compared to $3.4 million ~~and $6.8 million, respectively. Interest expense~~ for the three ~~and six month periods~~months ended ~~August~~May 31, ~~2016 was $3.6 million and $7.5 million, respectively.~~2017. The ~~decrease~~increase in interest expense in comparison to the same respective ~~periods~~period in the prior year was the result of a ~~lower~~higher average outstanding debt balance. As of ~~August~~May 31, ~~2017,~~2018, our gross outstanding debt was ~~$302.3~~$322.5 million, compared to ~~$302.5~~$300.3 million outstanding as of ~~August~~May 31, ~~2016.~~2017. Our gross debt to equity ratio was ~~0.55~~0.56 to 1 as of ~~August~~May 31, ~~2017,~~2018, compared to ~~0.59~~0.56 to 1 as of ~~August~~May 31, ~~2016.~~

~~Net Loss On Sale of Property, Plant and Equipment and Insurance Proceeds~~

For the three and six months ended August 31, 2017 , the amounts recorded were primarily driven from the realized loss from a property sale. For the three and six months ended August 31, 2016, the amounts recorded were insignificant.

~~Other Income, Net~~

~~For the three and six months ended August 31, 2017 and 2016, the amounts recorded to other income were insignificant and primarily attributable to foreign exchange transactions and royalty income.~~2017.

Income Taxes

The provision for income taxes reflects an effective tax rate of ~~28.7% and 28.5%~~22.0% for the three ~~and six~~ months ended ~~August~~May 31, ~~2017, respectively,~~2018, as compared to ~~10.9% and 26.5%~~28.4% for the ~~same respective periods~~comparable period in fiscal ~~2017.~~2018. The ~~increase~~decrease in the effective rate ~~for the three month period ended August 31, 2017~~ is primarily attributable to the ~~early adoption~~Tax Cuts and Jobs Act of ASU 2016-09 and state tax benefits from realignment costs incurred during the second quarter of fiscal 2017 and overall timing of stock compensation awards. The increase in the rate for the six month period ended August 31, 2017 is attributable to the early adoption of ASU 2016-09 in fiscal 2017 and overall timing of stock compensation awards during the second quarter of fiscal 2017.

Westinghouse Electric Company Bankruptcy Case

~~The Calvert Company, Inc. and Nuclear Logistics LLC, have~~We had existing contracts with subsidiaries of Westinghouse Electric Company (“WEC”). WEC and the relevant subsidiaries (the "Debtors") filed relief under Chapter ~~11of~~11 of the Bankruptcy Code on March 29, 2017 in the United States Bankruptcy Court for the Southern District of New York, jointly administered as In re Westinghouse Electric Company, et al., Case No. 17-10751 (the "Bankruptcy Case"). To date, WEC has continued to operate under a Debtor-in-Possession Financing Facility and ~~our subsidiaries~~we continue to honor their executory contracts. ~~Work continues on the Vogtle project, however, work has been halted by ownership at VC Summer.~~ The Company has been collecting on post-petition amounts due and owed. On February 22, 2018, the United States Bankruptcy Court for the Southern District of New York approved the Debtors’ Modified First Amended Disclosure Statement for the Joint Chapter 11 Plan of Reorganization. In the Disclosure Statement, the Debtors estimated a 98.9% to 100% distribution on Allowed General Unsecured Claims. We have approximately $12 million of such claims filed with the court, which includes 100% of our pre-petition claims. The ~~Company estimates it had approximately $7.2 million mostly in pre-petition exposure with WEC to~~total claims filed exceed the ~~Company’s two subsidiaries as~~book value of ~~March 29, 2017.~~our exposure.

