AZZ Inc.

10/13/2026 | Press release | Distributed by Public on 10/13/2026 14:16

Quarterly Report for Quarter Ending August 31, 2026 (Form 10-Q)

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," "could," "should," "expects," "plans," "will," "might," "would," "projects," "currently," "intends," "outlook," "forecasts," "targets," "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. Forward-looking statements speak only as of the date they are made and are subject to risks that could cause them to differ materially from actual results. Certain factors could affect the outcome of the matters described herein. This Quarterly Report may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand for our manufactured solutions, including demand in the construction markets; infrastructure; transportation; HVAC & appliance; container; and the metal coatings end markets. We could also experience additional inflationary increases in production costs such as higher labor, component and raw material costs, particularly for zinc and natural gas used in our hot-dip galvanizing process and paint used in our coil coating process; supply chain vendor delays; delays in additional acquisition opportunities; an increase in our debt leverage and/or interest rates on our debt, of which a significant portion is tied to variable interest rates; availability of experienced management and employees to implement AZZ's growth strategy; a downturn in market conditions in any industry relating to the manufactured solutions that we provide; economic volatility, including a prolonged economic downturn or macroeconomic conditions such as inflation or changes in the political stability in the United States or Canada; tariffs, acts of war or terrorism inside the United States or abroad; and other changes in economic and financial conditions. AZZ has provided additional information regarding risks associated with the business, including in Part I, Item 1A. Risk Factors, in AZZ's Annual Report on Form 10-K for the fiscal year ended February 28, 2026, 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 when 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 "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026, and with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.
Business Operations Update
Our results for the six months ended August 31, 2026 were impacted primarily by the growth in demand for our manufactured solutions in the construction, container and industrial end markets.
The demand for our manufactured solutions was the primary contributor to net income of $110.5 million for the current six-month period. Our operating results for the current six-month period, 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 $140.0 million of cash for the current six-month period. The components of our liquidity and descriptions of our cash flows, capital investments, and other 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 third quarter of fiscal 2027.
•Sales prices in our AZZ Metal Coatings segment are expected to increase slightly due to zinc inflationary pressures. Fluctuations in product mix, along with competitive market pressures, may impact selling price.
•Sales prices in our AZZ Precoat Metals segment are expected to stay consistent with current levels, 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.
RESULTS OF OPERATIONS
Overview
We are a provider of hot-dip galvanizing and coil coating solutions to a broad range of end-markets, predominantly 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. Our discussion and analysis of financial condition and results of operations is organized by segment, along with corporate costs and other costs not specifically identifiable to a segment. Management believes that the most meaningful analysis of our results of operations is to analyze our performance by segment. We use sales and operating income by segment to evaluate the performance of our segments. Segment operating income consists of sales less cost of sales and selling, general and administrative expenses that are specifically identifiable to a segment.
QUARTER ENDED AUGUST 31, 2026 COMPARED TO THE QUARTER ENDED AUGUST 31, 2025
Segment Sales and Operating Income
The following tables contain operating segment data by segment, for the Company's corporate operations and on a consolidated basis (in thousands):
Three Months Ended August 31, 2026
Metal
Coatings 		Precoat Metals
Infrastructure Solutions(1)
Corporate(2)
Total
Sales $ 233,519 $ 253,373 $ - $ - $ 486,892
Cost of sales 163,466 201,300 - - 364,766
Gross margin 70,053 52,073 - - 122,126
Selling, general and administrative 5,968 8,739 - 23,638 38,345
Operating income (loss) 64,085 43,334 - (23,638) 83,781
Interest expense - - - (10,807) (10,807)
Equity in earnings of unconsolidated subsidiary(3)
- - 6,789 - 6,789
Other income 19 - - 8 27
Income (loss) before income tax $ 64,104 $ 43,334 $ 6,789 (34,437) 79,790
Income tax expense 21,339 21,339
Net income (loss) $ (55,776) $ 58,451
See notes below tables.
Three Months Ended August 31, 2025
Metal Coatings Precoat Metals
Infrastructure Solutions(1)
Corporate(2)
Total
Sales $ 189,984 $ 227,291 $ - $ - $ 417,275
Cost of sales 132,923 183,060 - - 315,983
Gross margin 57,061 44,231 - - 101,292
Selling, general and administrative 5,355 7,710 26 19,740 32,831
Operating income (loss) 51,706 36,521 (26) (19,740) 68,461
Interest expense - - - (13,665) (13,665)
Equity in earnings of unconsolidated subsidiary(3)
- - 59,345 - 59,345
Other income 2 - - 186 188
Income (loss) before income tax $ 51,708 $ 36,521 $ 59,319 (33,219) 114,329
Income tax expense 24,983 24,983
Net income (loss) $ (58,202) $ 89,346
(1)
The AZZ 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.
