Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion together with "Item 8. Financial Statements and Supplementary Data." This discussion contains forward-looking statements regarding our business and operations; see "Forward-Looking Statements" at the beginning of this Annual Report on Form 10-K. Our actual results may differ materially from those we currently anticipate as a result of the factors we describe under "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form 10-K.
A discussion regarding our financial condition and results of operations as well as our liquidity and capital resources for fiscal year 2025 compared to fiscal year 2024 can be found under "Item 7. Management's Discussion and Analysis" in our Annual Report on Form 10-K for the fiscal year ended February 28, 2025, filed with the SEC on April 21, 2025, which such discussion is hereby incorporated by reference.
Overview
We are a provider of hot-dip galvanizing and coil coating solutions to a broad range of end-markets in North America. We operate three distinct business segments, the AZZ Metal Coatings segment, the AZZ Precoat Metals segment, and the AZZ Infrastructure Solutions segment, which consists of the Company's 40% investment in the AVAIL JV joint venture. Our discussion and analysis of financial condition and results of operations is presented for each of our segments, along with corporate costs and other costs not specifically identifiable to a segment. References herein to fiscal years are to the twelve-month periods that end in February of the relevant calendar year. For example, the twelve-month period ended February 28, 2026 is referred to as "fiscal 2026," "fiscal year 2026", "current year" or "current period", and the twelve-month period ended February 28, 2025 is referred to as "fiscal 2025," "fiscal year 2025," "prior year" or "prior year period."
Business Operations Update
Our results for the year ended February 28, 2026 were favorably impacted primarily by the recognition of equity in earnings for the AVAIL JV, which included the gain from AVAIL's sale of the Electrical Products Group and the Welding Services Business, and by the growth in demand for our manufactured solutions in the electrical, construction and industrial end markets .
The equity in earnings from the AVAIL JV was the primary contributor to net income available to common shareholders of $317.3 million for the year ended February 28, 2026. Our operating results for fiscal 2026, including operating results by segment, are described in the summary on the following page, and detailed descriptions can be found below under “Results of Operations.”
Our operations generated $525.4 million of cash in fiscal 2026. The components of our liquidity and descriptions of our cash flows, capital investments, and other utilities, construction and matters impacting our liquidity and capital resources can be found below under "Liquidity and Capital Resources."
Outlook
While it is difficult to predict future North American economic activity and its impact on the demand for our galvanizing and coil coating solutions, as well the impact that political or regulatory developments may have on us, we have noted several factors below that have impacted or may impact our results of operations during the first quarter of fiscal 2027.
• Sales prices in our AZZ Metal Coatings segment are expected to remain consistent with current levels. Fluctuations in product mix, along with competitive market pressures, may impact selling price.
• Sales prices in our AZZ Precoat Metals segment are expected to increase on average from past levels, resulting from passing through higher pricing on specified materials along with increased overall selling prices, although fluctuations in mix may impact the average selling price.
• Demand in our AZZ Metal Coatings and AZZ Precoat Metals segments is expected to follow our typical seasonal patterns.
• Volumes for our AZZ Metal Coatings segment remain at normal seasonal levels, which should support the continued demand for our metal coatings solutions.
• Customer inventories for our AZZ Precoat Metals segment remain at normal seasonal levels, which should support the continued demand for our coil coating solutions.
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Results of Operations
Income before income tax for our operating segments and corporate operations for fiscal 2026 and 2025 was as follows (in thousands):
Year Ended February 28, 2026
Metal Coatings (1)
Precoat Metals
Infrastructure Solutions (2)
Corporate (3)(4)
Total
Sales
Cost of sales
Gross margin
Selling, general and administrative (5)
Operating income (loss)
Interest expense
Equity in earnings of unconsolidated subsidiaries (6)
Other income (expense)
Income (loss) before income tax
See notes on page 23 .
Year Ended February 28, 2025
Metal Coatings
Precoat Metals
Infrastructure Solutions (2)
Corporate (3)(4)
Total
Sales
Cost of sales
Gross margin
Selling, general and administrative (5)
Operating income (loss)
Interest expense
Equity in earnings of unconsolidated subsidiaries
Other income (expense)
Income (loss) before income tax
Fiscal year 2026 includes restructuring charges related to the closure of two surface technology facilities in our Metal Coatings segment of $3.8 million. See "Item 8. Financial Statements and Supplementary Data—Note 21."
Infrastructure Solutions segment includes the equity in earnings from our investment in the AVAIL JV, as well as other expenses related to receivables and liabilities that were retained following the sale of the AIS business. Fiscal year 2025 includes $6.5 million related to legal matters.
Interest expense and Income tax expense are included under the Corporate heading, as these items are not allocated to the segments.
Amortization expense for intangible assets are included in Corporate expenses in "Selling, general and administrative" expense as these expenses are not allocated to the segments. Fiscal year 2025 also includes an accrual related to a legal settlement and accrual related to a non-operating entity of $3.5 million, as well as retirement and other severance expenses of $3.7 million.
Fiscal year 2026 includes stock-based compensation expense recognized upon the adoption of the Executive Retiree LTI Program of $2.2 million, of which $0.4 million and $1.8 million are included in Metal Coatings and Corporate, respectively. Fiscal year 2025 includes an accrual related to a legal settlement and accrual related to a non-operating entity of $3.5 million, as well as retirement and other severance expenses of $3.7 million.
