Azz Inc 10-Q for FY2025 Q3

Azz Inc (AZZ)

10-Q 2025-01-07 For: 2024-11-30

Added on April 04, 2026

About this 10-Q

Azz Inc filed this 10-Q on January 7, 2025, covering the quarter ended November 30, 2024 (FY2025 Q3).

Headline figures

Quarter ended November 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $403.65M; up 5.8% from $381.61M a year earlier
Net income: $33.6M; up 25.0% from net income of $26.89M a year earlier
Diluted EPS: $1.12; up 21.7% from $0.92 a year earlier

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

One Museum Place, Suite 500
3100 West 7th Street
Fort Worth,	Texas	76107
(Address of principal executive offices)		(Zip Code)


		PAGE NO.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Changes in Shareholders’ Equity	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 5	Other Information	46
Item 6.	Exhibits	47

	SIGNATURES	48


	As of
	November 30, 2024		February 29, 2024

Assets
Current assets:
Cash and cash equivalents	$	1,484	$	4,349
Trade accounts receivable, net of allowance for credit losses of $2,204 and $2,347 at November 30, 2024 and February 29, 2024, respectively	139,843		142,246
Other receivables	28,499		15,599
Inventories	114,701		117,656
Contract assets	99,158		79,335
Prepaid expenses and other	10,720		7,814


Total current assets	394,405		366,999
Property, plant and equipment, net	580,178		541,652
Right-of-use assets	25,888		23,739
Goodwill	704,569		705,468
Deferred tax assets	5,563		5,606
Intangible assets, net	427,812		445,435
Investment in AVAIL joint venture	102,121		98,169
Other assets	4,014		8,437

Total assets	$	2,244,550	$	2,195,505
Liabilities, Mezzanine Equity and Shareholders’ Equity
Current liabilities:
Accounts payable	$	97,798	$	88,001
Income taxes payable	2,723		172
Accrued salaries and wages	34,286		30,823
Other accrued liabilities	80,051		68,651
Lease liability, short-term	7,434		6,659


Total current liabilities	222,292		194,306
Long-term debt, net	879,548		952,742
Lease liability, long-term	19,255		17,827
Deferred tax liabilities	44,544		38,567
Other long-term liabilities	49,323		57,572

Total liabilities	1,214,962		1,261,014
Commitments and contingencies (Note 16)
Mezzanine equity:
Series A Preferred Stock, $1,000 par value; 100,000 shares authorized; 240 shares issued and outstanding February 29, 2024; aggregate liquidation preference $312,520 at February 29, 2024	—		233,722
Shareholders’ equity:
Common stock, $1 par value; 100,000 shares authorized; 29,877 and 25,102 shares issued and outstanding at November 30, 2024 and February 29, 2024, respectively	29,877		25,102
Capital in excess of par value	415,059		103,330
Retained earnings	594,034		576,231
Accumulated other comprehensive loss	(9,382)		(3,894)
Total shareholders’ equity	1,029,588		700,769
Total liabilities, mezzanine equity and shareholders' equity	$	2,244,550	$	2,195,505


	Three Months Ended November 30,				Nine Months Ended November 30,
	2024		2023		2024		2023
Sales	$	403,654	$	381,605	$	1,225,869	$	1,171,020
Cost of sales	305,876		293,456		921,907		888,606
Gross margin	97,778		88,149		303,962		282,414

Selling, general and administrative	39,243		35,325		108,032		103,087

Operating income	58,535		52,824		195,930		179,327

Interest expense, net	(19,223)		(25,855)		(63,906)		(82,331)
Equity in earnings of unconsolidated subsidiaries	7,168		8,742		12,470		11,136
Other income (expense), net	(763)		(41)		(142)		9
Income before income taxes	45,717		35,670		144,352		108,141
Income tax expense	12,114		8,780		35,728		24,397




Net income	33,603		26,890		108,624		83,744
Series A Preferred Stock Dividends	—		(3,600)		(1,200)		(10,800)
Redemption premium on Series A Preferred Stock	—		—		(75,198)		—
Net income available to common shareholders	$	33,603	$	23,290	$	32,226	$	72,944




Basic earnings per common share	$	1.12	$	0.93	$	1.12	$	2.91



Diluted earnings per common share	$	1.12	$	0.92	$	1.11	$	2.86

Weighted average shares outstanding - Basic	29,879		25,077		28,819		25,024
Weighted average shares outstanding - Diluted	30,118		29,330		29,076		29,278

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


	Three Months Ended November 30,				Nine Months Ended November 30,
	2024		2023		2024		2023

Net income available to common shareholders	$	33,603	$	23,290	$	32,226	$	72,944
Other comprehensive income (loss):
Unrealized translation loss	(1,943)		(59)		(1,504)		(21)
Unrealized translation loss for unconsolidated subsidiary(1)	(730)		3,088		(1,261)		1,314