LIQUIDITY AND CAPITAL RESOURCES

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

For the ~~six month period~~three months ended ~~August~~May 31, ~~2017,~~2018, net cash ~~provided by~~used in operating activities was ~~$2.8~~$12.4 million, net cash used in investing activities was ~~$26.7~~$10.8 million, net cash provided by financing activities was ~~$16.0~~$16.8 million, and ~~an increase~~a decrease of ~~$0.2~~$0.5 million from the net effect of exchange rate changes on cash resulting in a net decrease in cash and cash equivalents of ~~$7.8~~$6.9 million. In comparison to the comparable period in fiscal ~~2017,~~2018, the results in the statement of cash flows for operating activities for the ~~six~~three months ended ~~August~~May 31, ~~2017,~~2018, are primarily attributable to ~~a decrease~~the increase in net income, ~~and a~~partially offset by less favorable ~~impact~~impacts of changes in working capital. The Company's use of cash for investing activities was ~~lower~~slightly higher due to ~~reduced~~increased spending for acquisitions year over year, ~~and~~partially offset by lower capital expenditures. Cash provided by financing activities was ~~higher~~lower during the ~~six~~three months ended ~~August~~May 31, ~~2017~~2018 due primarily to ~~increased~~decreased net ~~borrowings, which was partially offset by purchases of treasury shares.~~borrowings.

Our working capital was ~~$204.8~~$248.5 million as of ~~August~~May 31, ~~2017~~,2018, as compared to ~~$166.2~~$197.4 million at ~~August 31, 2016~~February 28, 2018.

2017 Term Note and Revolving Credit Facility

On March 21, 2017, we executed the Amended and Restated Credit Agreement (the “2017 Credit Agreement”) with Bank of America and other lenders. The 2017 Credit Agreement amended the Credit Agreement entered into on March 27, 2013 by the following: (i) extending the maturity date until March 21, 2022, (ii) providing for a senior revolving credit facility in a principal amount of up to $450 million, with an additional $150 million accordion, (iii) including a $75 million sublimit for the issuance of standby and commercial letters of credit, (iv) including a $30 million sublimit for swing line loans, (v) restricting indebtedness incurred in respect of capital leases, synthetic lease obligations and purchase money obligations not to exceed $20 million, (vi) restricting investments in any foreign subsidiaries not to exceed $50 million in the aggregate, and (vii) including various financial covenants and certain restricted payments relating to dividends and share repurchases as specifically set forth in the 2017 Credit Agreement. The financial covenants, as defined in the 2017 Credit Agreement, require us to maintain on a consolidated basis a Leverage Ratio not to exceed 3.25:1.0 and an Interest Coverage Ratio of at least 3.00:1.0. The 2017 Credit Agreement will be used to finance working capital needs, capital improvements, dividends, future acquisitions, letter of credit needs and share repurchases.

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

As of ~~August~~May 31, ~~2017,~~2018, we had ~~$163.0~~$197.5 million of outstanding debt against the revolving credit facility provided and letters of credit outstanding in the amount of ~~$23.2~~$23.1 million, which left approximately ~~$263.8~~$229.4 million of additional credit available under the 2017 Credit Agreement.

2011 Senior Notes

On ~~March 31, 2008,~~January 21, 2011, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) pursuant to which the Company issued $100.0 million aggregate principal amount of its 6.24% unsecured Senior Notes (the “2008 Notes”) due March 31, 2018 through a private placement (the “2008 Note Offering”). Pursuant to the Note Purchase Agreement, the Company’s payment obligations with respect to the 2008 Notes may be accelerated upon any Event of Default, as defined in the Note Purchase Agreement.

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

The ~~2008 Notes and the~~ 2011 Notes ~~each~~ provide for various financial covenants requiring us, among other things, to a) maintain on a consolidated basis net worth (as defined in the Note Purchase Agreement) equal to at least the sum of $116.9 million plus 50.0% of future net income; b) maintain a ratio of indebtedness to EBITDA (as defined in Note Purchase Agreement) not to exceed 3.25:1.00; c) maintain on a consolidated basis a Fixed Charge Coverage Ratio (as defined in the Note Purchase Agreement) of at least 2.0:1.0; d) not at any time permit the aggregate amount of all Priority Indebtedness (as defined in the Note Purchase Agreement) to exceed 10.0% of Consolidated Net Worth.

2008 Senior Notes

On March 31, 2008, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) pursuant to which the Company issued $100.0 million aggregate principal amount of its 6.24% unsecured Senior Notes (the “2008 Notes”) due March 31, 2018 through a private placement (the “2008 Note Offering”). On March 31, 2018, the Company made the final principal payment of $14.3 million to fully settle the 2008 Senior Notes on the scheduled maturity date.