During the first quarter of fiscal 2026, AVAIL completed the sale of the Electrical Products Group ("EPG"). During the fourth quarter of fiscal 2026, AVAIL completed the sale of the majority of its Welding Services Business ("WSI"). Equity in earnings for the year ended February 28, 2026 includes $204.5 million, consisting of a net gain related to the sale of the EPG and WSI, partially offset by the recognition of an impairment loss on the AVAIL JV, a prior period adjustment for accounting errors within the Brazil operations of the AVAIL JV, and an adjustment related to a change in AVAIL's transfer pricing policy. For further information, see "Item 8. Financial Statements and Supplementary Data—Note 18."
For the fiscal year ended February 28, 2026, we recorded sales of $1.65 billion, compared to prior year's sales of $1.58 billion. Of total sales for fiscal 2026, 46.0% were generated from the AZZ Metal Coatings segment and 54.0% of sales were generated from the AZZ Precoat Metals segment. Net income for fiscal 2026 was $317.3 million, compared to $128.8 million
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for fiscal 2025. Net income as a percentage of sales was 19.2% for fiscal 2026 as compared to 8.2% for fiscal 2025. Diluted earnings per common share increased by 486.6%, to $10.50 per share for fiscal 2026, compared to $1.79 per share for fiscal 2025. The increase was primarily due to equity in earnings from the AVAIL JV and the redemption of the Series A Preferred Stock in the prior year. See "Liquidity and Capital Resources—AVAIL JV and —Series A Convertible Preferred Stock."
Sales
Sales for the AZZ Metal Coatings segment increased $93.6 million, or 14.1%, to $758.7 million, from the prior year's sales of $665.1 million. The increase in sales was primarily due to $110.4 million resulting from higher volume of steel processed, mainly due to increases in the construction, electrical, industrial, and transportation end markets, and an increase in other sales of $1.8 million. The increase was partially offset by a decrease in average selling price of $18.6 million due to product mix.
Sales for the AZZ Precoat Metals segment decreased $21.3 million, or 2.3%, to $891.4 million, from the prior year's sales of $912.6 million. The decrease in sales was primarily due to a lower volume of coil coated during fiscal 2026 , mainly due to decreases in construction and transportation end markets. The decrease was partially offset by an increase in average selling price due to vendor price increases that were passed through to the customer.
Operating Income
Operating income for the AZZ Metal Coatings segment increased $25.2 million, or 14.1%, for fiscal 2026, to $203.6 million, as compared to $178.5 million for the prior year. The increase is primarily due to net increase in sales as described above, offset by higher cost of sales and selling, general and administrative expenses. Cost of sales increased $66.8 million, primarily due to higher sales volumes and an increase in zinc, labor, and overhead costs. The increase in selling, general and administrative expense was primarily due to higher employee related costs.
Operating income for the AZZ Precoat Metals segment decreased $9.7 million, or 6.6%, for fiscal 2026, to $138.1 million, as compared to $147.8 million for the prior year. The decrease is primarily due to the decrease in sales as described above, partially offset by a decrease in cost of sales, primarily driven by lower cost of labor and materials (mainly due to lower volume). Selling, general and administrative expense decreased due to lower employee related costs and other indirect costs.
Operating loss for the AZZ Infrastructure solutions segment was $0.1 million compared to an operating loss of $6.7 million for the prior year, an improvement of $6.6 million for fiscal 2026. The operating loss was lower due to the prior year recognition of $1.2 million in litigation fees and the write-off of $5.2 million for a disputed receivable that was retained following the sale of the AIS business. For additional detail, see "Item 8. Financial Statements and Supplementary Data—Note 22."
Corporate Expenses
Corporate expenses decreased $6.2 million, to $77.0 million for fiscal 2026, compared to $83.2 million for fiscal 2025. The decrease is primarily due to decreases in salaries and wages, professional fees and legal expenses.
Interest Expense
Interest expense for fiscal 2026 decreased $25.6 million, to $55.7 million, as compared to $81.3 million in fiscal 2025. The decrease is primarily attributable to a decrease of $235.9 million in our weighted average debt outstanding and a decrease in the weighted average interest rate of 160 basis points. The decrease is offset by lower capitalized interest of $6.1 million in the current year associated with the new coil coating facility in Washington, Missouri, which became operational during the first quarter of fiscal 2026. See "Liquidity and Capital Resources—Greenfield Aluminum Coil Coating Facility" below for more information.
Equity in Earnings of Unconsolidated Entities
Equity in earnings of unconsolidated subsidiaries for the current period increased $193.6 million, to $209.7 million, compared to $16.2 million in the prior year period. The increase is due to a net gain from the sale of the Electrical Products Group and WSI, partially offset by an impairment loss recognized on the AVAIL JV in the second quarter of fiscal 2026, a prior period adjustment for accounting errors within the Brazil operations of the AVAIL JV, and lower earnings following the sale of the Electrical Products Group and WSI. See "Liquidity and Capital Resources—AVAIL JV" below for more information about the AVAIL JV.
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Other (Income) Expense, Net
Other income, net was $1.6 million for fiscal 2026, compared to other expense, net of $0.6 million for fiscal 2025. The increase in income is primarily due to foreign currency gains primarily attributed to our operations in Canada, and increased interest income in the current year.