(2)
Interest expense and Income tax expense are included in the Corporate segment as these items are not allocated to the segments.
(3)
On May 14, 2026, AVAIL completed the sale of Rig-A-Lite. The three months ended August 31, 2026 includes $7.9 million, which represents the gain related to the sale of Rig-A-Lite. During the first quarter of fiscal 2026, AVAIL completed the sale of the Electrical Products Group. The three months ended August 31, 2025 includes $61.6 million, which represents the gain related to the sale of the EPG, partially offset by an impairment loss on the AVAIL JV and an adjustment related to a change in AVAIL's transfer pricing policy. For additional information about the AVAIL JV, see "Item 1. Financial Statements-Note 8."
For the current quarter, we recorded sales of $486.9 million, compared to the prior year quarter of $417.3 million. Of total sales for the current quarter, 48.0% were generated from the AZZ Metal Coatings segment and 52.0% from the AZZ Precoat Metals segment. Net income for the current quarter was $58.5 million, compared to $89.3 million for the prior year quarter. Net income as a percentage of sales was 12.0% for the current quarter compared to 21.4% for the prior year quarter. Diluted earnings per common share decreased by 34.2%, to $1.94 per share for the current quarter, compared to $2.95 per share for the prior year quarter. The decrease was primarily due to higher equity in earnings from the AVAIL JV in the prior year quarter, which included a significant gain from AVAIL's sale of the Electrical Products Group ("EPG"), which was recorded in "Equity in earnings of unconsolidated subsidiary."
Sales
Sales for the AZZ Metal Coatings segment increased $43.5 million, or 22.9%, for the current quarter compared to the prior year quarter. The increase was primarily due to a $34.5 million increase resulting from a higher volume of steel processed, driven by increases in the construction, industrial, infrastructure, and transportation end markets; a $6.5 million increase in average selling price, primarily in response to inflationary pressures; and a $2.5 million increase in other sales.
Sales for the AZZ Precoat Metals segment increased $26.1 million, or 11.5%, for the current quarter compared to the prior year quarter. The increase was primarily due to a higher volume of coils coated, driven by increases in the construction and container end markets (including the continued ramp-up at the Washington, Missouri facility), partially offset by decreases in HVAC and appliances, transportation, and other end markets. The increase in sales was also driven by an increase in the average price of coils coated, primarily due to vendor price increases that were passed through to customers and product mix.
Operating Income
For the current quarter, consolidated operating income was $83.8 million, an increase of $15.3 million, or 22.4%, compared to the prior year quarter.
Operating income for the AZZ Metal Coatings segment increased $12.4 million, or 23.9%, for the current quarter, compared to the prior year quarter. The increase was due to increased sales as described above, partially offset by an increase in cost of sales. The $30.5 million increase in cost of sales was primarily due to an $11.3 million increase in zinc costs, an $8.5 million increase in variable overhead costs and a $6.1 million increase in labor costs, both driven by a higher volume of steel processed during the current quarter, partially offset by a $0.2 million decrease in other direct costs. The increase in cost of sales also included an increase in fixed costs of $4.8 million, primarily related to utilities and lease costs. Selling, general and administrative expense increased $0.6 million.
Operating income for the AZZ Precoat Metals segment increased $6.8 million, or 18.7%, for the current quarter, compared to the prior year quarter. The increase was due to increased sales as described above, partially offset by an increase in cost of sales. The $18.2 million increase in cost of sales was primarily due to an $11.4 million increase in material costs driven by higher sales volume and increases in paint prices, a $2.0 million increase in labor costs, and a $4.8 million increase in overhead and other direct costs, driven by higher sales volume during the current quarter. Selling, general and administrative expense increased $1.1 million.
Corporate Expenses
Corporate selling, general and administrative expenses increased $3.9 million, or 19.7%, for the current quarter, compared to the prior year quarter. The increase was primarily due to a $2.6 million increase in acquisition costs related to the Seattle Galvanizing acquisition and $1.3 million in higher compensation-related and other corporate expenses, primarily driven by stock-based compensation, salaries and wages, and travel expenses.