As of ~~August~~May 31, ~~2017,~~2018, the Company iswas in compliance with all of its debt covenants.

Historically, we have not experienced a significant impact on our operations from increases in general inflation other than for specific commodities. We have exposure to commodity price increases in both segments of our business, primarily copper, aluminum, steel and nickel based alloys in the Energy Segment and zinc and natural gas in the Metal Coatings Segment. We attempt to minimize these increases through escalation clauses in customer contracts for copper, aluminum, steel and nickel based alloys, when market conditions allow and through fixed cost contract purchases on zinc. In addition to these measures, we attempt to recover other cost increases through improvements to our manufacturing process, supply chain management, and through increases in prices where competitively feasible.

OFF BALANCE SHEET TRANSACTIONS AND RELATED MATTERS

Other than operating leases discussed below, there are 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 financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources of the Company.

CONTRACTUAL COMMITMENTS

Leases

We lease various facilities under non-cancelable operating leases with an initial term in excess of one year.

Commodity pricing

The Company manages its exposure to commodity prices through the use of the following:

In the Energy Segment, we have exposure to commodity pricing for copper, aluminum, steel, tungsten and nickel based alloys. Because the Energy Segment does not commit contractually to minimum volumes, increases in price for these items are normally managed through escalation clauses in customer contracts, although during difficult market conditions these escalation clauses may not be obtainable. In addition, we attempt to enter into firm pricing contracts with our vendors on material at the time we receive orders from our customers to minimize risk.

In the Metal Coatings Segment, we utilize contracts with our zinc suppliers that include protective caps and fixed cost contracts to guard against rising zinc prices. We also secure firm pricing for natural gas supplies with individual utilities when possible. Management believes these agreements ensure adequate supplies and partially offset exposure to commodity price swings.

We have no contracted commitments for any commodities including steel, aluminum, natural gas, nickel based alloys, copper, zinc or any other commodity, except for those entered into under the normal course of business.

Other

As of ~~August~~May 31, ~~2017,~~2018, we had outstanding letters of credit in the amount of ~~$23.2 million.~~$32.1 million, with $23.1 million issued under the 2017 Credit Agreement and $9.0 million issued by HSBC Bank (China). 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.

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


	Operating Leases		Long-Term Debt		Interest		Total		Operating Leases		Long-Term Debt		Interest		Total
Fiscal:	(In thousands)
2018	$	3,501	$	—	$	6,392	$	9,893
2019	6,627		14,286		12,339		33,252		$	6,606	$	—	$	12,427	$	19,033
2020	5,502		—		11,893		17,395		6,997		—		14,278		21,275
2021	4,804		125,000		11,893		141,697		5,808		125,000		14,278		145,086
2022	4,699		—		5,118		9,817		5,599		—		7,504		13,103
2023									5,392		197,500		721		203,613
Thereafter	21,828		163,000		525		185,353		26,248		—		—		26,248
Total	$	46,961	$	302,286	$	48,160	$	397,407	$	56,650	$	322,500	$	49,208	$	428,358

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

During the three months ended May 31, 2018, with the exception of the adoption of ASC 606, 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 and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended February 28, 2018. See Note 2 to the condensed consolidated financial statements included herein for our updated critical accounting policy and estimates related to revenue recognition upon the adoption of ASC 606.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1, The Company and Basis of Presentation, in Part I, Item 1. Financial Statements, of this Quarterly Report on Form 10-Q, for a full description of recent accounting pronouncements, including the actual and expected dates of adoption and estimated effects on our consolidated results of operations and financial condition, which is incorporated herein by reference.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk affecting our operations results primarily from changes in interest rates and commodity prices. We have only limited involvement with derivative financial instruments and are not a party to any leveraged derivatives.

In the Energy Segment, we have exposure to commodity pricing for copper, aluminum, steel, tungsten and nickel based alloys. Increases in price for these items are normally managed through escalation clauses in our customers' contracts, although during difficult market conditions customers' may resist these escalation clauses. In addition, we attempt to enter into firm pricing contracts with our vendors on material at the time we receive orders from our customers to minimize risk. We manage our exposures to commodity prices, primarily zinc used in our Metal Coatings Segment, by utilizing agreements with zinc suppliers that include protective caps and fixed contracts to guard against escalating commodity prices. We also secure firm pricing for natural gas supplies with individual utilities when possible. We believe these agreements ensure adequate supplies and partially offset exposure to commodity price escalation.