Income Taxes
The effective tax rate was flat at 24.5% for fiscal 2026 compared to fiscal 2025. In the current year, the effective tax rate was negatively impacted by an increase in state tax expense from our investment in the AVAIL JV, partially offset by higher R&D tax credits related to the construction of the new aluminum coil coating facility in Washington, Missouri. In the prior year, the effective tax rate was negatively impacted by non-deductible items such as compensation limited by IRC Sec. 162(m), meals and entertainment subject to the 50% limitation under IRC Sec. 274(n) and higher state tax expense, net of federal benefit.
Liquidity and Capital Resources
We have historically met our cash needs through a combination of cash flows from operating activities along with bank and bond market debt. Our cash requirements generally include working capital needs, capital improvements, quarterly cash dividends, acquisitions and other general corporate purposes. Based on our current financial condition and current operations, 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.
As of February 28, 2026, our total liquidity of $358.8 million, consisted of $358.1 million of available capacity under our Revolving Credit Facility and Receivables Securitization Facility, and cash and cash equivalents of $0.7 million.
Cash Flows
The following table summarizes our cash flows by category for the periods presented (in thousands):
Year Ended February 28,
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Net cash provided by operating activities for fiscal 2026 increased by $275.5 million, compared to fiscal 2025, primarily due to:
• an increase in cash distributions from the AVAIL JV of $260.7 million, following AVAIL's sale of its EPG and WSI businesses,
• an increase in net income of $188.4 million, primarily due to an increase in equity in earnings from the AVAIL JV,
• an increase in cash flows from deferred income taxes of $24.9 million, primarily due to cash tax savings from the enactment of the One Big Beautiful Bill Act on July 4, 2025, as well as an increase in book over tax basis related to goodwill and the deductibility of interest expense that had previously been capitalized for tax purposes,
• an increase in cash flows from long-term assets and liabilities of $7.1 million, primarily due to increases in long-term lease liabilities, partially offset by a decrease in pension liability, and
• an increase in non-cash expenses of $4.5 million, primarily due to additional depreciation expense, partly due to the new aluminum coil coating facility in Washington, Missouri and restructuring charges related to two locations in our AZZ Metal Coatings segment, partially offset by a decrease in bad debt expense, due to a write-off of a receivable in the prior year related to the AZZ Infrastructure Solutions segment, and a gain on the sale of property, plant and equipment in the current year, partially offset by
• an increase in non-cash equity in earnings from the AVAIL JV of $193.6 million, primarily due to equity in earnings related to the AVAIL JV's sale of its EPG and WSI businesses, and
• a decrease in cash from working capital of $16.5 million, related to decreases in accounts payable and accrued expenses, coupled with increases in accounts receivable, inventories and other receivables, partially offset by decreases in contract assets.
Cash flows used in investing activities for fiscal 2026 decreased by $23.5 million, compared to fiscal 2025, primarily due to:
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• a decrease of $35.1 million in the purchase of property, plant and equipment, primarily due to costs in the prior year associated with the new aluminum coil coating facility in Washington, Missouri, which became operational during fiscal 2026,
• an increase of $4.9 million in proceeds from the sale of property plant and equipment,
• an increase of $13.6 million in proceeds from return of investment from the AVAIL JV, partially offset by
• an increase of $30.1 million in cash used to acquire a facility in Canton, Ohio, in our Metal Coatings segment.
Cash flows used in financing activities for fiscal 2026 increased by $295.4 million, compared to fiscal 2025, primarily due to:
• an increase in net payments on long term debt and finance leases liabilities of $426.7 million,
• an increase in share repurchases of $20.0 million, due to the shares repurchased under the 2020 Authorization in the current year, and
• a decrease in proceeds from issuance of common stock of $307.9 million, due to the April 2024 Secondary Public Offering in the prior year, partially offset by
• a decrease in cash used for redemption of preferred stock of $308.9 million, due to the redemption of the Series A Preferred Stock in the prior year, and
• an increase in proceeds from our accounts receivables securitization facility of $150.0 million.
Net cash provided by operating activities for fiscal 2025 increased by $5.4 million, compared to fiscal 2024, primarily due to:
• an increase in net income of $27.2 million,
• an increase in non-cash expenses of $11.6 million, primarily due to additional depreciation expense, coupled with an increase in bad debt expense, due to a write-off of a receivable related to the AZZ Infrastructure Solutions segment, and an increase in stock-based compensation expense,
• an increase in cash distributions from the AVAIL JV of $9.5 million, primarily due to a full year of operations for the AVAIL JV,
• an increase in cash flows from deferred income taxes of $3.3 million, partially offset by
• a decrease in cash from working capital of $36.9 million, primarily related to increases in contract assets, inventories and accounts receivable, partially offset by increases in accounts payable and accrued expenses.
• a decrease in cash flows from long-term assets and liabilities of $8.4 million, and
• an increase in non-cash equity in earnings from the AVAIL JV of $0.8 million.
Cash flows used in investing activities for fiscal 2025 increased by $19.9 million, compared to fiscal 2024, primarily due to:
• an increase of $20.8 million in the purchase of property, plant and equipment, primarily due to costs associated with the new aluminum coil coating facility in Washington, Missouri, partially offset by
• an increase of $0.8 million in proceeds from the sale of property plant and equipment.
