AZZ(AZZ) - 2026 Q2 - Quarterly Report

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) This section presents the unaudited condensed consolidated financial statements, covering balance sheets, income, cash flows, equity, and related notes Condensed Consolidated Balance Sheets 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 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) 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 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] Condensed Consolidated Statements of Changes in Shareholders' Equity 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] Notes to Condensed Consolidated Financial Statements 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] - The company acquired Canton Galvanizing for $30.1 million on July 1, 2025, expanding its Metal Coatings segment[32] - 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][65] - 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] - 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][82] - 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][121] - 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] - 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][106][107] - The Series A Preferred Stock was fully redeemed on May 9, 2024, for $308.9 million, using proceeds from a secondary public offering[109][114] - 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] - Environmental liabilities reserve balance was $18.4 million as of August 31, 2025[128] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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] Business Operations Update 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] - Growth in demand for manufactured solutions in the construction and utilities industries also contributed positively[136] - Net income for the current six-month period was $260.3 million, primarily due to the AVAIL JV equity in earnings[137] - Operations generated $373.2 million of cash during the current six-month period[137] 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] - AZZ Precoat Metals segment expects sales prices to increase due to passing through higher material costs and overall selling price increases[140] - Demand and volumes for both Metal Coatings and Precoat Metals segments are expected to follow normal seasonal patterns[140] RESULTS OF OPERATIONS 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 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] - Segment performance is evaluated using sales and operating income for Metal Coatings and Precoat Metals, and net income for Infrastructure Solutions[139] QUARTER ENDED AUGUST 31, 2025 COMPARED TO THE QUARTER ENDED AUGUST 31, 2024 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 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] | 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 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] | 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 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] - The decrease was mainly due to lower compensation costs, including retirement and severance expenses recognized in the prior year[150] Interest Expense 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] - 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] Equity in Earnings of Unconsolidated Entities 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] - 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] Income Taxes 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] - The decrease is attributed to higher R&D tax credits from the new aluminum coil coating facility[153] SIX MONTHS ENDED AUGUST 31, 2025 COMPARED TO THE SIX MONTHS ENDED AUGUST 31, 2024 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 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] | 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 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] | 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 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] - 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] Interest Expense 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] - 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] Equity in Earnings of Unconsolidated Entities 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] - 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] Income Taxes 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] - The decrease is attributed to higher R&D tax credits from the new aluminum coil coating facility[166] - The One Big Beautiful Bill Act is expected to reduce fiscal 2026 cash tax payments[167] LIQUIDITY AND CAPITAL RESOURCES 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] - 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] - 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] