AZZ INC

Previous wording

The following discussion should be read in conjunction with management’s discussion and analysis contained in our Annual Report on Form 10-K for the fiscal year ended February 29, 2024, and with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

Current wording

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 29, 2024, and with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

Previous wording

Our results for the six months ended August 31, 2024 (the "current six-month period"), were favorably impacted by the growth in demand for our manufactured solutions in the construction, utilities, and transportation industries, coupled with our value driven pricing strategy.

Current wording

Our results for the nine months ended November 30, 2024 (the "current nine-month period") were favorably impacted by the growth in demand for our manufactured solutions in the construction andutilities industries.

Previous wording

The demand for our manufactured solutions was the primary contributor to net income of $75.0 million for the six months ended August 31, 2024. Our operating results for the three and six months ended August 31, 2024, 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.”

Current wording

The demand for our manufactured solutions was the primary contributor to net income of $108.6 million for the nine months ended November 30, 2024. Our operating results for the three and nine months ended November 30, 2024, 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."

Previous wording

Our operations generated $119.4 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.”

Current wording

Our operations generated $185.6 million of cash for the current nine-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."

Previous wording

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, several factors are outlined below that may impact our results of operations during the third quarter of fiscal 2025.

Current wording

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, several factors are outlined below that may impact our results of operations during the fourth quarter of fiscal 2025.

Previous wording

•Sales prices in our AZZ Metal Coatings segment are expected to remain consistent with current levels. Fluctuations in category mix and material type mix, along with competitive market pressures, may impact selling price.

Current wording

•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.

Previous wording

•Customer inventories for our AZZ Precoat Metals segment remain at historical levels, which should support the continued demand for our coil coating solutions.

Current wording

•Customer inventories for our AZZ Precoat Metals segment remain at normal seasonal levels, which should support the continued demand for our coil coating solutions.

Previous wording

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 divided by each of our segments, along with corporate costs and other costs not specifically identifiable to a segment. For a reconciliation of segment operating income to consolidated operating income, see Note 6 to the consolidated financial statements. 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.

Current wording

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 divided by each of our segments, along with corporate costs and other costs not specifically identifiable to a segment. For a reconciliation of segment operating income to consolidated operating income, see "Item I. Financial Statements—Note 6". 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.

Previous wording

For the three months ended August 31, 2024 (the "current quarter"), consolidated sales increased $10.5 million, or 2.6%, compared to the three months ended August 31, 2023 (the "prior year quarter"). Sales for the AZZ Metal Coatings segment increased $1.7 million, or 1.0%, for the current quarter, compared to the prior year quarter. The increase was primarily due to an increase of $1.6 million resulting from a higher volume of steel processed and an increase of $1.0 million due to an increase in selling price, partially offset by a decrease in other sales of $1.1 million.

Current wording

For the three months ended November 30, 2024 (the "current quarter"), consolidated sales increased $22.0 million, or 5.8%, compared to the three months ended November 30, 2023 (the "prior year quarter").

Previous wording

Sales for the AZZ Precoat Metals segment increased $8.8 million, or 3.8% for the current quarter. The increase is due to a higher volume of coil coated in the current quarter, compared to the prior year quarter, while the average price decreased slightly due to product mix.

Current wording

Sales for the AZZ Precoat Metals segment increased $16.6 million, or 7.6% for the current quarter. The increase is due to a higher volume of coil coated in the current quarter, compared to the prior year quarter, and an increase in the average price due to product mix.

Previous wording

For the current quarter, consolidated operating income was $67.6 million, an increase of $6.6 million, or 10.9%, compared to the prior year quarter.

Current wording

For the current quarter, consolidated operating income was $58.5 million, an increase of $5.7 million, or 10.8%, compared to the prior year quarter.

Previous wording

Operating income for the AZZ Metal Coatings segment increased $2.6 million, or 5.8%, for the current quarter, compared to the prior year quarter. The increase was due to increased sales as described above, coupled with lower cost of sales. The decrease in cost of sales of $1.3 million was primarily due to a $3.9 million decrease in zinc cost, partially offset by a $2.7 million increase in overhead costs and a $0.2 million increase in labor costs.