Cash flows used in financing activities for fiscal 2025 decreased by $9.2 million, compared to fiscal 2024, primarily due to:
• an increase in proceeds from issuance of common stock of $309.1 million, due to the April 2024 Secondary Public Offering,
• a decrease of $8.3 million for the payment of dividends on common and preferred shares, primarily due to the repayment of the Series A Preferred Stock in fiscal 2025, and
• a decrease in net payments on long term debt and finance leases liabilities of $4.4 million, partially offset by
• an increase in cash used for redemption of preferred stock of $308.9 million, due to the redemption of the Series A Preferred Stock in the prior year,
• an increase of $3.5 million in income taxes paid related to issuance of common shares under stock-based plans, primarily due to the increase in the Company's stock price.
See "Financing and Capital" section below for additional information.
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Financing and Capital
2022 Credit Agreement and Term Loan B
We have a credit agreement with a syndicate of financial institutions as lenders that was entered into on May 13, 2022 and was subsequently amended on August 17, 2023, December 20, 2023, March 20, 2024, September 24, 2024, February 27, 2025, and August 5, 2025 (collectively referred to herein as the "2022 Credit Agreement").
The 2022 Credit Agreement includes the following significant terms:
i. provides for a senior secured initial term loan in the aggregate principal amount of $1.3 billion (the "Term Loan B"), due May 13, 2029, which is secured by substantially all of the assets of the Company; as of February 28, 2026, the outstanding balance of the Term Loan B was $335.0 million;
ii. provides for a maximum senior secured Revolving Credit Facility in the aggregate principal amount of $400.0 million (the "Revolving Credit Facility"), due May 13, 2027;
iii. includes a letter of credit sub-facility of up to $100.0 million, which is part of, and not in addition to, the Revolving Credit Facility;
iv. borrowings under the Term Loan B bear an interest rate of Secured Overnight Financing Rate ("SOFR") plus 1.75% and the Revolving Credit Facility bears a leverage-based rate with various tiers between 1.75% and 2.75%; as of February 28, 2026 , the interest rate was SOFR plus 1.75%;
v. includes customary affirmative and negative covenants, and events of default; including restrictions on the incurrence of non-ordinary course debt, investment and dividends, subject to various exceptions; and,
vi. includes a maximum quarterly leverage ratio financial covenant, with reporting requirements to our banking group at each quarter-end.
On August 5, 2025, we repriced the Term Loan B. The repricing reduced the margin from SOFR plus 2.50% to SOFR plus 1.75% .
During fiscal 2025, we repriced our Revolving Credit Facility and Term Loan B, which amended the 2022 Credit Agreement as follows:
i. On March 20, 2024, we repriced our Term Loan B. The repricing reduced the margin from SOFR plus 3.75% to SOFR plus 3.25%.
ii. On September 24, 2024, we repriced the Term Loan B. The repricing reduced the margin from SOFR plus 3.25% to SOFR plus 2.50%.
iii. On February 27, 2025, we repriced the Revolving Credit Facility, which has a leverage-based rate with various tiers. The repricing reduced the interest rate tiers from SOFR plus 2.75% to 3.50% to SOFR plus 1.75% to 2.75%.
We primarily utilize proceeds from the Revolving Credit Facility to finance timing fluctuations of working capital needs, capital improvements, quarterly cash dividends, acquisitions and other general corporate purposes.
As defined in the 2022 Credit Agreement, quarterly prepayments were due against the outstanding principal of the Term Loan B and were payable on the last business day of each May, August, November and February, beginning August 31, 2022, in a quarterly aggregate principal amount of $3.25 million, with the entire remaining principal amount due on May 13, 2029, the maturity date. Additional prepayments made against the Term Loan B contributed to these required quarterly payments. Due to prepayments made against the Term Loan B since August 31, 2022, the quarterly mandatory principal payment requirement has been met, and the quarterly payments of $3.25 million are no longer required.
Receivables Securitization Facility
On July 10, 2025, we entered into a credit agreement secured by our trade accounts receivable and contract assets (the "Receivables Securitization Facility.") Under this arrangement, we transferred our trade receivables to a special purpose entity ("SPE"), which in turn pledged those receivables as collateral for borrowings under the facility. The transaction does not qualify as a sale under ASC 860, Transfers and Servicing ; as a result, the arrangement is accounted for as a secured borrowing.
Accordingly, the receivables transferred to the SPE will remain on our consolidated balance sheet within trade accounts receivable and contract assets, and the Receivables Securitization Facility is included in "Long-term debt, net." The Receivables Securitization Facility has a limit of $150.0 million and is due July 10, 2028. As of February 28, 2026, the total amount of receivables pledged under the facility was $247.9 million, consisting of $136.5 million in trade accounts receivable and $111.4 million in contract assets, with outstanding borrowings of $130.0 million. The interest rate on the Receivables Securitization Facility is one-month SOFR plus 0.95%.
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We remain exposed to the credit risk associated with the underlying receivables and are responsible for their collection. The Receivables Securitization Facility includes provisions that allow the SPE to take control of the assets only in the event of bankruptcy or violation of servicing the secured accounts receivable. We will monitor these provisions to ensure ongoing compliance and availability under the facility.
The proceeds from the Receivables Securitization Facility were used to pay down the Term Loan B.
The weighted average interest rate for our outstanding debt, including the Revolving Credit Facility, the Term Loan B, and Receivables Securitization Facility was 5.94% and 7.54% as of February 28, 2026 and 2025, respectively. We are also obligated to pay a leverage-based commitment fee with various tiers between 0.20% and 0.30% per year for unused amounts under the Revolving Credit Facility. As of February 28, 2026, the commitment fee rate was 0.20%.