~~As of August 31, 2017, the~~The Company ~~had~~has exposure to foreign currency exchange rates related to our operations in Canada, China, Brazil, Poland, and the Netherlands.

We do not believe that a hypothetical change of 10% of the interest rates or currency exchange rates that are currently in effect or a change of 10% of commodity prices would have a significant adverse effect on our results of operations, financial position, or cash flows as long as we are able to pass along the increases in commodity prices to our customers. However, there can be no assurance that either interest rates, exchange rates or commodity prices will not change in excess of the 10% hypothetical amount or that we would be able to pass along rising costs of commodity prices to our customers, and such hypothetical change could have an adverse effect on our results of operations, financial position, and cash flows.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

~~Subsequent to~~As previously disclosed, after filing ~~the Company’s quarterly report on~~our Form 10-Q for the ~~period~~quarter ended August 31, 2017, an error was discovered related to the Company’s historical revenue recognition policies and procedures. In particular, the Company determined that for certain contracts within its Energy Segment for which revenue was historically recognized upon contract completion and transfer of title, the Company instead should have applied the percentage-of-completion method in accordance with the FASB’s Accounting Standards Codification No. 605-35, Construction-Type and Production-Type Contracts. This error resulted in a material misstatement of the financial statements and required restatement of the financial statements included in the Company’s Form 10-K for the fiscal year ended February 28, 2017 and in the Company’s Form 10-Q for the quarterly periods ended May 31, 2017 and August 31, 2017. This error, which was not detected timely by management, was the result of inadequate design of controls pertaining to the Company’s review and ongoing monitoring of its revenue recognition policies. The deficiency represents a material weakness in the Company’s internal control over financial reporting.

Management is actively engaged in the ~~planning for, and~~ implementation of remediation efforts to address the material weakness identified above. The remediation plan includes i) the implementation of new controls designed to evaluate the appropriateness of revenue recognition policies and procedures, ii) new controls over recording revenue transactions, and iii) additional training.

Management believes the measures described above and others that may be implemented will remediate the material weaknesses that we have identified. As management continues to evaluate and improve internal control over financial reporting, we may decide to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures identified.

Subject to these remediation efforts, ~~that were implemented after August 31, 2017,~~ there have been no significant changes in the Company's internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On January 11, 2018, Logan Mullins, acting on behalf of himself and a putative class of persons who purchased or otherwise acquired the Company's securities between April 22, 2015 and January 8, 2018, filed a class action complaint in the U.S. District Court for the Northern District of Texas against the Company and two of its executive officers, Thomas E. Ferguson and Paul W. Fehlman. Logan Mullins v. AZZ, Inc., et al., Case No. 4:18-cv-00025-Y. The complaint alleges, among other things, that the Company's SEC filings contained statements that were rendered materially false and misleading by the Company's alleged failure to properly recognize revenue related to certain contracts in its Energy Segment in purported violation of (1) Section 10(b) of the Exchange Act and Rule 10b-5 and (2) Section 20(a) of the Exchange Act. The plaintiffs seek an award of compensatory and punitive damages, interests, attorneys' fees and costs. The Company denies the allegations and believes it has strong defenses to vigorously contest them. The Company cannot predict the outcome of this action nor when it will be resolved. If the plaintiffs were to prevail in this matter, the Company could be liable for damages, which could potentially be material and could adversely affect its financial condition or results of operations.

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

Item 1A. Risk Factors

There have been no material changes in the risk factors disclosed under Part I, Item 1A of our Annual Report on Form ~~10-K/A~~10-K for the fiscal year ended February 28, ~~2017.~~2018.