Interest Expense
Interest expense for the current quarter decreased $2.9 million, to $10.8 million, compared to $13.7 million for the prior year quarter. The decrease in interest expense was primarily attributable to a $131.9 million decrease in weighted average debt outstanding and a 98 basis point decrease in the weighted average interest rate, from 6.20% in the prior year quarter to 5.22% in the current quarter. The decrease in interest expense was partially offset by higher interest expense related to the Company's finance leases.
Equity in Earnings of Unconsolidated Subsidiary
Equity in earnings of unconsolidated subsidiary for the current quarter decreased $52.6 million, to $6.7 million, compared to $59.3 million in the prior year quarter. The decrease was primarily due to the recognition of a gain on the sale of AVAIL's EPG in the prior year quarter and lower ongoing equity in earnings in the current quarter, partially offset by a gain on the sale of AVAIL's Rig-A-Lite business in the current quarter and the recognition of an impairment loss on the AVAIL JV in the prior year quarter. See "Liquidity and Capital Resources-AVAIL JV" section below for more information about the AVAIL JV.
Income Taxes
The provision for income taxes reflects an effective tax rate of 26.7% for the three months ended August 31, 2026, compared to 21.9% for the three months ended August 31, 2025. The increase in the effective tax rate is primarily attributable to higher discrete R&D tax credits recorded during the prior year three-month period, a change in the relative mix of earnings across the jurisdictions within which we operate and higher compensation limited by Internal Revenue Code Section 162(m) in fiscal 2027.
SIX MONTHS ENDED AUGUST 31, 2026 COMPARED TO THE SIX MONTHS ENDED AUGUST 31, 2025
Segment Sales and Operating Income
The following tables contain operating segment data by segment, for the Company's corporate operations and on a consolidated basis (in thousands):
Six Months Ended August 31, 2026
Metal Coatings Precoat Metals
Infrastructure Solutions(1)
Corporate(2)
Total
Sales $ 443,824 $ 491,598 $ - $ - $ 935,422
Cost of sales 310,918 390,209 - - 701,127
Gross margin 132,906 101,389 - - 234,295
Selling, general and administrative(4)
12,270 16,520 - 44,691 73,481
Operating income (loss) 120,636 84,869 - (44,691) 160,814
Interest expense - - - (22,071) (22,071)
Equity in earnings of unconsolidated subsidiary(5)
- - 7,298 - 7,298
Other income (expense) 17 - - (250) (233)
Income (loss) before income tax $ 120,653 $ 84,869 $ 7,298 (67,012) 145,808
Income tax expense 35,351 35,351
Net income (loss) $ (102,363) $ 110,457
See notes below tables.
Six Months Ended August 31, 2025
Metal Coatings Precoat Metals
Infrastructure Solutions(1)
Corporate(2)
Total
Sales $ 377,199 $ 462,038 $ - $ - $ 839,237
Cost of sales(3)
263,279 370,536 - - 633,815
Gross margin 113,920 91,502 - - 205,422
Selling, general and administrative(4)
11,482 15,627 106 40,197 67,412
Operating income (loss) 102,438 75,875 (106) (40,197) 138,010
Interest expense - - - (32,228) (32,228)
Equity in earnings of unconsolidated subsidiary(5)
- - 232,868 - 232,868
Other income (expense) (60) - - 1,575 1,515
Income (loss) before income tax $ 102,378 $ 75,875 $ 232,762 (70,850) 340,165
Income tax expense 79,911 79,911
Net income (loss) $ (150,761) $ 260,254
(1)
The AZZ 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.
(2)
Interest expense and Income tax expense are included in the Corporate segment as these items are not allocated to the segments.
(3)
For the six months ended August 31, 2025, the AZZ Metal Coatings segment includes restructuring charges of $3.8 million. See "Item I. Financial Statements-Note 17."
(4)
Includes stock-based compensation expense recognized during the six months ended August 31, 2025 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 the AZZ Metal Coatings segment and the Corporate segment, respectively. See "Item I. Financial Statements-Note 15."
(5)
On May 14, 2026, AVAIL completed the sale of Rig-A-Lite. The six months ended August 31, 2026 includes a $8.0 million gain related to the sale of Rig-A-Lite. During the first quarter of fiscal 2026, AVAIL completed the sale of the EPG. The six months ended August 31, 2025 includes $227.5 million, which represents the gain related to the sale of the EPG business, offset by the recognition of an impairment loss on the AVAIL JV and an adjustment related to a change in AVAIL's transfer pricing policy. For additional information about the AVAIL JV, see "Liquidity and Capital Resources-AVAIL JV."