Our 2022 Credit Agreement requires us to maintain a maximum Total Net Leverage Ratio (as defined in the loan agreement) no greater than 4.5. We are also required to maintain certain covenants under the Receivables Securitization Facility. As of February 28, 2026, we were in compliance with all covenants and other requirements set forth in the 2022 Credit Agreement and the Receivables Securitization Facility.
April 2024 Secondary Public Offering
On April 30, 2024, we completed a secondary public offering in which we sold 4.6 million shares of our common stock at $70.00 per share (the "April 2024 Secondary Public Offering"). We received gross proceeds of $322.0 million, and paid offering expenses of $13.3 million, for net proceeds of $308.7 million. The proceeds from the April 2024 Offering were used to redeem the Series A Preferred Stock.
Series A Convertible Preferred Stock
On May 9, 2024, we fully redeemed our 240,000 shares of 6.0% Series A Convertible Preferred Stock for $308.9 million. The payment was calculated as the face value of the Series A Preferred Stock of $240.0 million, multiplied by the Return Factor of 1.4, less dividends paid to date of $27.1 million. The redemption premium of $75.2 million, which was calculated as the difference between the redemption amount and the book value of $233.7 million, was recorded as a deemed dividend, and reduced net income available to common shareholders. The Series A Preferred Stock was redeemed using proceeds from the April 2024 Secondary Public Offering.
Dividends
The Series A Preferred Stock accumulated a 6.0% dividend per annum, or $15.00 per share per quarter. Dividends were payable in cash or in kind, by accreting and increasing the Series A Base Amount ("PIK Dividends"). Dividends were payable on the sum of (i) the aggregate liquidation preference amount of $240.0 million plus (ii) any PIK Dividends. Dividends were accrued daily and paid quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year. Following the calendar quarter ending June 30, 2027, we were not able to elect PIK Dividends and dividends on the Series A Preferred Stock were required to be paid in cash. All dividends were paid in cash through May 9, 2024, at which time the Series A Preferred Stock was redeemed. The dividend would have increased annually by one percentage point, beginning with the dividend payable for the calendar quarter ending September 30, 2028. Dividends declared and paid for the fiscal year ended February 28, 2025 was $3.6 million.
Letters of Credit
As of February 28, 2026, w e had outstanding letters of credit in the amount of $12.0 million. These standby letters of credit are primarily issued to support insurance deductibles and other collateral requirements.
Interest Rate Swap
We manage our exposure to fluctuations in interest rates on our floating-rate debt by entering into interest rate swap agreements to convert a portion of our variable-rate debt to a fixed rate. On September 27, 2022, we entered into a fixed-rate interest rate swap agreement, which was subsequently amended on October 7, 2022. The 2022 Swap was terminated on June 30, 2025.
Simultaneous to the termination of the 2022 Swap, we entered into a new fixed-rate interest rate swap agreement on June 30, 2025. The 2025 Swap converts the SOFR-based component of the interest rate to 3.759%. As of February 28, 2026, the 2025 Swap resulted in a total fixed rate of 5.509%. The 2025 Swap had an initial notional amount of $290.0 million and a maturity date of June 30, 2027. The objective of the 2025 Swap is to eliminate the variability of cash flows in interest payments attributable to changes in benchmark one-month SOFR interest rates. The hedged risk is the interest rate risk exposure to
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changes in interest payments, attributable to changes in benchmark one-month SOFR interest rates over the interest rate swap term. The changes in cash flows of the interest rate swap are expected to exactly offset changes in cash flows of the variable-rate debt. We designated the 2025 Swap as a cash flow hedge at inception. Cash settlements, in the form of cash payments or cash receipts, of the 2025 Swap are recognized in interest expense.
Other
We plan to contribute $6.1 million to our pension plan during fiscal 2027. See "Item 8. Financial Statements and Supplementary Data—Note 15" for a discussion of our employee benefit plans.
As of February 28, 2026, we had $515.0 million of debt outstanding, with varying maturities through fiscal 2030. We had approximately $358.1 million of additional credit available as of February 28, 2026.
Capital Commitments—Greenfield Aluminum Coil Coating Facility
We have expanded our coatings capabilities through the construction of a new 25-acre aluminum coil coating facility in Washington, Missouri, which became operational during the first quarter of fiscal 2026. The new greenfield facility is included in the AZZ Precoat Metals segment and is supported by a take-or-pay contract for approximately 75% of the output from the new plant. We expect to spend approximately $122.8 million in capital payments related to the project, of which $113.6 million was paid prior to fiscal 2026 and approximately $7.8 million was paid during fiscal year 2026. The remaining balance of $1.4 million is expected to be paid in the first quarter of fiscal 2027.
AVAIL JV
We account for our 40% interest in the AVAIL JV under the equity method of accounting and include our equity in earnings as part of the AZZ Infrastructure Solutions segment. We record our equity in earnings in the AVAIL JV on a one-month lag.
In May 2025, Avail Infrastructure Solutions ("AVAIL"), in which we have an unconsolidated investment through the AVAIL JV, completed the sale of its electrical enclosures, switchgear, and bus systems businesses (the "Electrical Products Group" or "EPG"). During the first quarter of fiscal 2026, we received a distribution of cash from the AVAIL JV of $273.2 million. We classified the distribution as an operating activity in the statement of cash flows, in accordance with our policy to apply the cumulative earnings approach for the classification of distributions.