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

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

The ~~following tab provides information with respect to purchases~~Company did not make any repurchases of its common ~~stock of the Company made~~shares during the three months ended ~~August~~May 31, ~~2017, by the Company or any "affiliated purchaser" as defined in Rule 10b-18(a)(3) under the Exchange act:~~

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

Jun 1, 2017 through Jun 30, 2017 —
$ —
—
1,152,800
Jul 1, 2017 through Jul 31, 2017 —
—
—
1,152,800
Aug 1, 2017 through Aug 31, 2017 50,000
50.04
50,000
1,102,800
Total 50,000
$ 50.04
50,000
1,102,800
2018.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

~~Exhibits Required by Item 601 of Regulation S-K.~~

~~A list of the exhibits required by Item 601 of Regulation S-K and filed as part of this report is set forth in the Index to Exhibits on page 28, which immediately precedes such exhibits.~~

~~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: April 19, 2018~~	~~By:~~	~~/s/ Paul W. Fehlman~~
		~~Paul W. Fehlman~~ ~~Senior Vice President,~~ ~~Chief Financial Officer~~

~~EXHIBIT INDEX~~



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

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

10.1		Note Purchase Agreement dated March 31, 2008,, by and among AZZ incorporated and the purchasers listed therein (incorporated by reference to Exhibit 10(1) of the Current Report on Form 8-K filed by the registrant on April 2, 2008).

10.2		AZZ incorporated Employee Stock Purchase Plan (incorporated by reference to Appendix B of the Proxy Statement for the 2008 Annual Shareholders Meeting).

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

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

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

10.6*		First Amendment to AZZ Inc. 2014 Long Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the registrant on January 21, 2016.

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

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

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

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

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

* Management contract, compensatory plan or ~~arrangement.~~arrangement

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 3, 2018	By:	/s/ Paul W. Fehlman
			Paul W. Fehlman Senior Vice President and Chief Financial Officer

2825



	Common Stock					Capital in Excess of Par Value			Retained Earnings (Restated)			Accumulated Other Comprehensive Income (Loss)			Total (Restated)

	Shares		Amount
Balance at February 28, 2017	25,964		$	25,964		$	37,739		$	498,527		$	(29,094	)	$	533,136
Stock compensation	16		16			3,384			—			—			3,400
Restricted stock units	42		42			(1,240		)	—			—			(1,198		)
Stock issued for SARs	1		1			(1		)	—			—			—
Employee stock purchase plan	35		35			1,597			—			—			1,632
Retirement of treasury shares	(97	)	(97		)	(5,088		)	—			—			(5,185		)
Cash dividends paid	—		—			—			(8,845		)	—			(8,845		)
Net income, as restated	—		—			—			21,848			—			21,848
Foreign currency translation	—		—			—			—			4,328			4,328
Interest rate swap, net of $15 income tax	—		—			—			—			(27		)	(27		)
Balance at August 31, 2017, as restated	25,961		$	25,961		$	36,391		$	511,530		$	(24,793	)	$	549,089



	August 31, 2017
	As Reported		Correction			As Restated
Assets
Inventories - net	$	144,008	$	(35,555	)	$	108,453
Costs and estimated earnings in excess of billings on uncompleted contracts	32,082		33,736			65,818
Total current assets	325,007		(1,819		)	323,188
Total assets	$	1,011,401	$	(1,819	)	$	1,009,582
Liabilities and Shareholders’ Equity
Other accrued liabilities	$	20,085	$	1,505		$	21,590
Customer deposits	25,951		(24,345		)	1,606
Billings in excess of costs and estimated earnings on uncompleted contracts	6,708		14,979			21,687
Total current liabilities	126,273		(7,861		)	118,412
Deferred income tax liabilities	52,293		2,266			54,559
Total liabilities	466,088		(5,595		)	460,493
Shareholders’ equity:
Retained earnings	507,754		3,776			511,530
Total shareholders’ equity	545,313		3,776			549,089
Total liabilities and shareholders' equity	$	1,011,401	$	(1,819	)	$	1,009,582



	Retained Earnings		Total Stockholders' Equity
Balance at August 31, 2017, as reported	$	507,754	$	545,313
Correction	3,776		3,776
Balance at August 31, 2017, as restated	$	511,530	$	549,089



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

Jun 1, 2017 through Jun 30, 2017	—	$	—	—	1,152,800
Jul 1, 2017 through Jul 31, 2017	—	—		—	1,152,800
Aug 1, 2017 through Aug 31, 2017	50,000	50.04		50,000	1,102,800
Total	50,000	$	50.04	50,000	1,102,800