Current wording

Operating income for the AZZ Metal Coatings segment increased $8.5 million, or 22.5%, 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 increase in cost of sales of $0.6 million was primarily due to a $3.1 million increase in overhead costs and a $0.8 million increase in labor costs, partially offset by a $3.4 million decrease in zinc cost. Selling, general and administrative expense decreased $3.7 million, due to a legal reserve in the prior year, partially offset by an increase in compensation costs.

Previous wording

Operating income for the AZZ Precoat Metals segment increased $3.5 million, or 9.0% for the current quarter. The increase is primarily due to increased sales as described above, offset by higher cost of sales. Cost of sales increased $5.5 million, primarily due to variable costs related to the increased volume of steel processed, partially offset by a decrease of $0.2 million in selling, general and administrative expense.

Current wording

Operating income for the AZZ Precoat Metals segment increased $4.3 million, or 13.2% for the current quarter. The increase is primarily due to increased sales as described above, offset by higher cost of sales. Cost of sales increased $11.8 million, primarily due to variable costs related to the increased volume of coil coated and an increase in fixed costs. Selling, general and administrative expense increased $0.5 million.

Previous wording

Corporate selling, general and administrative expenses increased $5.4 million, or 31.6%, for the current quarter, compared to the prior year quarter. The increase was primarily due to an increase in stock-based compensation related to the Company's employee stock purchase plan, due to the increase in AZZ's common stock price. In addition, salaries and wages increased due to retirement and other severance expense for certain executive management employees and transition services agreement fees associated with the AVAIL JV, which were received in the prior year quarter, with no comparable receipt in the current quarter.

Current wording

Corporate selling, general and administrative expenses increased $7.4 million, or 42.4%, for the current quarter, compared to the prior year quarter. The increase was primarily due to: an increase in salaries and wages, due to retirement and other severance expense for certain executive management employees; increased incentive expense, due to improved performance of the Company; an increase in stock-based compensation related to the Company's employee stock purchase plan, due to the increase in AZZ's common stock price; a legal settlement and other legal expenses related to a non-operating entity of $3.5 million; and transition services agreement fees associated with the AVAIL JV, which were received in the prior year quarter, with no comparable receipt in the current quarter.

Previous wording

Interest expense for the current quarter decreased $5.9 million, to $21.9 million, compared to $27.8 million for the prior year quarter. The decrease in interest expense is primarily attributable to a decrease in the weighted average debt outstanding of $99.4 million and a decrease in the weighted average interest rate of 1.03% in the current quarter compared to the prior year quarter, coupled with higher capitalized interest of $1.2 million associated with the construction of the new plant in Washington, Missouri.

Current wording

Interest expense for the current quarter decreased $6.6 million, to $19.2 million, compared to $25.9 million for the prior year quarter. The decrease in interest expense is primarily attributable to a decrease in the weighted average debt outstanding of $111.2 million and a decrease in the weighted average interest rate of 1.3% in the current quarter compared to the prior year quarter, coupled with higher capitalized interest of $1.1 million associated with the construction of the new plant in Washington, Missouri.

Previous wording

Equity in earnings of unconsolidated subsidiaries for the current quarter increased $0.5 million, to $1.5 million, compared to $1.0 million in the prior year quarter. The increase is due to higher earnings from the AVAIL JV, primarily driven by AVAIL's enclosure business.

Current wording

Equity in earnings of unconsolidated subsidiaries for the current quarter decreased $1.6 million, to $7.2 million, compared to $8.7 million in the prior year quarter. The decrease is due to lower earnings from the AVAIL JV in the current quarter compared to the prior year quarter.

Previous wording

For the current six-month period, consolidated sales increased $32.8 million, or 4.2%, compared to the six months ended August 31, 2023 (the "prior year six-month period").

Current wording

For the current nine-month period, consolidated sales increased $54.8 million, or 4.7%, compared to the nine months ended November 30, 2023 (the "prior year nine-month period").

Previous wording

Sales for the AZZ Metal Coatings segment increased $9.5 million, or 2.8%, for the current six-month period, compared to the prior year six-month period. The increase in sales was primarily due to an increase of $13.2 million resulting from a higher volume of steel processed during the period and an increase of $1.9 million due to an increase in selling price, partially offset by a decrease in other sales of $2.3 million.