Subsequent to AVAIL’s sale of EPG, management identified events and circumstances indicating that the fair value of our investment in the AVAIL JV may have fallen below its carrying value on an other-than-temporary basis. These indicators arose principally from the significant business divestiture by AVAIL and a corresponding reduction in AVAIL's projected future earnings. In response, management performed a recoverability analysis of our investment in the AVAIL JV. Management estimated the fair value of our 40% interest in the AVAIL JV and concluded that the decline in fair value was other-than-temporary. Accordingly, we recorded an impairment charge of $45.9 million during the second quarter of fiscal 2026 to write down the carrying value of our investment in the AVAIL JV.
In December 2025, AVAIL completed the sale of the majority of WSI. In addition, during the fourth quarter of fiscal 2026, we received a cash distribution of $13.6 million from the AVAIL JV. We classify cash flows from distributions using the cumulative earnings method. Cash received is classified as return on investment in operating cash flows to the extent that cumulative earnings exceeds cumulative distributions, less distributions received in prior periods that were deemed returns of investment. During the year ended February 28, 2026, we received $286.8 million in distributions, and $273.2 million were deemed to be return on investment and reflected in cash flows from operating activities, and $13.6 million were deemed to be return of investment and reflected in cash flows from investing activities.
As of February 28, 2026, management believes the carrying value of the investment in the AVAIL JV is recoverable based on AVAIL's current financial position. We will continue to monitor the AVAIL JV for any indicators of impairment, and if further declines in the fair value occur and are deemed other-than-temporary, additional write-downs will be recorded.
During the year ended February 28, 2026, AVAIL recorded a prior period adjustment for accounting errors within the Brazil operations of the AVAIL JV. We recorded our proportionate share of the adjustment during the fourth quarter of fiscal year 2026. Our share of the adjustment was approximately $9.6 million and is included in “Equity in earnings of unconsolidated joint ventures” in our consolidated statement of operations. The adjustment is comprised of $1.2 million related to the full year ended February 28, 2026 and $8.4 million related to prior periods. Management performed an out of period analysis and concluded that the adjustment was not material to any previously issued financial statements or to the Company’s consolidated financial statements for the year ended February 28, 2026.
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As of February 28, 2026, our investment in the AVAIL JV was $20.0 million. For the year ended February 28, 2026, we recorded $209.7 million of equity in earnings, which consists of 1) a net gain of $261.8 million from the sale of the EPG and WSI, 2) $3.4 million of equity in earnings from the AVAIL JV's operations for the year ended February 28, 2026, offset by 3) an impairment loss of $45.9 million on the AVAIL JV recognized during the second quarter of fiscal 2026, and 4) an adjustment of $9.6 million related to accounting errors identified within the Brazil operations of the AVAIL JV.
Share Repurchase Program
On November 10, 2020, our Board of Directors authorized a $100 million share repurchase program pursuant to which we may repurchase our common stock (the "2020 Authorization"). Repurchases under the 2020 Authorization will be made through open market or private transactions, in accordance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans, which allows stock repurchases when we might otherwise be precluded from doing so.
On January 22, 2026, our Board of Directors authorized a $100 million share repurchase program (the "2026 Share Repurchase Program") pursuant to which we may repurchase our common stock. Repurchases under the 2026 Share Repurchase Program will be made through open market or private transactions, in accordance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans, which allows stock repurchases when we might otherwise be precluded from doing so.
During fiscal 2026, we repurchased 201,416 shares of common stock in the amount of $20.0 million at an average purchase price of $99.28 under the 2020 Share Authorization. As of February 28, 2026, there was $33.2 million remaining to repurchase shares under the 2020 Authorization. During fiscal 2026, we did not repurchase any shares under the 2026 Share Repurchase Program. As of February 28, 2026, there was $100.0 million remaining to repurchase shares under the 2026 Share Repurchase Program. Currently, share repurchases may not exceed 6% of our market capitalization per fiscal year.
Other Exposures
We have exposure to commodity price increases in all three of our operating segments, primarily zinc and natural gas in the AZZ Metal Coatings segment, and natural gas, steel, and aluminum scrap in the AZZ Precoat Metals segment. We attempt to minimize these increases by entering into agreements with our zinc suppliers and such agreements generally include fixed premiums, and by entering into agreements with our natural gas suppliers to fix a portion of our purchase cost. In addition to these measures, we attempt to recover other cost increases through improvements to our manufacturing process, supply chain management, and through increases in prices to match inflationary increases where competitively feasible. We have indirect exposure to copper, aluminum, steel and nickel-based alloys in the AZZ Infrastructure Solutions segment through our 40% investment in the AVAIL JV.
Off-Balance Sheet Arrangements and Contractual Commitments
As of February 28, 2026, we did not have any off-balance sheet arrangements as defined under SEC rules. Specifically, there were no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on the financial condition, changes in financial condition, sales or expenses, results of operations, liquidity, capital expenditures or capital resources of the Company.
As of February 28, 2026, we had non-cancelable forward contracts to purchase approximately $97.1 million of zinc and $7.3 million of natural gas at various volumes and prices. All such contracts expire in fiscal 2027.
As of February 28, 2026, w e had outstanding letters of credit in the amount of $12.0 million. These standby letters of credit are primarily issued to support insurance deductibles and other collateral requirements.