For the current six-month period, we recorded sales of $935.4 million, compared to the prior year six-month period of $839.2 million. Of total sales for the current six-month period, 47.4% were generated from the AZZ Metal Coatings segment and 52.6% from the AZZ Precoat Metals segment. Net income for the current six-month period was $110.5 million, compared to $260.3 million for the prior year six-month period. Net income as a percentage of sales was 11.8% for the six-month period compared to 31.0% for the prior year six-month period. Diluted earnings per common share decreased by 57.5%, to $3.66 per share for the current six-month period, compared to $8.61 per share for the prior year six-month period. The decrease was primarily due to higher equity in earnings from the AVAIL JV in the prior year six-month period, which included a significant gain from AVAIL's sale of the EPG, partially offset by a gain from AVAIL's sale of Rig-A-Lite in the current six-month period.
Sales
Sales for the AZZ Metal Coatings segment increased $66.6 million, or 17.7%, for the current six-month period, compared to the prior year six-month period. The increase was primarily due to a $56.6 million increase resulting from a higher volume of steel processed, primarily driven by increases in the construction and industrial end markets; a $6.2 million increase in average selling price, primarily in response to inflationary pressures; and a $3.8 million increase in other sales, primarily due to by-product sales related to zinc.
Sales for the AZZ Precoat Metals segment increased $29.6 million, or 6.4%, for the current six-month period, compared to the prior year six-month period. The increase was primarily due to an increase in the average price of coils coated, primarily due to vendor price increases that were passed through to customers and product mix. The increase in sales was partially offset by a lower volume of coils coated, driven by decreases in construction, HVAC and appliances, infrastructure, transportation, and other end markets, partially offset by increases in the container end market, driven by continued ramp-up at the Washington, Missouri facility.
Operating Income
For the current six-month period, consolidated operating income increased $22.8 million, or 16.5%, to $160.8 million, compared to the prior year six-month period.
Operating income for the AZZ Metal Coatings segment increased $18.2 million, or 17.8%, for the current six-month period, compared to the prior year six-month period. The increase was due to increased sales as described above, partially offset by an increase in cost of sales. The $47.6 million increase in cost of sales was primarily due to a $17.5 million increase in zinc costs, a $11.9 million increase in variable overhead costs, and a $9.8 million increase in labor costs, partially offset by a $0.5 million decrease in other direct costs. The increase in cost of sales also included $8.9 million of higher fixed overhead costs, primarily related to insurance costs, utilities, lease costs, and employee benefits. Selling, general and administrative expense increased $0.8 million.
Operating income for the AZZ Precoat Metals segment increased $9.0 million, or 11.9%, for the current six-month period, compared to the prior year six-month period. The increase was due to increased sales as described above, partially offset by an increase in cost of sales. The $19.7 million increase in cost of sales was primarily due to a $9.3 million increase in material costs driven by increases in paint prices, a $3.7 million increase in labor costs, and a $6.7 million increase in overhead and other direct costs. Selling, general and administrative expense increased $0.9 million, primarily due to professional services, payroll-related costs, and equity-based compensation.
Corporate Expenses
Corporate selling, general and administrative expenses increased $4.5 million, or 11.2%, for the current six-month period, compared to the prior year six-month period. The increase was primarily due to a $2.6 million increase in acquisition costs related to the Seattle Galvanizing acquisition and $1.9 million in other corporate expenses, primarily driven by salary and wage increases, travel expenses, director fees, and payroll-related costs.
Interest Expense
Interest expense for the current six-month period decreased $10.2 million, to $22.1 million, compared to $32.2 million for the prior year six-month period. The decrease was primarily attributable to a $248.1 million decrease in weighted average debt outstanding and a 126 basis point decrease in the weighted average interest rate, from 6.49% in the prior year six-month period to 5.23% in the current six-month period. The decrease in interest expense was partially offset by higher interest expense related to Company's finance leases, debt financing cost amortization, and lower capitalized interest.
Equity in Earnings of Unconsolidated subsidiary
Equity in earnings of unconsolidated subsidiary decreased $225.6 million, to $7.3 million, for the current six-month period, compared to $232.9 million in the prior year six-month period. The decrease was primarily due to the recognition of a gain on the sale of AVAIL's EPG in the prior year six-month period and lower ongoing earnings following the divestiture of AVAIL's EPG and WSI businesses, partially offset by the recognition of an impairment loss on the AVAIL JV in the prior year six-month period and the recognition of a gain on the sale of AVAIL's Rig-A-Lite business in the current six-month period. See "Liquidity and Capital Resources-AVAIL JV" section below for more information about the AVAIL JV.