Unrealized gain (loss) on derivatives qualified for hedge accounting:
Unrealized gain (loss) on interest rate swap, net of tax(2)	1,037		(22)		194		1,847
Amounts reclassified from accumulated other comprehensive income to earnings, net of tax(3)	(663)		(1,057)		(2,876)		(2,544)
Unrealized gain on interest rate swap, net of tax for unconsolidated subsidiary(4)	(188)		(93)		(41)		20
Other comprehensive income (loss)	(2,487)		1,857		(5,488)		616
Comprehensive income	$	31,116	$	25,147	$	26,738	$	73,560

(1) Unrealized translation loss for unconsolidated subsidiary is related to our unconsolidated investment in the AVAIL JV and represents our 40% interest in this amount. Net of tax benefit of $(227) and $(438) for the three and nine months ended November 30, 2024, respectively, and $0 for both the three and nine months ended November 30, 2023.
(2) Net of tax expense (benefit) of $327 and ($8) for the three months ended November 30, 2024 and 2023, respectively. Net of tax expense (benefit) of ($15) and $671 for the nine months ended November 30, 2024 and 2023, respectively.
(3) Net of tax benefit of ($209) and ($384) for the three months ended November 30, 2024 and 2023, respectively. Net of tax benefit of $(908) and $(924) for the nine months ended November 30, 2024 and 2023, respectively. See Note 8.
(4) Unrealized gain (loss) on interest rate swap, net of tax for unconsolidated subsidiary is related to our unconsolidated investment in the AVAIL JV and represents our 40% interest in this amount. Net of tax expense (benefit) of ($59) and ($34) for the three months ended November 30, 2024 and 2023, respectively. Net of tax expense (benefit) of ($13) and $7 for the nine months ended November 30, 2024 and 2023, respectively.


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


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


		Three Months Ended November 30, 2024
	Common Stock		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Total
		Shares									Amount
Balance at August 31, 2024		29,877	$	29,877	$	411,263	$	565,511	$	(6,895)		$	999,756
Share-based compensation		—	—		3,796		—		—			3,796






Cash dividends paid on common stock		—	—		—		(5,080)		—			(5,080)

Net income		—	—		—		33,603		—			33,603
Other comprehensive loss		—	—		—		—		(2,487)			(2,487)
Balance at November 30, 2024		29,877	$	29,877	$	415,059	$	594,034	$	(9,382)		$	1,029,588


		Nine Months Ended November 30, 2024
	Common Stock		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Total
		Shares									Amount
Balance at February 29, 2024		25,102	$	25,102	$	103,330	$	576,231	$	(3,894)		$	700,769
Share-based compensation		—	—		11,234		—		—			11,234

Common stock issued under stock-based plans and related tax expense		132	132		(5,099)		—		—			(4,967)
Common stock issued under employee stock purchase plan		43	43		1,526		—		—			1,569
Secondary public offering and issuance of additional common stock		4,600	4,600		304,068		—		—			308,668

Dividends on Series A Preferred Stock		—	—		—		(1,200)		—			(1,200)
Cash dividends paid on common stock		—	—		—		(14,423)		—			(14,423)
Redemption premium on Series A Preferred Stock		—	—		—		(75,198)		—			(75,198)
Net income		—	—		—		108,624		—			108,624
Other comprehensive loss		—	—		—		—		(5,488)			(5,488)
Balance at November 30, 2024		29,877	$	29,877	$	415,059	$	594,034	$	(9,382)		$	1,029,588


		Three Months Ended November 30, 2023
	Common Stock		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Total

		Shares									Amount
Balance at August 31, 2023		25,077	$	25,077	$	97,884	$	547,208	$	(5,814)		$	664,355
Share-based compensation		—	—		2,189		—		—			2,189




Dividends on Series A Preferred Stock		—	—		—		(3,600)		—			(3,600)
Cash dividends paid on common stock		—	—		—		(4,263)		—			(4,263)
Net income		—	—		—		26,890		—			26,890
Other comprehensive loss		—	—		—		—		1,857			1,857
Balance at November 30, 2023		25,077	$	25,077	$	100,073	$	566,235	$	(3,957)		$	687,428


		Nine Months Ended November 30, 2023
	Common Stock		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Total
		Shares									Amount
Balance at February 28, 2023		24,912	$	24,912	$	93,357	$	506,042	$	(4,573)		$	619,738
Share-based compensation		—	—		6,207		—		—			6,207

Common stock issued under stock-based plans and related tax expense		123	123		(914)		—		—			(791)
Common stock issued under employee stock purchase plan		42	42		1,423		—		—			1,465

