Financial Performance - Sales reached $417.3 million, a 2.0% increase compared to the previous fiscal year[3] - Adjusted EBITDA was $88.7 million, representing a substantial 150.0% increase[3] - Adjusted Diluted EPS stood at $1.55, up by 3.4%[3] Segment Results - Metal Coatings sales amounted to $190 million, reflecting a 10.8% increase[1, 5] with Adjusted EBITDA Margin of 30.8%[5] - Precoat Metals sales were $227.3 million, a decrease of 4.3%[1, 6] with Adjusted EBITDA Margin of 20.2%[6] Balance Sheet and Cash Flow - Cash provided by operating activities in Q2 was $58.4 million, a 23% increase[1] - Debt reduction of $5 million was achieved, resulting in a net leverage ratio of 1.7X[1] FY2026 Guidance - The company maintains its FY2026 sales guidance of $1.625-$1.725 billion[1] - Adjusted EBITDA is projected to be in the range of $360-$400 million[1] - Adjusted Diluted EPS is expected to be $5.75-$6.25[1] Shareholder Returns - Total value returned to shareholders year-to-date in FY2026 through dividend payments was $11.1 million[7]

Core Viewpoint - AZZ Inc. experienced a decline in share prices following the announcement of fiscal second-quarter results that fell short of expectations, primarily due to weak demand in several key end markets [1] Group 1: Financial Performance - The company reported lower-than-expected sales for the fiscal second quarter, indicating challenges in meeting market demand [1] - The decline in sales was attributed to weak demand across multiple key end markets, which negatively impacted overall performance [1] Group 2: Market Reaction - Following the earnings report, AZZ Inc.'s stock price fell, reflecting investor concerns regarding the company's performance and market conditions [1]

Summary of Key Points Core Viewpoint - U.S. stock futures are slightly lower, with Nasdaq futures down approximately 0.1% on Thursday, indicating a cautious market sentiment [1]. Company-Specific Summaries Helen of Troy Ltd (NASDAQ:HELE) - Helen of Troy reported quarterly earnings of 59 cents per share, surpassing the analyst consensus estimate of 53 cents per share [1]. - The company achieved quarterly sales of $431.781 million, exceeding the analyst consensus estimate of $418.806 million [1]. - For FY2026, Helen of Troy projects adjusted EPS between $3.75 and $4.25, which is below market estimates of $4.58 [1]. - The company anticipates sales in the range of $1.739 billion to $1.780 billion, compared to market estimates of $1.750 billion [1]. - Shares of Helen of Troy fell 16.7% to $23.00 in pre-market trading following the earnings report [2]. Ferrari NV (NYSE:RACE) - Ferrari's shares decreased by 12.4% to $420.00 in pre-market trading after the release of its comprehensive 2030 strategic plan and updated near-term financial guidance [4]. Apogee Therapeutics, Inc. (NASDAQ:APGE) - Apogee Therapeutics' stock tumbled 9.6% to $42.70 in pre-market trading after announcing a $300 million underwritten public offering [4]. AZZ Inc (NYSE:AZZ) - AZZ Inc's shares declined by 9.4% to $96.01 in pre-market trading following weak second-quarter results [4]. Plug Power Inc. (NASDAQ:PLUG) - Plug Power's stock fell 7.8% to $3.37 in pre-market trading after a decline of more than 5% on Wednesday, despite raising $370 million from the immediate exercise of 185.4 million warrants at $2 per share [4]. Other Notable Stocks - Inventiva (NYSE:IVA) shares fell 6.3% to $5.02 in pre-market trading [4]. - NextNRG Inc (NASDAQ:NXXT) saw a decline of 5.8% to $2.59 in pre-market trading [4].

Group 1: Helen of Troy Ltd - Helen of Troy reported quarterly earnings of 59 cents per share, beating the analyst consensus estimate of 53 cents per share [1] - The company reported quarterly sales of $431.781 million, exceeding the analyst consensus estimate of $418.806 million [1] - For FY2026, Helen of Troy expects adjusted EPS of $3.75-$4.25, lower than market estimates of $4.58, and sales of $1.739 billion-$1.780 billion, compared to market estimates of $1.750 billion [1] Group 2: Stock Movements - Helen of Troy shares fell 16.7% to $23.00 in pre-market trading following the earnings report [2] - Ferrari NV shares decreased by 12.4% to $420.00 after releasing its 2030 strategic plan and updated financial guidance [4] - Apogee Therapeutics, Inc. shares tumbled 9.6% to $42.70 after announcing a $300 million public offering [4] - AZZ Inc shares declined 9.4% to $96.01 following weak second-quarter results [4] - Plug Power Inc shares fell 7.8% to $3.37 after raising $370 million from the exercise of warrants [4] - Inventiva shares decreased by 6.3% to $5.02 in pre-market trading [4] - NextNRG Inc shares fell 5.8% to $2.59 in pre-market trading [4]

Core Insights - AZZ Inc. reported earnings per share (EPS) of $1.55, slightly below the estimated $1.56, with total revenue of approximately $417.3 million, lower than the estimated $426.2 million [1][2] Financial Performance - Total sales increased by 2% year-over-year, reaching $417.3 million [2][6] - Metal Coatings sales rose by 10.8% to $190 million, while Precoat Metals sales declined by 4.3% to $227.3 million [2] - Net income surged by 152.3% to $89.3 million, with adjusted net income increasing by 13.8% to $46.9 million [2][6] - GAAP diluted EPS rose by 150% to $2.95 per share, and adjusted diluted EPS increased by 13.1% to $1.55 [3] - Consolidated adjusted EBITDA was $88.7 million, representing 21.3% of sales, slightly down from 22.5% the previous year [3] Segment Performance - The adjusted EBITDA margin was 30.8% for Metal Coatings and 20.2% for Precoat Metals [3] - Infrastructure Solutions reported an adjusted EBITDA of negative $2.3 million, excluding gains and other adjustments [3] Strategic Developments - AZZ completed the acquisition of a galvanizing facility in Canton, Ohio, for $30.1 million [4] - The company paid a cash dividend of $0.20 per share to common shareholders [4] - The strong performance of Metal Coatings was driven by infrastructure project spending and growth in construction, industrial, and electrical transmission and distribution markets [4] Market Valuation - AZZ has a price-to-earnings (P/E) ratio of approximately 12.19, indicating the market's valuation of its earnings [5][6] - The price-to-sales ratio stands at about 2.00, with an enterprise value to sales ratio of around 2.38 [5] - The enterprise value to operating cash flow ratio is approximately 7.66, and the earnings yield for AZZ is 8.20% [5] - The company's debt-to-equity ratio is 0.49, suggesting a moderate level of debt relative to equity, and it maintains a current ratio of 1.51 [5]