Current wording

Sales for the AZZ Metal Coatings segment increased $14.9 million, or 3.0%, for the current nine-month period, compared to the prior year nine-month period. The increase in sales was primarily due to an increase of $23.0 million resulting from a higher volume of steel processed during the period, partially offset by a decrease of $4.4 million in selling price, due to product mix. Other sales decreased $3.7 million.

Previous wording

Sales for the AZZ Precoat Metals segment increased $23.3 million, or 5.2% for the current six-month period, primarily due to a higher volume of coil coated, partially offset by a decrease in selling price.

Current wording

Sales for the AZZ Precoat Metals segment increased $39.9 million, or 6.0% for the current nine-month period, primarily due to a higher volume of coil coated, partially offset by a decrease in selling price due to product mix.

Previous wording

For the current six-month period, consolidated operating income increased $10.9 million, or 8.6%, to $137.4 million, compared to the prior year six-month period.

Current wording

For the current nine-month period, consolidated operating income increased $16.6 million, or 9.3%, to $195.9 million, compared to the prior year nine-month period.

Previous wording

Operating income for the AZZ Metal Coatings segment increased $5.1 million, or 5.6% for the current six-month period, compared to the prior year six-month period. The increase was due to improved sales as described above, partially offset by higher cost of sales and higher selling, general and administrative expenses. Cost of sales increased $3.6 million, prim arily due to higher labor and overhead costs, partially offset by a decrease in zinc costs. Selling, general and administrative expense increased primarily due to an increase in compensation costs.

Current wording

Operating income for the AZZ Metal Coatings segment increased $13.6 million, or 10.6% for the current nine-month period, compared to the prior year nine-month period. The increase was due to improved sales as described above, and lower selling, general and administrative expenses, partially offset by higher cost of sales. Cost of sales increased $4.2 million, prim arily due to higher labor and overhead costs of $13.8 million, partially offset by a decrease in zinc costs of $9.6 million. Selling, general and administrative expense decreased $2.9 million primarily due toa legal reserve in the prior year, partially offset byan increase in compensation costs.

Previous wording

Operating income for the AZZ Precoat Metals segment increased $5.9 million, or 7.7%. The increase is primarily due to the increase in sales as described above, offset by higher cost of sales. Cost of sales increased $17.2 million, prima rily due to variable costs related to the increased volume of steel processed.

Current wording

Operating income for the AZZ Precoat Metals segment increased $10.3 million, or 9.4%. The increase is primarily due to the increase in sales as described above, offset by higher cost of sales. Cost of sales increased $29.0 million, prima rily due to variable costs related to the increased volume of coil coated.

Previous wording

Operating income for the AZZ Infrastructure Solutions segment increased $5.9 million, primarily due to a legal settlement of $5.75 million and legal expenses associated with the settlement in the prior year six-month period.

Current wording

Operating income for the AZZ Infrastructure Solutions segment increased $6.2 million, primarily due to a legal settlement of $5.75 million and legal expenses associated with the settlement in the prior year nine-month period.

Previous wording

Corporate selling, general and administrative expenses increased $6.0 million, or 17.3%, for the current six-month period, compared to the prior year six-month period. The increase was primarily due to an increase in stock-based compensation related to the Company's employee stock purchase plan, due to the increase in AZZ's common stock price. In addition, salaries and wages increased due to the retirement and other severance expense for certain executive management employees and transition services agreement fees associated with the AVAIL JV, which were received in the prior year six-month period, with no comparable receipt in the current six-month period.

Current wording

Corporate selling, general and administrative expenses increased $13.4 million, or 25.7%, for the current nine-month period, compared to the prior year nine-month period. The increase was primarily due to: an increase in salaries and wages, due to the retirement and other severance expense for certain executive management employees; increased incentive expense due to improved performance of the Company; an increase in stock-based compensation related to our employee stock purchase plan, due to the increase in AZZ's common stock price; a legal settlement and other legal expenses related to a non-operating entity of $3.5 million; and transition services agreement fees associated with the AVAIL JV, which were received in the prior year nine-month period, with no comparable receipt in the current nine-month period.

Previous wording

Interest expense for the current six-month period decreased $11.8 million, to $44.7 million, compared to $56.5 million for the prior year six-month period. The decrease in interest expense is primarily attributable to a decrease in the weighted average debt outstanding of $108.5 million and a decrease in the weighted average interest rate of 0.92% in the current six-month period compared to the prior year six-month period, coupled with higher capitalized interest of $2.4 million associated with the construction of the new plant in Washington, MO.

Current wording

Interest expense for the current nine-month period decreased $18.4 million, to $63.9 million, compared to $82.3 million for the prior year nine-month period. The decrease in interest expense is primarily attributable to a decrease in the weighted average debt outstanding of $109.4 million and a decrease in the weighted average interest rate of 1.05% in the current nine-month period compared to the prior year nine-month period, coupled with higher capitalized interest of $3.5 million associated with the construction of the new plant in Washington, MO.

Previous wording

Equity in earnings of unconsolidated subsidiaries for the current six-month period increased $2.9 million, to $5.3 million, compared to $2.4 million inthe prior year six-month period. The increase is due to higher earnings from the AVAIL JV, primarily driven by AVAIL's enclosure business.

Current wording

Equity in earnings of unconsolidated subsidiaries for the current nine-month period increased $1.3 million, to $12.5 million, compared to $11.1 million inthe prior year nine-month period. The increase is due to higher earnings from the AVAIL JV, primarily driven by AVAIL's enclosure business.

Previous wording

The provision for income taxes reflects an effective tax rate of 23.9% for the current six-month period, compared to 21.5% for the prior year six-month period. The increase in the effective tax rate is primarily attributable to favorable adjustments for the prior year six-month period related to uncertain tax positions, partially offset by higher discrete items driven by tax deductions for stock compensation in fiscal year 2025.

Current wording

The provision for income taxes reflects an effective tax rate of 24.8% for the current nine-month period compared to 22.6% for the prior year nine-month period. The increase in the effective tax rate is primarily attributable to favorable adjustments for the prior year nine-month period related to uncertain tax positions, partially offset by higher discrete items driven by tax deductions for stock compensation in fiscal year 2025. The increase is also attributable to the increase in state tax expense, net of federal benefit.

Previous wording

As of August 31, 2024, our total liquidity of $312.9 million consisted of available capacity on our Revolving Credit Facility of $310.7 million and cash and cash equivalents of $2.2 million.

Current wording

As of November 30, 2024, our total liquidity of $347.2 million consisted of available capacity on our Revolving Credit Facility of $345.7 million and cash and cash equivalents of $1.5 million.

Previous wording

Net cash provided by operating activities for the current six-month period was $119.4 million, driven primarily by net income from continuing operations of $75.0 million, adjusted to exclude non-cash charges, net of non-cash income of $48.6 million, an increase in cash resulting from a reduction in working capital of $8.5 million, a decrease in cash resulting from changes in other long-term assets and liabilities, including deferred taxes, of $0.9 million and a cash distribution received on the investment in the AVAIL JV of $5.2 million. The increase in working capital is due primarily to increases in accounts payable, other accrued liabilities and income taxes payable, as well as a reduction in inventories; partially offset by increases in accounts receivable, other receivables, prepaid expenses and contract assets due to higher sales. Net cash provided by operating activities was used to fund $59.5 million of capital expenditures, make net payments on long-term debt and finance leases liabilities of $45.4 million, make dividend payments of $12.9 million and make payments for taxes related to net share settlement of equity awards of $5.0 million. We also completed a secondary public offering of 4.6 million shares of our common stock, which provided cash, net of offering costs, of $310.2 million, which was used to redeem our 240,000 shares of Series A Preferred Stock for $308.9 million.

Current wording

Net cash provided by operating activities for the current nine-month period was $185.6 million, driven primarily by net income from continuing operations of $108.6 million, adjusted to exclude non-cash charges, net of non-cash income of $69.1 million, an increase in cash resulting from a reduction in working capital of $2.9 million, a decrease in cash resulting from changes in other long-term assets and liabilities, including deferred taxes, of $1.8 million and a cash distribution received on the investment in the AVAIL JV of $6.8 million. The reduction in working capital is due primarily to increases in accounts payable, other accrued liabilities and income taxes payable, as well as a reduction in inventories and accounts receivable; partially offset by increases in other receivables, prepaid expenses and contract assets due to higher sales. Net cash provided by operating activities was used to fund $85.9 million of capital expenditures, make net payments on long-term debt and finance leases liabilities of $82.2 million, make dividend payments of $18.0 million and make payments for taxes related to net share settlement of equity awards of $5.0 million. We also completed a secondary public offering of 4.6 million shares of our common stock, which provided cash, net of offering costs, of $310.2 million, which was used to redeem our 240,000 shares of Series A Preferred Stock for $308.9 million.

Previous wording

Net cash provided by operating activities for the prior year six-month period was $118.3 million, driven primarily by net income of $56.9 million, adjusted to exclude non-cash charges, net of non-cash income of $46.4 million and an increase in cash resulting from an decrease in working capital of $21.4 million, partially offset by a decrease in cash resulting from other long-term assets and liabilities, including deferred taxes, of $6.3 million. Net cash provided by operating activities was used to fund $42.7 million of capital expenditures, make net payments on long-term debt and finance leases liabilities of $60.2 million, make dividend payments of $15.7 million and make payments for taxes related to net share settlement of equity awards of $0.8 million.

Current wording

Net cash provided by operating activities for the prior year nine-month period was $180.9 million, driven primarily by net income of $83.7 million, adjusted to exclude non-cash charges, net of non-cash income of $63.3 million and an increase in cash resulting from an decrease in working capital of $38.8 million, partially offset by a decrease in cash resulting from other long-term assets and liabilities, including deferred taxes, of $4.9 million. Net cash provided by operating activities was used to fund $66.9 million of capital expenditures, make net payments on long-term debt and finance leases liabilities of $86.6 million, make dividend payments of $23.6 million and make payments for taxes related to net share settlement of equity awards of $0.8 million.

Previous wording

We have a credit agreement with a syndicate of financial institutions that was entered into on May 13, 2022, and was subsequently amended on August 17, 2023, December 20, 2023 and March 20, 2024 (collectively referred to herein as the "2022 Credit Agreement"). See below for information related to the repricing of the Company's Term Loan B on September 24, 2024.

Current wording

We have a credit agreement with a syndicate of financial institutions that was entered into on May 13, 2022, and was subsequently amended on August 17, 2023, December 20, 2023, March 20, 2024 and September 24, 2024 (collectively referred to herein as the "2022 Credit Agreement").

Previous wording

iv. borrowings under the Term Loan B bear a tiered interest rate of Secured Overnight Financing Rate ("SOFR") plus 3.25%, which is part of, and not in addition to, the Revolving Credit Facility;

Current wording

iv. borrowings under the Term Loan B bear an interest rate of Secured Overnight Financing Rate ("SOFR") plus 2.50%, which is part of, and not in addition to, the Revolving Credit Facility;

Previous wording

v. borrowings under the Term Loan B bear a tiered interest rate of Secured Overnight Financing Rate ("SOFR") plus 3.25% (following the repricing on March 20, 2024 as described below) and the Revolving Credit Facility bears a leverage-based rate with various tiers between 2.75% and 3.50%; as of August 31, 2024, the interest rate was SOFR plus 2.75%;

Current wording

v. borrowings under the Term Loan B bear an interest rate of Secured Overnight Financing Rate ("SOFR") plus 2.50% (following the repricings on March 20, 2024 and September 24, 2024 as described below) and the Revolving Credit Facility bears a leverage-based rate with various tiers between 2.75% and 3.50%; as of November 30, 2024, the interest rate was SOFR plus 2.75%;

Previous wording

On September 24, 2024, we completed our third repricing of the Term Loan B, for which $890.3 million was outstanding as of August 31, 2024 . The repricing reduced the margin from SOFR plus 3.25% to SOFR plus 2.50%, for a total reduction of 75 basis points.

Current wording

On September 24, 2024, we completed our third repricing of the Term Loan B. The repricing reduced the margin from SOFR plus 3.25% to SOFR plus 2.50%, for a total reduction of 75 basis points.

Previous wording

The weighted average interest rate for our outstanding debt, including the Revolving Credit Facility and the Term Loan B, was 8.03% and 8.56% for the six months ended August 31, 2024 and 2023, respectively.

Current wording

The weighted average interest rate for our outstanding debt, including the Revolving Credit Facility and the Term Loan B, was 7.77% and 8.54% for the nine months ended November 30, 2024 and 2023, respectively.

Previous wording

As of August 31, 2024, we had $965.3 million of debt outstanding on the Revolving Credit Facility and the Term Loan B, with varying maturities through fiscal 2029. We had approximately $310.7 million of additional credit available as of August 31, 2024.

Current wording

As of November 30, 2024, we had $930.3 million of debt outstanding on the Revolving Credit Facility and the Term Loan B, with varying maturities through fiscal 2029. We had approximately $345.7 million of additional credit available as of November 30, 2024.

Previous wording

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"), with banks that are parties to the 2022 Credit Agreement, to change the SOFR-based component of the interest rate. The 2022 Swap converts the SOFR portion to 4.277%. On March 20, 2024, we repriced our Term Loan B to SOFR plus 3.25%, resulting in a total fixed rate of 7.527%. See "2022 Credit Agreement and Term Loan B" section above for information related to the repricing of the Company's Term Loan B on September 24, 2024. The 2022 Swap had an initial notional amount of $550.0 million and a maturity date of September 30, 2025. The notional amount of the interest rate swap decreases by a pro-rata portion of any quarterly principal payments made on the Term Loan B, and the current notional amount is $539.0 million as of August 31, 2024. The objective of the 2022 Swap is to eliminate the variability of cash flows in interest payments attributable to changes in benchmark one-month SOFR interest rates, for a portion of our variable-rate debt. 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 2022 Swap exactly offset changes in cash flows of the variable-rate debt. We designated the 2022 Swap as a cash flow hedge at inception. Cash payments or receipts to settle the 2022 Swap are recognized in interest expense.

Current wording

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"), with banks that are parties to the 2022 Credit Agreement, to change the SOFR-based component of the interest rate. The 2022 Swap converts the SOFR portion to 4.277%. On September 24, 2024, we repriced our Term Loan B to SOFR plus 2.50%, resulting in a total fixed rate of 6.777%. See "2022 Credit Agreement and Term Loan B" section abovefor information related to the repricing of the Company's Term Loan B on September 24, 2024. The 2022 Swap had an initial notional amount of $550.0 million and a maturity date of September 30, 2025. The notional amount of the interest rate swap decreases by a pro-rata portion of any quarterly principal payments made on the Term Loan B, and the current notional amount is $537.6 million as of November 30, 2024. The objective of the 2022 Swap is to eliminate the variability of cash flows in interest payments attributable to changes in benchmark one-month SOFR interest rates, for a portion of our variable-rate debt. 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 2022 Swap exactly offset changes in cash flows of the variable-rate debt. We designated the 2022 Swap as a cash flow hedge at inception. Cash payments or receipts to settle the 2022 Swap are recognized in interest expense.

Previous wording

Greenfield Aluminum Coil Coating Facility

Current wording

Capital Commitments—Greenfield Aluminum Coil Coating Facility

Previous wording

We are expanding our coatings capabilities by constructing a new 25-acre aluminum coil coating facility in Washington, Missouri that is expected to be operational in calendar year 2025 (the Company's fiscal year 2026). The new greenfield facility will be 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 $124.0 million in capital payments over the life of the project, of which $60.8 million was paid prior to fiscal 2025 and $35.6 million was paid during the six months ended August 31, 2024. The remaining balance of $27.6 million is to occur prior to the end of fiscal 2025, of which we have capital commitments of $17.4 million. The remaining payments in fiscal 2025 are expected to be funded through cash flows from operations.

Current wording

We are expanding our coatings capabilities by constructing a new 25-acre aluminum coil coating facility in Washington, Missouri that is expected to be operational in calendar year 2025 (the Company's fiscal year 2026). The new greenfield facility will be 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 $124.0 million in capital payments over the life of the project, of which $60.8 million was paid prior to fiscal 2025 and $46.8 million was paid during the nine months ended November 30, 2024. The remaining balance of $16.4 million is on schedule to occur by the first quarter of fiscal 2026, of which we have capital commitments of $9.7 million. The remaining payments through fiscal 2026 are expected to be funded through cash flows from operations.

Previous wording

During the six months ended August 31, 2024 and 2023, we did not repurchase shares of common stock under the 2020 Share Authorization. As of August 31, 2024, we had $53.2 million available under the 2020 Share Authorization that may be used to purchase shares in the future. See Part II, “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.”

Current wording

During the nine months ended November 30, 2024 and 2023, we did not repurchase shares of common stock under the 2020 Share Authorization. As of November 30, 2024, we had $53.2 million available under the 2020 Share Authorization that may be used to purchase shares in the future. See "Part II. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.”