Dividends on Series A Preferred Stock		—	—		—		(10,800)		—			(10,800)
Cash dividends paid on common stock		—	—		—		(12,751)		—			(12,751)
Net income		—	—		—		83,744		—			83,744
Other comprehensive loss		—	—		—		—		616			616
Balance at November 30, 2023		25,077	$	25,077	$	100,073	$	566,235	$	(3,957)		$	687,428


	Three Months Ended November 30, 2024
	Metal Coatings		Precoat Metals		Infrastructure Solutions(1)		Corporate(2)		Total
Sales	$	168,599	$	235,055	$	—	$	—	$	403,654
Cost of sales	116,542		189,334		—		—		305,876
Gross margin	52,057		45,721		—		—		97,778

Selling, general and administrative	5,684		8,641		29		24,889		39,243

Operating income (loss)	46,373		37,080		(29)		(24,889)		58,535

Interest expense	—		—		—		(19,223)		(19,223)
Equity in earnings of unconsolidated subsidiaries	—		—		7,168		—		7,168
Other income (expense)	116		—		—		(879)		(763)
Income (loss) before income tax	$	46,489	$	37,080	$	7,139	(44,991)		45,717
Income tax expense							12,114		12,114
Net income (loss)							$	(57,105)	$	33,603


Summarized Balance Sheet
	As of
	November 30, 2024(1)
Current assets	$	321,035
Long-term assets	180,001
Total assets	$	501,036

Current liabilities	166,201
Long-term liabilities	123,173
Total liabilities	$	289,374
Total partners' capital	211,662
Total liabilities and partners' capital	$	501,036


Summarized Operating Data
	Three Months Ended		Nine Months Ended
	November 30, 2024(1)		November 30, 2024(1)
Sales	$	150,998	$	400,298
Gross profit	42,842		101,928
Net income	21,015		32,036

(1) We report our equity in earnings on a one-month lag basis; therefore, amounts in the summarized financials above are as of and for the three and nine months ended October 31, 2024. Amounts in the table above exclude certain adjustments made by us to record equity in earnings of the AVAIL JV under U.S GAAP for public companies, primarily to reverse the amortization of goodwill.


			Fair Value Measurements Using								Fair Value Measurements Using
	Carrying Value								Carrying Value
	November 30, 2024		Level 1		Level 2		Level 3		February 29, 2024		Level 1		Level 2		Level 3
Assets:
Interest Rate Swap Agreement(1)	$	—	$	—	$	—	$	—	$	3,410	$	—	$	3,410	$	—
Total Assets	$	—							$	3,410
Liabilities:
Interest Rate Swap Agreement(1)	195		—		195		—		—		—		—		—
Total Liabilities	$	195							$	—

(1) The fair value of the Company's interest rate swap agreement was an asset at February 29, 2024 and a liability at November 30, 2024.


	Balance Sheet Classification	As of
		November 30, 2024		February 29, 2024
Assets
Operating right-of-use assets	Right-of-use assets	$	20,924	$	19,808
Finance right-of-use assets	Right-of-use assets	4,964		3,931
Liabilities
Operating lease liabilities ― short-term	Lease liability - short-term	$	6,377	$	5,893
Operating lease liabilities ― long-term	Lease liability - long-term	15,202		14,606
Finance lease liabilities ― short-term	Lease liability - short-term	1,057		766
Finance lease liabilities ― long-term	Lease liability - long-term	4,053		3,221


Fiscal year:	Operating Leases		Finance Leases		Total
2025	$	1,897	$	353	$	2,250
2026	7,126		1,355		8,481
2027	5,813		1,316		7,129
2028	3,752		1,229		4,981
2029	3,117		1,009		4,126
2030	1,203		556		1,759
Thereafter	903		170		1,073
Total lease payments	$	23,811	$	5,988	$	29,799
Less imputed interest	(2,232)		(878)		(3,110)
Total	$	21,579	$	5,110	$	26,689


	As of
	November 30, 2024		February 29, 2024
Raw material	$	111,172	$	111,674
Work in process	769		898
Finished goods	2,760		5,084
Total inventories	$	114,701	$	117,656


	Three Months Ended November 30,				Nine Months Ended November 30,
	2024		2023		2024		2023
Sales:
Construction	$	233,653	$	214,081	$	695,344	$	637,035
Industrial	37,551		35,489		114,318		118,273
Transportation	35,047		35,871		109,959		107,734
Consumer	29,464		29,384		94,633		99,537
Utilities	29,599		24,804		88,944		76,116
Other (1)	38,340		41,976		122,671		132,325
Total Sales	$	403,654	$	381,605	$	1,225,869	$	1,171,020

(1) Other includes less significant markets, such as agriculture, recreation, petro-chem, AZZ Tubular products and sales from recycling.