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 consolidated financial statements and the accompanying notes. Actual results may differ from these estimates under different assumptions or conditions. The SEC defines critical accounting estimates as those made in accordance with U.S. GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on a company's financial condition or results of operations. We consider the following accounting estimates to meet this definition because they are dependent on our judgement and assumptions about matters that are inherently uncertain and represent our more critical estimates.
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Impairment of Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination and is not amortized. We test goodwill for potential impairment annually as of December 31, or more frequently, if an event occurs or circumstances change that would more-likely-than-not reduce the reporting unit's fair value below its carrying amount.
If no impairment indicators are present, we may first perform a qualitative assessment of goodwill to determine whether a quantitative assessment is necessary. If we perform a quantitative assessment for the annual goodwill impairment test, then we use the income approach. The income approach uses Level 3 fair value inputs, such as future cash flows and estimated terminal values for our reporting units that are discounted using a market participant perspective to determine the fair value of the reporting unit, which is then compared to the carrying value of that reporting unit to determine if there is impairment. The income approach includes assumptions about revenue growth rates, operating margins and terminal growth rates, discounted by an estimated weighted-average cost of capital derived from other publicly traded companies that are similar but not identical from an operational and economic standpoint. A significant change in events, circumstances or any of these assumptions could result in an impairment of goodwill. Variables impacting future cash flows include, but are not limited to, the level of customer demand for and response to manufactured solutions we offer to the construction, industrial, consumer, transportation, electrical, and utility markets, changes in economic conditions of these various markets, assumptions about future sales, zinc and natural gas prices, operating costs, margins and the availability of experienced labor and management to implement our growth strategies.
Long-lived assets and Intangible assets
Long-lived assets, including property and equipment and intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Indefinite-lived intangible assets are evaluated for impairment annually as of December 31, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Impairment is measured by a comparison of the carrying amount to the estimated undiscounted cash flows to be generated by those assets. If the undiscounted cash flows are less than the carrying amount, we record impairment losses for the excess of their carrying value over the estimated fair value.
We make estimates of projected cash flows when performing our impairment evaluation. These estimates include, but are not limited to, assumptions about future sales, zinc and natural gas prices, operating costs, margins, the use or disposition of the asset, the asset's estimated remaining useful life, and future expenditures necessary to maintain the asset's existing service potential. Due to the significant subjectivity of the assumptions used to test for recoverability, changes in market conditions could result in significant impairment charges in the future, which would impact our net income.
Accruals for Contingent Liabilities
We are subject to the possibility of various loss contingencies arising in the normal course of business. The amounts we may record for estimated claims, such as self-insurance programs, warranty, environmental, legal, and other contingent liabilities, requires us to make judgments regarding the amount of expenses that will ultimately be incurred. We use past history and experience as well as other specific circumstances surrounding these claims in evaluating the amount of liability that should be recorded. Due to the inherent limitations in estimating future events, actual amounts paid or transferred may differ from those estimates.
Business Combinations
Assets acquired and liabilities assumed as part of a business acquisition are generally recorded at their fair value at the date of acquisition. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Determining fair value of identifiable assets, particularly intangibles, and liabilities acquired also requires management judgement and the use of key assumptions and estimates, particularly regarding projected future cash flows and applicable discount rates. These assumptions and estimates are based upon available information that may be subject to further refinement over the purchase accounting period of one year.
Recent Accounting Pronouncements
See "Part II. Item 8. Financial Statements and Supplementary Data—Note 1" for a full description of recent accounting pronouncements, including the actual and expected dates of adoption and estimated effects on our consolidated results of operations and financial condition, which is incorporated herein by reference.
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Non-GAAP Disclosures
In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"), we provide Adjusted Net Income, Adjusted Earnings per Share and Adjusted EBITDA (collectively, the "Adjusted Earnings Measures"), which are non-GAAP measures. Management believes that the presentation of these measures provides investors with greater transparency when comparing operating results across a broad spectrum of companies, which provides a more complete understanding of our financial performance, competitive position, prospects for future capital investment and debt reduction. Management also believes that investors regularly rely on non-GAAP financial measures, such as Adjusted Net Income, Adjusted Earnings per Share and Adjusted EBITDA to assess operating performance and that such measures may highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP.
In calculating adjusted net income and adjusted earnings per share, management excludes: 1) intangible asset amortization, 2) restructuring charges, 3) certain legal settlements and accruals, 4) retirement and other severance expenses, 5) redemption premium on Series A Preferred Stock, 6) additional stock compensation expense related to the adoption of our executive retiree long-term incentive program, and 7) certain adjustments related to the Company's unconsolidated joint venture from the reported GAAP measure. Management defines Adjusted EBITDA as adjusted net income excluding depreciation, amortization, interest and provision for income taxes. Management believes Adjusted EBITDA is used by investors to analyze operating performance and evaluate the Company's ability to incur and service debt, as well as its capacity for making capital expenditures in the future.
Management provides non-GAAP financial measures for informational purposes and to enhance understanding of the Company's GAAP consolidated financial statements. Readers should consider these measures in addition to, but not instead of or superior to, the Company's financial statements prepared in accordance with GAAP, and undue reliance should not be placed on these non-GAAP financial measures. Additionally, these non-GAAP financial measures may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.