Income Taxes
The provision for income taxes reflects an effective tax rate of 24.2% for the six months ended August 31, 2026, compared to 23.5% for the six months ended August 31, 2025. The increase in the effective tax rate is primarily attributable to higher discrete R&D tax credits recorded during the prior year six-month period, a change in the relative mix of earnings across the jurisdictions within which we operate and higher compensation limited by Internal Revenue Code Section 162(m), partially offset by higher tax deductions for stock compensation in fiscal 2027.
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 August 31, 2026, our total liquidity of $376.4 million consisted of available capacity under our Revolving Credit Facility of $374.4 million and cash and cash equivalents of $2.0 million.
Cash Flows
The following table summarizes our cash flows by category for the periods presented (in thousands):
Six Months Ended August 31,
2026 2025
Net cash provided by operating activities $ 139,991 $ 373,169
Net cash used in investing activities (78,893) (66,491)
Net cash used in financing activities (59,981) (306,614)
Net cash provided by operating activities for the six months ended August 31, 2026 decreased by $233.2 million compared to the six months ended August 31, 2025, primarily due to:
•a decrease in cash distributions from the AVAIL JV of $273.2 million, following AVAIL's sale of its EPG business,
•a decrease in net income of $149.8 million, primarily due to a decrease in equity in earnings from the AVAIL JV,
•a decrease in cash from working capital of $25.5 million, related to decreases in income tax payable and accrued expenses, coupled with an increase in inventories, accounts receivable, and contract assets, partially offset by an increase in accounts payable; and
•a decrease in cash flows from deferred income taxes of $13.2 million, primarily due to cash tax savings recognized in the prior year resulting from the enactment of the One Big Beautiful Bill; partially offset by
•a decrease in non-cash equity in earnings from the AVAIL JV of $225.6 million, primarily due to equity in earnings related to the AVAIL JV's sale of its EPG business in the prior year,
•an increase in non-cash expenses of $2.0 million, primarily due to restructuring expenses recognized in the prior year, as well as share-based compensation expense, a decrease in gain on sale of property, plant and equipment and bad debt expense, partially offset by an increase in depreciation expense, partly due to the new aluminum coil coating facility in Washington, Missouri and an increase in amortization of debt financing costs due to the write-off following the refinancing of the 2022 Credit Agreement, and
•an increase in cash flows from long-term assets and liabilities of $0.9 million, primarily due to decreases in long-term lease liabilities and other long-term liabilities,
Cash flows used in investing activities for the six months ended August 31, 2026 increased by $12.4 million compared to the prior six months ended August 31, 2025, primarily due to:
•an increase in cash used of $27.4 million due to the acquisition of Seattle Galvanizing on July 30, 2026, and
•a decrease of $3.7 million in proceeds from the sale of property, plant and equipment, partially offset by
•an increase of $15.7 million in proceeds from return of investment from the AVAIL JV; and
•a decrease of $3.0 million in capital expenditures, primarily due to a decrease in capital expenditures for our Precoat Metals segment, partially offset by an increase in capital expenditures for our Metal Coatings segment.
Cash flows used in financing activities for the six months ended August 31, 2026 decreased by $246.6 million compared to the prior six months ended August 31, 2025, primarily due to:
•a decrease in net payments on long-term debt and finance leases of $274.5 million, and
•a decrease in debt financing costs paid of $0.2 million, partially offset by
•an increase in repurchase of treasury stock of $20.0 million,
•an increase in tax payments related to common stock issued under stock-based plans of $6.1 million,
•an increase in dividend payments of $2.1 million, reflecting an increase in the quarterly cash dividend per share compared to the prior year quarter.
Financing and Capital
2022 Credit Agreement and Term Loan B
We have a credit agreement with a syndicate of financial institutions as lenders, entered into on May 13, 2022 and amended from time to time (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 August 31, 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 7, 2029 (following the amendment on May 7, 2026, as described below);
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 1.25% and 2.25%; as of August 31, 2026, the interest rate was SOFR plus 1.50%;
v.includes customary affirmative and negative covenants, and events of default; including restrictions on the incurrence of non-ordinary course debt, investments 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 May 7, 2026, we amended our 2022 Credit Agreement to change the following terms of the Revolving Credit Facility:
i.extended the maturity date of our Revolving Credit Facility from May 31, 2026 to May 7, 2029;
ii.added JP Morgan Chase Bank, N.A. and PNC Capital Markets LLC as additional lenders, and removed Citibank N.A. and Barclays Bank PLC as lenders;
iii.reduced the interest rate tiers from a range of SOFR plus 1.75% to 2.75% to a range of SOFR plus 1.25% to 2.25%; and
iv.reduced the leverage-based commitment fee tiers from a range of 0.20% to 0.30% to a range of 0.15% to 0.25%.