Core Insights - AZZ reported quarterly earnings of $1.55 per share, slightly missing the Zacks Consensus Estimate of $1.56 per share, but showing an increase from $1.37 per share a year ago, resulting in an earnings surprise of -0.64% [1] - The company posted revenues of $417.28 million for the quarter, which was 2.84% below the Zacks Consensus Estimate, but an increase from $409.01 million year-over-year [2] - AZZ shares have increased by approximately 28.3% since the beginning of the year, outperforming the S&P 500's gain of 14.2% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.53, with expected revenues of $431.16 million, and for the current fiscal year, the EPS estimate is $6.02 on revenues of $1.68 billion [7] - The estimate revisions trend for AZZ was favorable prior to the earnings release, leading to a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Manufacturing - Electronics industry, to which AZZ belongs, is currently ranked in the bottom 39% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Another company in the same industry, A.O. Smith, is expected to report quarterly earnings of $0.89 per share, reflecting a year-over-year increase of 8.5%, with revenues projected at $935.3 million, up 3.6% from the previous year [9][10]

Core Insights - AZZ Inc. reported solid financial results for the second quarter of fiscal year 2026, with total sales of $417.3 million, reflecting a 2.0% increase year-over-year, and adjusted diluted EPS of $1.55, up 13.1% [2][9] - The company maintains its fiscal year 2026 guidance, projecting sales between $1.625 billion and $1.725 billion, adjusted EBITDA of $360 million to $400 million, and adjusted diluted EPS of $5.75 to $6.25 [7][8] Financial Performance - Total sales for the second quarter reached $417.3 million, up 2.0% from the previous year, with Metal Coatings sales increasing by 10.8% to $190.0 million, while Precoat Metals sales decreased by 4.3% to $227.3 million [2][9] - Adjusted EBITDA for the quarter was $88.7 million, representing 21.3% of sales, down from $91.9 million or 22.5% of sales in the prior year [9] - Net income surged to $89.3 million, a 152.3% increase, while adjusted net income rose by 13.8% to $46.9 million [9] Segment Performance - Metal Coatings segment achieved sales of $190.0 million, up 10.8%, driven by infrastructure-related project spending, with an adjusted EBITDA margin of 30.8% [4][9] - Precoat Metals segment reported sales of $227.3 million, down 4.3%, primarily due to weaker demand in building construction, HVAC, and appliance markets, with an EBITDA margin of 20.2% [5][9] Balance Sheet and Cash Flow - The company generated $58.4 million in cash from operations during the quarter, with a net debt leverage ratio of 1.7x at the end of the quarter [3][6] - Significant operating cash of $373.2 million was generated in the first six months of fiscal year 2026, including a distribution of $273.2 million from the AVAIL joint venture [6][14] - AZZ Inc. completed a $30.1 million acquisition during the quarter and increased its cash dividend to $0.20 per share [3][9] Guidance and Outlook - The fiscal year 2026 guidance remains unchanged, reflecting anticipated market conditions, lower interest expenses, and an effective tax rate of 24% [7][8] - The company continues to monitor customer trends in key markets to ensure the achievability of its financial targets for the year [2][3]

[Press Release Overview](index=1&type=section&id=Press%20Release%20Overview) [Headline and Introduction](index=1&type=section&id=Headline%20and%20Introduction) AZZ Inc. reported strong Q2 FY2026 results, showing growth in sales, EPS, and cash flow, with unchanged FY2026 guidance - AZZ Inc. reported Q2 FY2026 results with growth in **sales, EPS, and cash flow**[1](index=1&type=chunk)[2](index=2&type=chunk) - Fiscal Year 2026 Guidance remains unchanged[1](index=1&type=chunk) [Fiscal Year 2026 Second Quarter Highlights](index=1&type=section&id=Fiscal%20Year%202026%20Second%20Quarter%20Highlights) Q2 FY2026 sales increased 2.0% to $417.3 million, net income surged 152.3% to $89.3 million, and adjusted EPS grew 13.1% to $1.55 Q2 FY2026 Key Financial Highlights | Metric | Q2 FY2026 (Millions) | Change YoY | | :----------------------- | :------------------- | :--------- | | Total Sales | $417.3 | +2.0% | | Metal Coatings Sales | $190.0 | +10.8% | | Precoat Metals Sales | $227.3 | -4.3% | | Net Income | $89.3 | +152.3% | | Adjusted Net Income | $46.9 | +13.8% | | GAAP Diluted EPS | $2.95 | +150.0% | | Adjusted Diluted EPS | $1.55 | +13.1% | | Consolidated Adjusted EBITDA | $88.7 | -3.5% (from $91.9M) | | Cash from Operating Activities | $58.4 | +23% | - Completed the acquisition of a galvanizing facility in Canton, Ohio for **$30.1 million**[6](index=6&type=chunk) - Paid a cash dividend of **$0.20 per share** to common shareholders during the quarter[6](index=6&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Tom Ferguson highlighted Q2 sales growth, strong Metal Coatings, weaker Precoat Metals, and balance sheet strengthening, affirming FY2026 guidance - Metal Coatings delivered strong, **double-digit sales gains** on volume increases, driven by infrastructure-driven project spending in construction, industrial, and electrical transmission and distribution end-markets[4](index=4&type=chunk) - Precoat Metals experienced weaker demand in building construction, HVAC, and appliance end-markets[4](index=4&type=chunk) - Strengthened balance sheet by introducing an Accounts Receivable securitization program, repricing Term Loan B (**75-basis point reduction**), and achieving modest debt paydown, maintaining a net debt leverage of **1.7x**[5](index=5&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) [Metal Coatings Segment](index=2&type=section&id=Metal%20Coatings%20Segment) The Metal Coatings segment reported sales of $190.0 million, a 10.8% increase, driven by higher volumes from infrastructure-related project spending Metal Coatings Segment Performance (Q2 FY2026 vs Q2 FY2025) | Metric | Q2 FY2026 | Q2 FY2025 | Change YoY | | :------------------- | :---------- | :---------- | :--------- | | Sales | $190.0 million | $171.5 million | +10.8% | | Adjusted EBITDA | $58.5 million | $54.4 million | +7.5% | | Adjusted EBITDA Margin | 30.8% | 31.7% | -90 bps | - Sales increase driven by **increased volume** supported by infrastructure-related project spending in construction, industrial, and