	As of
	November 30, 2024		February 29, 2024
Revolving Credit Facility	$	40,000	$	30,000

Term Loan B	890,250		980,250
Total debt, gross	930,250		1,010,250
Unamortized debt issuance costs	(50,702)		(57,508)


Long-term debt, net	$	879,548	$	952,742


	Three Months Ended November 30,				Nine Months Ended November 30,
	2024		2023		2024		2023
Operating cash flows from operating leases included in lease liabilities	$	1,867	$	1,811	$	5,426	$	5,471
Lease liabilities obtained from new ROU assets - operating	5,345		60		5,979		1,942
Decrease in ROU assets related to lease terminations	—		—		—		(1,294)
Operating cash flows from finance leases included in lease liabilities	86		24		237		61
Financing cash flows from finance leases included in lease liabilities	257		106		689		269
Lease liabilities obtained from new ROU assets - finance leases	394		173		1,813		773


	Three Months Ended November 30, 2024
	Foreign Currency Translation Gain (Loss)		Foreign Currency Translation Gain (Loss) for Unconsolidated Subsidiary, Net of Tax		Net Actuarial Gain (Loss), Net of Tax		Interest Rate Swap, Net of Tax		Interest Rate Swap, Net of Tax for Unconsolidated Subsidiary		Total
Balance as of beginning of period	$	(7,189)	$	887	$	(184)	$	(523)	$	114	$	(6,895)
Other comprehensive income before reclassification	(1,943)		(730)		—		1,037		(188)		(1,824)
Amounts reclassified from AOCI	—		—		—		(663)		—		(663)
Net change in AOCI	(1,943)		(730)		—		374		(188)		(2,487)
Balance as of end of period	$	(9,132)	$	157	$	(184)	$	(149)	$	(74)	$	(9,382)


	Nine Months Ended November 30, 2023
	Metal Coatings		Precoat Metals(4)		Infrastructure Solutions(1)		Corporate(2)		Total
Sales	$	501,816	$	669,204	$	—	$	—	$	1,171,020
Cost of sales	353,280		535,326		—		—		888,606
Gross margin	148,536		133,878		—		—		282,414

Selling, general and administrative	20,143		24,429		6,244		52,271		103,087

Operating income (loss)	128,393		109,449		(6,244)		(52,271)		179,327

Interest expense	—		—		—		(82,331)		(82,331)
Equity in earnings of unconsolidated subsidiaries	—		—		11,136		—		11,136
Other income (expense)	(40)		—		—		49		9
Income (loss) before income tax	$	128,353	$	109,449	$	4,892	(134,553)		108,141
Income tax expense							24,397		24,397
Net income (loss)							$	(158,950)	$	83,744


	Trailing Twelve Months Ended
	November 30,		February 29,
	2024		2024

Gross debt	$	930,250	$	1,010,250
Less: Cash per bank statement	(10,233)		(24,807)
Add: Finance lease liability	5,110		3,987
Consolidated indebtedness	$	925,127	$	989,430

Net income	$	126,487	$	108,624
Depreciation and amortization	81,771		61,383
Interest expense	88,641		63,907
Income tax expense	39,827		35,728



EBITDA per Credit Agreement	336,726		269,642





Cash items(7)	15,230		25,443






Non-cash items(8)	12,634		9,510


Equity in earnings, net of distributions	(6,863)		(12,294)
Adjusted EBITDA per Credit Agreement	$	357,727	$	292,301

Net leverage ratio	2.6x		3.4x


2.1						Contribution and Purchase Agreement, dated as of June 23, 2022, by and between AZZ Inc., AIS investment Holdings LLC and Fernweh AIS Acquisition L.P. (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the SEC on June 27, 2022.)

3.1						Amended and Restated Bylaws dated April 24, 2023 (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K filed with the SEC on April 25, 2023.)

3.2						Amended and Restated Certificate of Formation (with Certificate of Correction dated May 15, 2023) (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed with the SEC on October 10, 2023.)

4.1						Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q filed with the SEC on October 13, 2000.)

4.2						Indenture, dated as of May 13, 2022, by and between AZZ Inc. and UMB Bank, N.A. (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the SEC on May 16, 2022.

10.1						Fourth Amendment to Credit Agreement, dated as of September 24, 2024, by and among AZZ Inc., the Guarantors, the Lenders, and Citibank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on September 24, 2024.)

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

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

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

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

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Dated:	January 7, 2025	/s/ Thomas E. Ferguson
		Thomas E. Ferguson
		President and Chief Executive Officer


Dated:	January 7, 2025	/s/ Jason Crawford
		Jason Crawford Senior Vice President, Chief Financial Officer and Principal Accounting Officer