In connection with the amendment, approximately 37.50% of the aggregate principal amount was reallocated to the new lenders. We evaluated the amendment under the guidance in ASC 470-50, Debt-Modifications and Extinguishments, and concluded that the amendment represented a modification at the instrument level, as the quantitative 10% cash flow test was not met. However, the lender reallocation resulted in a partial extinguishment at the lender level. As a result, for the six months ended August 31, 2026, we recognized a write-off of approximately $0.6 million of unamortized debt financing costs, which is included in "Interest expense, net" on our consolidated statement of operations and in "Amortization of debt financing costs" on our consolidated statement of cash flows.
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 August 31, 2026, the total amount of receivables pledged under the facility was $271.1 million, consisting of $166.1 million in trade accounts receivable and $105.0 million in contract assets, with outstanding borrowings of $150.0 million. The interest rate on the Receivables Securitization Facility is one-month SOFR plus 0.95%.
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 continuously monitor these provisions to ensure compliance and availability under the facility.
The proceeds from the Receivables Securitization Facility were used to pay down the Term Loan B.
Debt Compliance and Outstanding Borrowings
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 August 31, 2026, we were in compliance with all covenants and other requirements set forth in the 2022 Credit Agreement and the Receivables Securitization Facility.
The weighted-average interest rate for our outstanding debt, including the Revolving Credit Facility, the Term Loan B, and the Receivables Securitization Facility was 5.23% and 5.94% as of August 31, 2026 and February 28, 2026, respectively. We are also obligated to pay a leverage-based commitment fee with various tiers between 0.15% and 0.25% per year for unused amounts under the Revolving Credit Facility. As of August 31, 2026, the commitment fee rate was 0.175%.
As of August 31, 2026, we had $500.0 million of debt outstanding, with varying maturities through fiscal 2030. We had approximately $374.4 million of additional credit available as of August 31, 2026.
Letters of Credit
As of August 31, 2026, we had outstanding letters of credit in the amount of $10.6 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 June 30, 2025, we entered into a fixed-rate interest rate swap agreement (the "2025 Swap"). The 2025 Swap converts the SOFR-based component of the interest rate to 3.759%. As of August 31, 2026, the 2025 Swap resulted in a total fixed rate of 5.509%. The 2025 Swap has a 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 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, net" in the consolidated statement of operations.
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.
On May 14, 2026, AVAIL completed the sale of its industrial lighting business, Rig-A-Lite.
As of August 31, 2026, our investment in the AVAIL JV was $11.5 million. For the three and six months ended August 31, 2026, we recorded $6.8 million and $7.3 million of equity in earnings, respectively. The majority of the equity in earnings related to the recognition of our proportionate share of the gain on the sale of Rig-A-Lite. During both the three and six months ended August 31, 2026, our proportionate share of equity in earnings (loss) from AVAIL JV operations was not significant.
We classify cash flows from distributions using the cumulative earnings method. Cash received is classified as a return on investment and included in operating cash flows to the extent that cumulative earnings exceed cumulative distributions, less distributions received in prior periods that were deemed returns of investment. During the six months ended August 31, 2026, we received $15.7 million in distributions, which were deemed to be returns on investment and reflected in cash flows from operating activities.
Share Repurchase Program
During the six months ended August 31, 2026, we repurchased 136,303 shares of common stock in the amount of $20.0 million at an average purchase price per share of $146.71 under the 2020 Authorization. As of August 31, 2026, there was $13.2 million remaining to repurchase shares under the 2020 Authorization. During the six months ended August 31, 2026, we did not repurchase any shares of common stock under the 2026 Share Repurchase Program. As of August 31, 2026, there was $100.0 million remaining to repurchase shares under the 2026 Share Repurchase Program. See "Part II. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds."
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 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 Obligations
As of August 31, 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.
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.
There were no significant changes to our critical accounting policies and estimates 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, 2026.
Recent Accounting Pronouncements
See "Item I. Financial Statements-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.