The following tables provide a reconciliation for the years ended February 28, 2026 and 2025 between the non-GAAP Adjusted Earnings Measures to the most comparable measures, calculated in accordance with GAAP (in thousands, except per share data):
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Adjusted Net Income and Adjusted Earnings Per Share
Year Ended February 28,
Amount
Per
Diluted Share (1)
Amount
Per
Diluted Share (1)
Net income
Less: Series A Preferred Stock Dividends
Less: Redemption premium on Series A Preferred Stock
Net income available to common shareholders (2)
Impact of Series A Preferred Stock dividends (2)
Net income and diluted earnings per share for Adjusted net income calculation (2)
Adjustments:
Amortization of intangible assets
Restructuring charges (3)
Legal settlement and accrual (4)
Retirement and other severance expense (5)
Redemption premium on Series A Preferred Stock (6)
Executive retiree long-term incentive program (7)
AVAIL JV equity in earnings adjustment (8)
Subtotal
Tax impact (9)
Total adjustments
Adjusted net income and adjusted earnings per share (non-GAAP)
Weighted average shares outstanding—Diluted for Adjusted earnings per share (2)
See notes on page 35 .
Adjusted EBITDA
Year Ended February 28,
Net income
Interest expense
Income tax expense
Depreciation and amortization
Adjustments:
Restructuring charges (3)
Legal settlement and accrual (4)
Retirement and other severance expense (5)
Executive retiree long-term incentive program (7)
AVAIL JV equity in earnings adjustment (8)
Adjusted EBITDA (non-GAAP)
See notes on page 35 .
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Adjusted EBITDA by Segment
The following table outlines adjusted EBITDA for our reportable segments and corporate operations:
Year Ended February 28, 2026
Metal Coatings
Precoat Metals
Infra-
structure Solutions
Corporate
Total
Net income (loss)
Interest expense
Income tax expense
Depreciation and amortization
Adjustments:
Restructuring charges (3)
Executive retiree long-term incentive program (7)
AVAIL JV equity in earnings adjustment (8)
Adjusted EBITDA (non-GAAP)
See notes on page 35 .
Year Ended February 28, 2025
Metal Coatings
Precoat Metals
Infra-
structure Solutions
Corporate
Total
Net income (loss)
Interest expense
Income tax expense
Depreciation and amortization
Adjustments:
Legal settlement and accrual (4)
Retirement and other severance expense (5)
Adjusted EBITDA (non-GAAP)
See notes on page 35 .
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Debt Leverage Ratio Reconciliation
Trailing Twelve Months Ended
February 28, 2026
February 28, 2025
Gross debt
Less: Cash per bank statement
Add: Finance lease liability
Consolidated indebtedness
Net income
Depreciation and amortization
Interest expense
Income tax expense
EBITDA
Cash items (10)
Non-cash items (11)
Equity in earnings, net of distributions
Adjusted EBITDA per Credit Agreement
Net leverage ratio
Earnings per share amounts included in the "Adjusted Net Income and Adjusted Earnings Per Share" table above may not sum due to rounding differences.
For the year ended February 28, 2025, diluted earnings per share is based on weighted average shares outstanding of 29,344, as the Series A Preferred Stock that was redeemed May 9, 2024 is anti-dilutive for this calculation. The calculation of adjusted diluted earnings per share is based on weighted average shares outstanding of 30,134, as the Series A Preferred Stock is dilutive to adjusted diluted earnings per share. Adjusted net income for adjusted earnings per share also includes the addback of Series A Preferred Stock dividends for the period noted above. For further information regarding the calculation of earnings per share, see "Item 8. Financial Statements and Supplementary Data—Note 14."
Includes restructuring charges related to the closure of two surface technology facilities in our Metal Coatings segment. See "Item 8. Financial Statements and Supplementary Data—Note 21."
For the year ended February 28, 2025, consists of a $3.5 million legal settlement and accrual related to a non-operating entity, and is classified as "Corporate" in our operating segment disclosure and $6.5 million for the write off of receivable and related legal fees due to the unfavorable resolution of a litigation matter related to the AIS segment that was retained following the sale of the AIS business. See "Item 8. Financial Statements and Supplementary Data—Note 22."
Related to retention and transition of certain executive management employees.
On May 9, 2024, we redeemed AZZ's Series A Preferred Stock. The redemption premium represents the difference between the redemption amount paid and the book value of the Series A Preferred Stock.
During the year ended February 28, 2026, we recognized additional stock-based compensation expense of $2.2 million upon the adoption of the Executive Retiree Long-term Incentive Program. For further information regarding the adoption of the ERP, see "Item 8. Financial Statements and Supplementary Data—Note 16."
During fiscal year 2026, AVAIL completed the sale of EPG and WSI. The year ended February 28, 2026 includes the net gain related to the sale of EPG and WSI, partially offset by the recognition of an impairment loss on the AVAIL JV, a prior period adjustment for accounting errors within the Brazil operations for the AVAIL JV and an adjustment related to a change in AVAIL's transfer pricing policy. For further information, see "Item 8. Financial Statements and Supplementary Data—Note 18."
For the year ended February 28, 2026, the non-GAAP effective tax rate is 24.0% for amortization of intangible assets, restructuring charges, and executive retiree long-term incentive program, and is 25.5% for the AVAIL JV equity in earnings adjustment. For the year ended February 28, 2025, the non-GAAP effective tax rate is 24.0% for all adjustments, except the Redemption premium on Series A Preferred Stock, which is not tax effected.
Cash items include certain legal settlements, accruals, retirement and other severance expenses, and restructuring charges associated with the Metal Coatings segment.
Non-cash items include stock-based compensation expense.
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