electrical transmission and distribution end markets[7](index=7&type=chunk) [Precoat Metals Segment](index=2&type=section&id=Precoat%20Metals%20Segment) The Precoat Metals segment's sales decreased by 4.3% to $227.3 million due to weaker demand in building construction, HVAC, and appliance end markets Precoat Metals Segment Performance (Q2 FY2026 vs Q2 FY2025) | Metric | Q2 FY2026 | Q2 FY2025 | Change YoY | | :------------------- | :---------- | :---------- | :--------- | | Sales | $227.3 million | $237.5 million | -4.3% | | Adjusted EBITDA | $45.9 million | $50.2 million | -8.4% | | Adjusted EBITDA Margin | 20.2% | 21.1% | -90 bps | - Sales decrease primarily due to **weaker end markets**, including building construction, HVAC, and appliance[8](index=8&type=chunk) [Financial Position and Capital Allocation](index=2&type=section&id=Balance%20Sheet%2C%20Liquidity%20and%20Capital%20Allocation) [Balance Sheet, Liquidity and Capital Allocation Summary](index=2&type=section&id=Balance%20Sheet%2C%20Liquidity%20and%20Capital%20Allocation%20Summary) For H1 FY2026, AZZ generated $373.2M in operating cash, reduced debt by $290.4M, and maintained a net leverage of 1.7x Key Financial Position and Capital Allocation Metrics (Six Months Ended Aug 31) | Metric | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | Change YoY | | :-------------------------------- | :---------------------------- | :---------------------------- | :--------- | | Operating Cash Flow | $373.2 million | $119.4 million | +212.5% | | Debt Paid Down | $290.4 million | N/A | N/A | | Cash Dividends to Shareholders | $11.1 million | N/A | N/A | | Capital Expenditures | $40.2 million | N/A | N/A | - Net leverage ratio was **1.7x** trailing twelve months Adjusted EBITDA at the end of Q2 FY2026[9](index=9&type=chunk) - Operating cash flow for the first six months includes a **$273.2 million distribution** from the AVAIL JV following the sale of its Electrical Products Group[9](index=9&type=chunk) - Full fiscal year capital expenditures are expected to be approximately **$60 - $80 million**[9](index=9&type=chunk) [Financial Outlook](index=2&type=section&id=Financial%20Outlook%20%E2%80%94%20Fiscal%20Year%202026%20Guidance%20Remains%20Unchanged) [FY2026 Guidance](index=2&type=section&id=FY2026%20Guidance) AZZ Inc. maintains its FY2026 guidance, anticipating sales between $1.625 billion and $1.725 billion, Adjusted EBITDA of $360 million to $400 million, and Adjusted Diluted EPS of $5.75 to $6.25 FY2026 Financial Guidance | Metric | FY2026 Guidance | | :---------------- | :-------------------- | | Sales | $1.625 - $1.725 billion | | Adjusted EBITDA | $360 - $400 million | | Adjusted Diluted EPS | $5.75 - $6.25 | - Guidance assumes an annualized effective tax rate of **24%** and excludes future acquisitions, future equity in earnings from AVAIL joint venture, and certain non-GAAP adjustments[10](index=10&type=chunk)[12](index=12&type=chunk) - Assumes EBITDA margin range of **27-32%** for the Metal Coatings segment and **17-22%** for the Precoat Metals segment[12](index=12&type=chunk) [Additional Information](index=2&type=section&id=Additional%20Information) [Conference Call Details](index=3&type=section&id=Conference%20Call%20Details) AZZ Inc. will host a live conference call on Thursday, October 9, 2025, at 11:00 A.M. ET to discuss Q2 FY2026 financial results - Live conference call on **Thursday, October 9, 2025, at 11:00 A.M. ET**[11](index=11&type=chunk) - Webcast of the call will be available on the Company's Investor Relations page at http://www.azz.com/investor-relations, with a replay available for **12 months**[11](index=11&type=chunk)[13](index=13&type=chunk) [About AZZ Inc.](index=3&type=section&id=About%20AZZ%20Inc.) AZZ Inc. is a leading independent provider of hot-dip galvanizing and coil coating solutions in North America, enhancing essential infrastructure and products - Leading independent provider of hot-dip galvanizing and coil coating solutions to a broad range of end-markets in North America[14](index=14&type=chunk) - Business segments provide sustainable, unmatched metal coating solutions that enhance the longevity and appearance of buildings, products, and infrastructure[14](index=14&type=chunk) [Safe Harbor Statement](index=3&type=section&id=Safe%20Harbor%20Statement) The report contains forward-looking statements subject to various risks, including changes in demand, cost increases, supply-chain delays, and economic volatility - Forward-looking statements are subject to risks such as changes in **customer demand** for manufactured solutions (construction, industrial, metal coatings markets)[15](index=15&type=chunk) - Risks include increases in **labor costs**, components and **raw materials** (zinc, natural gas, paint), **supply-chain vendor delays**, customer requested delays, and delays in additional acquisition opportunities[15](index=15&type=chunk) - Other risks include an increase in **debt leverage** and/or **interest rates**, availability of experienced management and employees, downturns in market conditions, **economic volatility**, tariffs, acts of war or terrorism[15](index=15&type=chunk) [Contact Information](index=3&type=section&id=Contact%20Information) Contact details are provided for AZZ Inc.'s Chief Marketing,

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, covering balance sheets, income, cash flows, equity, and related notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly decreased to **$2.226 billion**, while total liabilities significantly decreased to **$922.952 million**, and shareholders' equity increased to **$1.303 billion** | Metric | As of Aug 31, 2025 (in thousands) | As of Feb 28, 2025 (in thousands) | Change (in thousands) | | :----- | :-------------------------------- | :-------------------------------- | :-------------------- | | Total Assets | $2,225,983 | $2,227,101 | $(1,118) | | Total Liabilities | $922,952 | $1,181,606 | $(258,654) | | Total Shareholders' Equity | $1,303,031 | $1,045,495 | $257,536 | | Long-term debt, net | $566,864 | $852,365 | $(285,501) | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net income for the three months ended August 31, 2025, significantly increased to **$89.346 million**, and for the six months, net income available to common shareholders was **$260.254 million** | Metric | 3 Months Ended Aug 31, 2025 (in thousands) | 3 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :----- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | Sales | $417,275 | $409,007 | $8,268 | 2.0% | | Gross margin | $101,292 | $103,514 | $(2,222) | -2.1% | | Operating income | $68,461 | $67,646 | $815 | 1.2% | | Net income | $89,346 | $35,419 | $53,927 | 152.2% | | Basic EPS | $2.97 | $1.19 | $1.78 | 149.6% | | Diluted EPS | $2.95 | $1.18 | $1.77 | 150.0% | | Metric | 6 Months Ended Aug 31, 2025 (in thousands) | 6 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :----- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | Sales | $839,237 | $822,215 | $17,022 | 2.1% | | Gross margin | $205,422 | $206,184 | $(762) | -0.4% | | Operating income | $138,010 | $137,395 | $615 | 0.4% | | Net income available to common shareholders | $260,254 | $(1,377) | $261,631 | N/A | | Basic EPS | $8.68 | $(0.05) | $8.73 | N/A | | Diluted EPS | $8.61 | $(0.05) | $8.66 | N/A | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Comprehensive income for the three months ended August 31, 2025, was **$88.761 million**, and for the six months, it was **$262.160 million**, a significant improvement from the prior year | Metric | 3 Months Ended Aug 31, 2025 (in thousands) | 3 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :----- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | Net income (loss) available to common shareholders | $89,346 | $35,419 | $53,927 | 152.2% | | Other comprehensive income (loss) | $(585) | $(3,836) | $3,251 | -84.7% | | Comprehensive income (loss) | $88,761 | $31,583 | $57,178 | 181.0% | | Metric | 6 Months Ended Aug 31, 2025 (in thousands) | 6 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :----- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | Net income (loss) available to common shareholders | $260,254 | $(1,377) | $261,631 | N/A | | Other comprehensive income (loss) | $1,906 | $(3,001) | $4,907 | N/A | | Comprehensive income (loss) | $262,160 | $(4,378) | $266,538 | N/A | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly increased to **$373.169 million** for the six months ended August 31, 2025, primarily used for debt payments, capital expenditures, and dividends | Metric | 6 Months Ended Aug 31, 2025 (in thousands) | 6 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :----- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- |\n| Net cash provided by operating activities | $373,169 | $119,430 | $253,739 | 212.5% | | Net cash used in investing activities | $(66,491) | $(58,740) | $(7,751) | 13.2% | | Net cash used in financing activities | $(306,614) | $(62,750) | $(243,864) | 388.6% | | Net decrease in cash and cash equivalents | $(591) | $(2,197) | $1,606 | -73.1% | - Operating cash flows were significantly boosted by a **$273.2 million** cash distribution from the AVAIL JV[17](index=17&type=chunk) [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Total shareholders' equity increased from **$1.045 billion** to **$1.303 billion** at August 31, 2025, primarily due to net income | Metric | As of Aug 31, 2025 (in thousands) | As of Feb 28, 2025 (in thousands) | Change (in thousands) | | :----- | :-------------------------------- | :-------------------------------- | :-------------------- | | Total Shareholders' Equity | $1,303,031 | $1,045,495 | $257,536 | | Retained Earnings | $858,315 | $609,158 | $249,157 | | Common Stock Shares Outstanding | 30,057 | 29,913 | 144 | - The increase in shareholders' equity was primarily driven by net income of **$260.254 million** for the six months ended August 31, 2025[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering company operations, accounting policies, and various financial items - AZZ Inc. operates in three segments: Metal Coatings, Precoat Metals, and Infrastructure Solutions (**40%** interest in AVAIL JV)[24](index=24&type=chunk) - The company acquired Canton Galvanizing for **$30.1 million** on July 1, 2025, expanding its Metal Coatings segment[32](index=32&type=chunk) - The AVAIL JV sold its Electrical Products Group for **$975.0 million** in May 2025, leading to a significant gain recognized by AZZ, partially offset by an impairment charge on the AVAIL JV investment[62](index=62&type=chunk)[65](index=65&type=chunk) - The company entered into a new fixed-rate interest rate swap (2025 Swap) for **$290.0 million** at **5.509%** to manage interest rate exposure, replacing a terminated 2022 Swap[72](index=72&type=chunk) - Long-term debt decreased significantly from **$852.365 million** to **$566.864 million**, partly due to proceeds from a new **$150.0 million** Receivables Securitization Facility used to pay down the Term Loan B[74](index=74&type=chunk)[82](index=82&type=chunk) - The company initiated a restructuring plan in the Metal Coatings segment, closing two facilities and incurring **$3.8 million** in charges to improve operational efficiency[120](index=120&type=chunk)[121](index=121&type=chunk) - A new **25-acre** aluminum coil coating facility in Washington, Missouri, became operational in Q1 fiscal 2026, supported by a take-or-pay contract for **75%** of its output[131](index=131&type=chunk) - The effective tax rate decreased to **21.9%** for the three months and **23.5%** for the six months ended August 31, 2025, primarily due to higher R&D tax credits from the new aluminum coil coating facility[104](index=104&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - The Series A Preferred Stock was fully redeemed on May 9, 2024, for **$308.9 million**, using proceeds from a secondary public offering[109](index=109&type=chunk)[114](index=114&type=chunk) - The company recorded a legal accrual of **$5.5 million** for a breach of contract lawsuit verdict against AZZ Beaumont, which is currently under appeal[126](index=126&type=chunk) - Environmental liabilities reserve balance was **$18.4 million** as of August 31, 2025[128](index=128&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition and results, including business updates, outlook, segment performance, liquidity, and non-GAAP measures [Forward Looking Statements](index=30&type=section&id=Forward%20Looking%20Statements) This section outlines cautionary statements regarding forward-looking information, emphasizing that actual results may differ due to various risks - Forward-looking statements are subject to risks such as changes in customer demand, increased labor and raw material costs (zinc, natural gas, paint), supply-chain delays, and interest rate fluctuations[133](index=133&type=chunk) - Investors are cautioned not to place undue reliance on forward-looking statements, which are based on information as of the report date and are not updated[134](index=134&type=chunk) [Business Operations Update](index=30&type=section&id=Business%20Operations%20Update) The company's financial results for the six months ended August 31, 2025, were positively impacted by significant equity in earnings from the AVAIL JV and increased demand - Results for the current six-month period were favorably impacted by equity in earnings from the AVAIL JV, including a gain from the sale of its Electrical Products Group[136](index=136&type=chunk) - Growth in demand for manufactured solutions in the construction and utilities industries also contributed positively[136](index=136&type=chunk) - Net income for the current six-month period was **$260.3 million**, primarily due to the AVAIL JV equity in earnings[137](index=137&type=chunk) - Operations generated **$373.2 million** of cash during the current six-month period[137](index=137&type=chunk) [Outlook](index=31&type=section&id=Outlook) The company anticipates consistent sales prices in Metal Coatings and price increases in Precoat Metals, with demand following typical seasonal patterns - AZZ Metal Coatings segment expects sales prices to remain consistent, with potential impact from product mix and competitive pressures[140](index=140&type=chunk) - AZZ Precoat Metals segment expects sales prices to increase due to passing through higher material costs and overall selling price increases[140](index=140&type=chunk) - Demand and volumes for both Metal Coatings and Precoat Metals segments are expected to follow normal seasonal patterns[140](index=140&type=chunk) [RESULTS OF OPERATIONS](index=31&type=section&id=RESULTS%20OF%20OPERATIONS) This section details the financial performance of AZZ's three operating segments for the three and six months ended August 31, 2025, analyzing sales, operating income, and other financial metrics [Overview](index=31&type=section&id=Overview) AZZ Inc. provides hot-dip galvanizing and coil coating solutions through three segments: Metal Coatings, Precoat Metals, and Infrastructure Solutions, with performance evaluated by sales and operating income - AZZ operates three segments: AZZ Metal Coatings, AZZ Precoat Metals, and AZZ Infrastructure Solutions[139](index=139&type=chunk) - Segment performance is evaluated using sales and operating income for Metal Coatings and Precoat Metals, and net income for Infrastructure Solutions[139](index=139&type=chunk) [QUARTER ENDED AUGUST 31, 2025 COMPARED TO THE QUARTER ENDED AUGUST 31, 2024](index=32&type=section&id=QUARTER%20ENDED%20AUGUST%2031,%202025%20COMPARED%20TO%20THE%20QUARTER%20ENDED%20AUGUST%2031,%202024) Consolidated sales increased by **2.0%** to **$417.3 million**, and net income significantly increased by **152.2%** to **$89.3 million**, driven by the AVAIL JV gain | Metric | 3 Months Ended Aug 31, 2025 (in thousands) | 3 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :----- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | Consolidated Sales | $417,275 | $409,007 | $8,268 | 2.0% | | Consolidated Operating Income | $68,461 | $67,646 | $815 | 1.2% | | Net Income | $89,346 | $35,419 | $53,927 | 152.2% | [Sales](index=33&type=section&id=Sales_QoQ) Consolidated sales increased by **$8.3 million** (**2.0%**) year-over-year, with Metal Coatings sales up **10.8%** and Precoat Metals sales down **4.3%** - Consolidated sales increased by **$8.3 million** (**2.0%**) YoY[144](index=144&type=chunk) | Segment | 3 Months Ended Aug 31, 2025 (in thousands) | 3 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :------ | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | AZZ Metal Coatings Sales | $189,984 | $171,500 | $18,484 | 10.8% | | AZZ Precoat Metals Sales | $227,291 | $237,507 | $(10,216) | -4.3% | [Operating Income](index=33&type=section&id=Operating%20Income_QoQ) Consolidated operating income increased by **$0.8 million** (**1.2%**), with Metal Coatings up **8.4%** and Precoat Metals down **14.1%** due to lower sales volume and new plant costs - Consolidated operating income increased by **$0.8 million** (**1.2%**) YoY[147](index=147&type=chunk) | Segment | 3 Months Ended Aug 31, 2025 (in thousands) | 3 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :------ | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | AZZ Metal Coatings Operating Income | $51,706 | $47,688 | $4,018 | 8.4% | | AZZ Precoat Metals Operating Income | $36,521 | $42,530 | $(6,009) | -14.1% | [Corporate Expenses](index=34&type=section&id=Corporate%20Expenses_QoQ) Corporate SG&A expenses decreased by **$2.8 million** (**12.5%**) due to lower compensation costs from prior year retirement and severance - Corporate SG&A expenses decreased by **$2.8 million** (**12.5%**) YoY[150](index=150&type=chunk) - The decrease was mainly due to lower compensation costs, including retirement and severance expenses recognized in the prior year[150](index=150&type=chunk) [Interest Expense](index=34&type=section&id=Interest%20Expense_QoQ) Interest expense decreased by **$8.2 million** to **$13.7 million**, primarily due to a **$304.4 million** decrease in weighted average debt and a **1.77%** lower interest rate - Interest expense decreased by **$8.2 million** to **$13.7 million** YoY[151](index=151&type=chunk) - This reduction was driven by a **$304.4 million** decrease in weighted average debt outstanding and a **1.77%** decrease in the weighted average interest rate[151](index=151&type=chunk) [Equity in Earnings of Unconsolidated Entities](index=34&type=section&id=Equity%20in%20Earnings%20of%20Unconsolidated%20Entities_QoQ) Equity in earnings from unconsolidated subsidiaries increased significantly by **$57.9 million** to **$59.3 million**, mainly due to a **$109.4 million** gain from the AVAIL JV sale - Equity in earnings increased by **$57.9 million** to **$59.3 million** YoY[152](index=152&type=chunk) - The increase was mainly due to a **$109.4 million** gain from the sale of AVAIL's Electrical Products Group, offset by a **$45.9 million** impairment loss on the AVAIL JV[152](index=152&type=chunk) [Income Taxes](index=34&type=section&id=Income%20Taxes_QoQ) The effective tax rate decreased to **21.9%** from **25.6%**, primarily due to higher R&D tax credits from the new aluminum coil coating facility - Effective tax rate decreased to **21.9%** from **25.6%** YoY[153](index=153&type=chunk) - The decrease is attributed to higher R&D tax credits from the new aluminum coil coating facility[153](index=153&type=chunk) [SIX MONTHS ENDED AUGUST 31, 2025 COMPARED TO THE SIX MONTHS ENDED AUGUST 31, 2024](index=35&type=section&id=SIX%20MONTHS%20ENDED%20AUGUST%2031,%202025%20COMPARED%20TO%20THE%20SIX%20MONTHS%20ENDED%20AUGUST%2031,%202024) Consolidated sales increased by **2.1%** to **$839.2 million**, and net income available to common shareholders dramatically improved to **$260.3 million** from a prior year loss | Metric | 6 Months Ended Aug 31, 2025 (in thousands) | 6 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :----- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | Consolidated Sales | $839,237 | $822,215 | $17,022 | 2.1% | | Consolidated Operating Income | $138,010 | $137,395 | $615 | 0.4% | | Net Income (Loss) available to common shareholders | $260,254 | $(1,377) | $261,631 | N/A | [Sales](index=36&type=section&id=Sales_YoY) Consolidated sales increased by **$17.0 million** (**2.1%**) year-over-year, with Metal Coatings sales up **8.3%** and Precoat Metals sales down **2.5%** - Consolidated sales increased by **$17.0 million** (**2.1%**) YoY[157](index=157&type=chunk) | Segment | 6 Months Ended Aug 31, 2025 (in thousands) | 6 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :------ | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | AZZ Metal Coatings Sales | $377,199 | $348,152 | $29,047 | 8.3% | | AZZ Precoat Metals Sales | $462,038 | $474,063 | $(12,025) | -2.5% | [Operating Income](index=36&type=section&id=Operating%20Income_YoY) Consolidated operating income increased by **$0.6 million** (**0.4%**), with Metal Coatings up **7.1%** and Precoat Metals down **8.2%** due to lower sales volume and new plant costs - Consolidated operating income increased by **$0.6 million** (**0.4%**) YoY[160](index=160&type=chunk) | Segment | 6 Months Ended Aug 31, 2025 (in thousands) | 6 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :------ | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | AZZ Metal Coatings Operating Income | $102,438 | $95,621 | $6,817 | 7.1% | | AZZ Precoat Metals Operating Income | $75,875 | $82,623 | $(6,748) | -8.2% | [Corporate Expenses](index=36&type=section&id=Corporate%20Expenses_YoY) Corporate SG&A expenses decreased by **$0.6 million** (**1.5%**) due to lower compensation costs from prior year retirement and severance - Corporate SG&A expenses decreased by **$0.6 million** (**1.5%**) YoY[163](index=163&type=chunk) - The decrease was mainly due to lower compensation costs from prior year retirement/severance, partially offset by increased stock-based compensation from the Executive Retiree LTI Program[163](index=163&type=chunk) [Interest Expense](index=36&type=section&id=Interest%20Expense_YoY) Interest expense decreased by **$12.5 million** to **$32.2 million**, primarily due to a **$136.4 million** decrease in weighted average debt and a **1.54%** lower interest rate - Interest expense decreased by **$12.5 million** to **$32.2 million** YoY[164](index=164&type=chunk) - This reduction was driven by a **$136.4 million** decrease in weighted average debt outstanding and a **1.54%** decrease in the weighted average interest rate[164](index=164&type=chunk) [Equity in Earnings of Unconsolidated Entities](index=36&type=section&id=Equity%20in%20Earnings%20of%20Unconsolidated%20Entities_YoY) Equity in earnings from unconsolidated subsidiaries increased significantly by **$227.6 million** to **$232.9 million**, mainly due to a **$275.2 million** gain from the AVAIL JV sale - Equity in earnings increased by **$227.6 million** to **$232.9 million** YoY[165](index=165&type=chunk) - The increase was mainly due to a **$275.2 million** gain from the sale of AVAIL's Electrical Products Group, offset by a **$45.9 million** impairment loss on the AVAIL JV[165](index=165&type=chunk) [Income Taxes](index=36&type=section&id=Income%20Taxes_YoY) The effective tax rate decreased to **23.5%** from **23.9%**, primarily due to higher R&D tax credits, with the One Big Beautiful Bill Act expected to reduce fiscal 2026 cash tax payments - Effective tax rate decreased to **23.5%** from **23.9%** YoY[166](index=166&type=chunk) - The decrease is attributed to higher R&D tax credits from the new aluminum coil coating facility[166](index=166&type=chunk) - The One Big Beautiful Bill Act is expected to reduce fiscal 2026 cash tax payments[167](index=167&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=38&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company's liquidity as of August 31, 2025, was **$362.2 million**, with operating activities generating **$373.2 million** in cash, primarily used for debt payments and capital expenditures - Total liquidity as of August 31, 2025, was **$362.2 million**, including **$361.3 million** from credit facilities and **$0.9 million** cash[169](index=169&type=chunk) - Net cash provided by operating activities for the six months ended August 31, 2025, was **$373.2 million**, a significant increase from **$119.4 million** in the prior year[170](index=170&type=chunk) - Operating cash was used to fund **$40.2 million** in capital expenditures, **$291.4 million** in net debt/finance lease payments, and **$11.1 million** in dividends[170](index=170&type=chunk) [Cash Flows](index=38&type=section&id=Cash%20Flows) Net cash provided by operating activities for the six months ended August 31, 2025, was **$373.2 million**, a substantial increase from **$119.4 million** in the prior year, driven by higher net income and a cash distribution from the AVAIL JV | Metric | 6 Months Ended Aug 31, 2025 (in thousands) | 6 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :----- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | Net cash provided by operating activities | $373,169 | $119,430 | $253,739 | 212.5% | | Net cash used in investing activities | $(66,491) | $(58,740) | $(7,751) | 13.2% | | Net cash used in financing activities | $(306,614) | $(62,750) | $(243,864) | 388.6% | | Net decrease in cash and cash equivalents | $(591) | $(2,197) | $1,606 | -73.1% | - The increase in operating cash flow was primarily due to net income of **$260.3 million** and a **$273.2 million** cash distribution from the AVAIL JV[170](index=170&type=chunk) [Financing and Capital](index=38&type=section&id=Financing%20and%20Capital) Long-term debt decreased to **$566.9 million** from **$852.4 million**, with the Term Loan B repriced and a new **$150.0 million** Receivables Securitization Facility established, reducing the weighted average interest rate to **6.49%** - Term Loan B outstanding balance was **$434.9 million** as of August 31, 2025, and was repriced to SOFR plus **1.75%** (from **2.50%**)[173](index=173&type=chunk)[174](index=174&type=chunk) - A new **$150.0 million** Receivables Securitization Facility was entered into, with proceeds used to pay down the Term Loan B[176](index=176&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk) - The weighted average interest rate for outstanding debt decreased to **6.49%** for the six months ended August 31, 2025, from **8.03%** in the prior year[180](index=180&type=chunk) - The company was in compliance with all debt covenants, including a maximum Total Net Leverage Ratio of **4.5** (actual **1.7x**)[181](index=181&type=chunk)[207](index=207&type=chunk) [Capital Commitments—Greenfield Aluminum Coil Coating Facility](index=40&type=section&id=Capital%20Commitments%E2%80%94Greenfield%20Aluminum%20Coil%20Coating%20Facility) The new aluminum coil coating facility became operational in Q1 fiscal 2026, with total project capital payments expected to be **$121.8 million**, and **$4.1 million** remaining to be paid - The new greenfield aluminum coil coating facility became operational in Q1 fiscal 2026[186](index=186&type=chunk) - Total capital payments for the project are expected to be **$121.8 million**, with **$4.1 million** remaining to be paid in H2 fiscal 2026[186](index=186&type=chunk) [AVAIL JV](index=40&type=section&id=AVAIL%20JV) The AVAIL JV sold its Electrical Products Group for **$975.0 million**, resulting in a **$275.2 million** gain for AZZ, offset by a **$45.9 million** impairment loss, leading to **$232.9 million** in equity in earnings - AVAIL JV sold its Electrical Products Group for **$975.0 million** in May 2025[187](index=187&type=chunk) - AZZ recognized a **$275.2 million** gain from the sale, offset by a **$45.9 million** impairment loss on the AVAIL JV investment[189](index=189&type=chunk)[190](index=190&type=chunk) - Total equity in earnings from unconsolidated subsidiaries for the six months ended August 31, 2025, was **$232.9 million**[189](index=189&type=chunk) [Share Repurchase Program](index=41&type=section&id=Share%20Repurchase%20Program) No shares were repurchased during the six months ended August 31, 2025, with **$53.2 million** remaining authorized for repurchases - No common stock repurchases were made during the six months ended August 31, 2025[191](index=191&type=chunk) - **$53.2 million** remains available under the 2020 Share Authorization for future repurchases[191](index=191&type=chunk) [Other Exposures](index=41&type=section&id=Other%20Exposures) The company faces commodity price exposure, primarily to zinc, natural gas, steel, and aluminum scrap, with mitigation strategies including fixed-price agreements and price increases - Commodity price exposure includes zinc and natural gas (Metal Coatings), and natural gas, steel, and aluminum scrap (Precoat Metals)[191](index=191&type=chunk) - Mitigation strategies include fixed-premium agreements with zinc suppliers, fixed-price natural gas contracts, and price increases to customers[191](index=191&type=chunk) [Off Balance Sheet Arrangements and Contractual Obligations](index=41&type=section&id=Off%20Balance%20Sheet%20Arrangements%20and%20Contractual%20Obligations) As of August 31, 2025, the company had no material off-balance sheet arrangements as defined by SEC rules - No material off-balance sheet arrangements existed as of August 31, 2025[192](index=192&type=chunk) [Critical Accounting Policies and Estimates](index=41&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There were no significant changes to the company's critical accounting policies and estimates compared to those disclosed in the Annual Report on Form 10-K - No significant changes to critical accounting policies and estimates were reported[194](index=194&type=chunk) [Recent Accounting Pronouncements](index=41&type=section&id=Recent%20Accounting%20Pronouncements) The company provided a full description of recent accounting pronouncements, including adoption dates and estimated effects, in Note 1 of the financial statements - Details on recent accounting pronouncements, adoption dates, and estimated effects are provided in Note 1[195](index=195&type=chunk) [Non-GAAP Disclosures](index=42&type=section&id=Non-GAAP%20Disclosures) The company provides non-GAAP measures like adjusted net income, adjusted EPS, and Adjusted EBITDA for greater transparency, excluding items such as intangible asset amortization and restructuring charges - Non-GAAP measures (adjusted net income, adjusted EPS, Adjusted EBITDA) are provided for greater transparency and understanding of financial performance[196](index=196&type=chunk) - Adjustments typically exclude intangible asset amortization, restructuring charges, severance expenses, preferred stock redemption premium, executive retiree LTI program expense, and AVAIL JV equity in earnings adjustments[197](index=197&type=chunk) [Adjusted Net Income and Adjusted Earnings Per Share](index=43&type=section&id=Adjusted%20Net%20Income%20and%20Adjusted%20Earnings%20Per%20Share) Adjusted net income for the three months ended August 31, 2025, was **$46.9 million** (**$1.55** diluted EPS), and for the six months, it was **$100.7 million** (**$3.33** diluted EPS) | Metric | 3 Months Ended Aug 31, 2025 (in thousands) | 3 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :----- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | Adjusted Net Income | $46,926 | $41,252 | $5,674 | 13.8% | | Adjusted Diluted EPS | $1.55 | $1.37 | $0.18 | 13.1% | | Metric | 6 Months Ended Aug 31, 2025 (in thousands) | 6 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :----- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | Adjusted Net Income | $100,733 | $85,257 | $15,476 | 18.2% | | Adjusted Diluted EPS | $3.33 | $2.83 | $0.50 | 17.7% | [Adjusted EBITDA](index=44&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA for the three months ended August 31, 2025, was **$88.7 million**, and for the six months, it increased to **$195.1 million** | Metric | 3 Months Ended Aug 31, 2025 (in thousands) | 3 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :----- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | Adjusted EBITDA | $88,727 | $91,858 | $(3,131) | -3.4% | | Metric | 6 Months Ended Aug 31, 2025 (in thousands) | 6 Months Ended Aug 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :----- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :------------- | | Adjusted EBITDA | $195,139 | $185,956 | $9,183 | 4.9% | [Adjusted EBITDA by Segment](index=44&type=section&id=Adjusted%20EBITDA%20by%20Segment) This section provides a reconciliation of Adjusted EBITDA by segment, detailing the contribution of Metal Coatings, Precoat Metals, and Infrastructure Solutions to the overall Adjusted EBITDA - Adjusted EBITDA for Metal Coatings was **$58.5 million** (3 months) and **$120.1 million** (6 months)[203](index=203&type=chunk)[205](index=205&type=chunk) - Adjusted EBITDA for Precoat Metals was **$45.9 million** (3 months) and **$94.4 million** (6 months)[203](index=203&type=chunk)[205](index=205&type=chunk) - Infrastructure Solutions Adjusted EBITDA was negative **$(2.3) million** (3 months) and positive **$5.3 million** (6 months), reflecting the AVAIL JV adjustments[203](index=203&type=chunk)[205](index=205&type=chunk) [Debt Leverage Ratio Reconciliation](index=46&type=section&id=Debt%20Leverage%20Ratio%20Reconciliation) The company's net leverage ratio improved to **1.7x** as of August 31, 2025, from **2.5x** as of February 28, 2025, indicating a significant reduction in leverage | Metric | Trailing Twelve Months Ended Aug 31, 2025 | Trailing Twelve Months Ended Feb 28, 2025 | | :----- | :---------------------------------------- | :---------------------------------------- | | Consolidated Indebtedness | $616,372 | $894,227 | | Adjusted EBITDA per Credit Agreement | $365,273 | $358,058 | | Net Leverage Ratio | 1.7x | 2.5x | - The net leverage ratio improved from **2.5x** to **1.7x**, demonstrating reduced debt relative to Adjusted EBITDA[207](index=207&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There were no material changes to the company's market risk disclosures during the three and six months ended August 31, 2025, referring to the Annual Report on Form 10-K for detailed information - No material changes to market risk disclosures were reported for the current periods[208](index=208&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were effective as of August 31, 2025, with no material changes in internal control over financial reporting during the period - Disclosure controls and procedures were deemed effective at a reasonable assurance level[209](index=209&type=chunk) - No material changes in internal control over financial reporting occurred during the period[210](index=210&type=chunk) PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, other information, exhibits, and signatures [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) AZZ and its subsidiaries are involved in various routine lawsuits, with a **$5.5 million** legal accrual recorded for a breach of contract verdict currently under appeal - The company is involved in routine lawsuits, but management does not expect a material financial impact[212](index=212&type=chunk) - A **$5.5 million** legal accrual was recorded for a breach of contract verdict against AZZ Beaumont, which is currently under appeal[212](index=212&type=chunk)[126](index=126&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's most recent Annual Report on Form 10-K - No material changes to risk factors were reported from the previous Annual Report on Form 10-K[213](index=213&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares of common stock were repurchased during the six months ended August 31, 2025, with **$53.2 million** remaining available for repurchases - No common stock repurchases were made during the six months ended August 31, 2025[215](index=215&type=chunk) - **$53.2 million** remains available under the 2020 Share Authorization[215](index=215&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) The Chief Legal Officer entered into a Rule 10b5-1 trading arrangement for the potential sale of up to **8,281** shares of common stock from vested restricted and performance stock units - Chief Legal Officer and Secretary, Tara D. Mackey, entered into a Rule 10b5-1 trading arrangement on August 14, 2025[217](index=217&type=chunk) - The arrangement allows for the potential sale of up to **8,281** shares from vested RSUs and PSUs, with sales starting November 13, 2025, and expiring August 15, 2027[217](index=217&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including amendments to credit agreements, securitization agreements, and certifications - Exhibits include the Sixth Amendment to Credit Agreement (August 5, 2025) and various agreements related to the Receivables Securitization Facility (July 10, 2025)[219](index=219&type=chunk) - Certifications from the CEO and CFO (pursuant to Sarbanes-Oxley Act Sections 302 and 906) are filed/furnished[219](index=219&type=chunk) [SIGNATURES](index=51&type=section&id=SIGNATURES) The report was duly signed on October 8, 2025, by Jason Crawford, Senior Vice President, Chief Financial Officer, and Principal Accounting Officer of AZZ Inc - The report was signed by Jason Crawford, SVP, CFO, and Principal Accounting Officer, on October 8, 2025[222](index=222&type=chunk)

Market Overview - U.S. stock futures rose on Wednesday after declines on Tuesday, with major benchmark indices showing positive movement [1] - The 10-year Treasury bond yielded 4.11%, while the two-year bond was at 3.56%, indicating market expectations for a potential interest rate cut by the Federal Reserve [2] Stock Performance - Oracle Corp. shares fell 2.5% on Tuesday, negatively impacting other tech stocks due to financial struggles related to Nvidia chips [1] - Trilogy Metals Inc. saw an 8% increase in premarket trading, driven by interest in rare earths and battery metals following U.S. government investments [6] - Nuburu Inc. surged 34.84% after acquiring Orbit S.r.l., marking its expansion into defense software [6] - POET Technologies Inc. gained 12.94% after raising $75 million through a private placement, the largest investment in its history [7] - Joby Aviation Inc. dropped 9.47% as it announced plans to offer $500 million in common stock [7] Sector Insights - Consumer staples and utilities stocks closed higher, while most sectors in the S&P 500 ended negatively, with industrials, consumer discretionary, and communication services recording the largest losses [5] - Financials are in a "sweet spot," with commercial bank loans and leases indicating a healthy economy, as the S&P 500 Diversified Banks stock price index reached a record high, up 4.7% year-on-year [9] Economic Indicators - Crude oil futures rose by 0.97% to approximately $62.33 per barrel, while gold spot prices increased by 1.33% to around $4,037.62 per ounce [13] - The U.S. Dollar Index spot was up 0.36% at 98.9350 [13]