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 the following items from the reported GAAP measure: 1) intangible asset amortization, 2) restructuring charges, 3) acquisition costs, 4) additional stock compensation expense related to the adoption of our executive retiree long-term incentive program, 5) certain adjustments related to the Company's unconsolidated joint venture, and 6) the write-off of debt financing costs. 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 three and six months ended August 31, 2026 and 2025 from the non-GAAP Adjusted Earnings Measures to the most comparable measures, calculated in accordance with GAAP (in thousands, except per share data):
Adjusted Net Income and Adjusted Earnings Per Share
Three Months Ended August 31, Six Months Ended August 31,
2026 2025 2026 2025
Amount
Per
Diluted Share(1)
Amount
Per
Diluted Share(1)
Amount
Per
Diluted Share(1)
Amount
Per
Diluted Share(1)
Net income $ 58,451 $ 1.94 $ 89,346 $ 2.95 $ 110,457 $ 3.66 $ 260,254 $ 8.61
Adjustments:
Amortization of intangible assets 5,941 0.20 5,823 0.19 11,667 0.39 11,557 0.38
Restructuring charges(2)
- - - - - - 3,827 0.13
Acquisition costs(3)
2,771 0.09 - - 2,771 0.09 - -
Executive retiree long-term incentive program(4)
- - - - - - 2,185 0.07
AVAIL JV equity in earnings adjustment(5)
(6,663) (0.22) (61,639) (2.04) (8,011) (0.27) (227,465) (7.52)
Write-off of debt financing costs(6)
- - - - 572 0.02 - -
Subtotal 2,049 0.07 (55,816) (1.84) 6,999 0.23 (209,896) (6.94)
Tax impact(7)
(365) (0.01) 13,396 0.44 (1,553) (0.05) 50,375 1.67
Total adjustments 1,684 0.06 (42,420) (1.40) 5,446 0.18 (159,521) (5.27)
Adjusted net income and adjusted earnings per share (non-GAAP) $ 60,135 $ 2.00 $ 46,926 $ 1.55 $ 115,903 $ 3.84 $ 100,733 $ 3.33
Weighted average shares outstanding-Diluted for Adjusted earnings per share 30,123 30,244 30,145 30,243
See notes below tables.
Adjusted EBITDA
Three Months Ended August 31, Six Months Ended August 31,
2026 2025 2026 2025
Net income $ 58,451 $ 89,346 $ 110,457 $ 260,254
Interest expense 10,807 13,665 22,071 32,228
Income tax expense 21,339 24,983 35,351 79,911
Depreciation and amortization 24,168 22,372 47,687 44,199
Adjustments:
Restructuring charges(2)
- - - 3,827
Acquisition costs(3)
2,771 - 2,771 -
Executive retiree long-term incentive program(4)
- - - 2,185
AVAIL JV equity in earnings adjustment(5)
(6,663) (61,639) (8,011) (227,465)
Adjusted EBITDA (non-GAAP) $ 110,873 $ 88,727 $ 210,326 $ 195,139
See notes below tables.
Adjusted EBITDA by Segment
A reconciliation of Adjusted EBITDA by segment to net income is as follows (in thousands):
Three Months Ended August 31, 2026
Metal Coatings Precoat Metals Infra-
structure Solutions 		Corporate Total
Net income (loss) $ 64,104 $ 43,334 $ 6,789 $ (55,776) $ 58,451
Interest expense - - - 10,807 10,807
Income tax expense - - - 21,339 21,339
Depreciation and amortization 7,472 10,487 - 6,209 24,168
Adjustments:
Acquisition costs(3)
- - - 2,771 2,771
AVAIL JV equity in earnings adjustment(5)
- - (6,663) - (6,663)
Adjusted EBITDA (non-GAAP) $ 71,576 $ 53,821 $ 126 $ (14,650) $ 110,873
See notes below tables.
Three Months Ended August 31, 2025
Metal Coatings Precoat Metals Infra-
structure Solutions 		Corporate Total
Net income (loss) $ 51,708 $ 36,521 $ 59,319 $ (58,202) $ 89,346
Interest expense - - - 13,665 13,665
Income tax expense - - - 24,983 24,983
Depreciation and amortization 6,830 9,424 - 6,118 22,372
Adjustments:
AVAIL JV equity in earnings adjustment(5)
- - (61,639) - (61,639)
Adjusted EBITDA (non-GAAP) $ 58,538 $ 45,945 $ (2,320) $ (13,436) $ 88,727
See notes below tables.
Six Months Ended August 31, 2026
Metal Coatings Precoat Metals Infra-
structure Solutions 		Corporate Total
Net income (loss) $ 120,653 $ 84,869 $ 7,298 $ (102,363) $ 110,457
Interest expense - - - 22,071 22,071
Income tax expense - - - 35,351 35,351
Depreciation and amortization 14,738 20,709 - 12,240 47,687
Adjustments:
Acquisition costs(3)
- - - 2,771 2,771
AVAIL JV equity in earnings adjustment(5)
- - (8,011) - (8,011)
Adjusted EBITDA (non-GAAP) $ 135,391 $ 105,578 $ (713) $ (29,930) $ 210,326
See notes below tables.
Six Months Ended August 31, 2025
Metal Coatings Precoat Metals Infra-
structure Solutions 		Corporate Total
Net income (loss) $ 102,378 $ 75,875 $ 232,762 $ (150,761) $ 260,254
Interest expense - - - 32,228 32,228
Income tax expense - - - 79,911 79,911
Depreciation and amortization 13,490 18,546 - 12,163 44,199
Adjustments:
Restructuring charges(2)
3,827 - - - 3,827
Executive retiree long-term incentive program(4)
358 - - 1,827 2,185
AVAIL JV equity in earnings adjustment(5)
- - (227,465) - (227,465)
Adjusted EBITDA (non-GAAP) $ 120,053 $ 94,421 $ 5,297 $ (24,632) $ 195,139
See notes below tables.
Debt Leverage Ratio Reconciliation
Trailing Twelve Months Ended
August 31, 2026 February 28, 2026
Gross debt $ 500,000 $ 515,000
Less: Cash per bank statement (6,800) (13,227)
Add: Finance lease liability 45,650 13,746
Consolidated indebtedness $ 538,850 $ 515,519
Net income $ 167,463 $ 317,260
Depreciation and amortization 93,543 90,056
Interest expense 45,493 55,650
Income tax expense 58,495 103,055
EBITDA $ 364,994 $ 566,021
Cash items(8)
8,200 5,426
Non-cash items(9)
14,057 14,832
Equity in earnings, net of distributions 15,836 (209,733)
Adjusted EBITDA per Credit Agreement $ 403,087 $ 376,546
Net leverage ratio 1.3x 1.4x
(1)
Earnings per share amounts included in the "Adjusted Net Income and Adjusted Earnings Per Share" table above may not sum due to rounding differences.
(2)
The six months ended August 31, 2025 includes restructuring charges related to the closure of two surface technology facilities in our AZZ Metal Coatings segment. See "Item 1. Financial Statements-Note 17."
(3)
The three and six months ended August 31, 2026 include expenses related to the Seattle Galvanizing acquisition. For further information about the Seattle Galvanizing acquisition, see "Item 1. Financial Statements-Note 2."
(4)
During the six months ended August 31, 2025, 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 1. Financial Statements-Note 15."
(5)
On May 14, 2026, AVAIL completed the sale of Rig-A-Lite. The three months ended August 31, 2026 include $7.9 million from the sale of Rig-A-Lite, partially offset by a $1.3 million decrease to a previously recognized gain on the sale of AVAIL's WSI business. The six months ended August 31, 2026 include $7.9 million, which represents the gain related to the sale of Rig-A-Lite.
During the first quarter of fiscal 2026, AVAIL completed the sale of the EPG. The three and six months ended August 31, 2025 include $61.6 million and $227.5 million, respectively, which represent the gain related to the sale of the EPG, partially offset by an impairment loss on the AVAIL JV and an adjustment related to a change in AVAIL's transfer pricing policy. For additional information about the AVAIL JV, see Note 8.
(6)
The write-off of $0.6 million of unamortized debt financing costs relates to the refinancing of our Revolving Credit Facility on May 7, 2026, which resulted in a partial extinguishment at the lender level. For further information, see "Item 1. Financial Statements-Note 10."
(7)
For the three and six months ended August 31, 2026, the tax impact includes a non-GAAP effective tax rate of 24.0% for amortization of intangible assets, acquisition costs, and the write-off of debt financing costs, and non-GAAP effective tax rates of 25.9% and 25.6%, respectively, for the AVAIL JV equity in earnings adjustment.
For the three and six months ended August 31, 2025, the non-GAAP effective tax rate is estimated at 24.0%.
(8)
Cash items include certain legal settlements, retirement and other severance expenses, restructuring charges associated with the AZZ Metal Coatings segment, acquisition costs, and other accruals.
(9)
Non-cash items include stock-based compensation expense.
AZZ Inc. published this content on October 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 13, 2026 at 20:17 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]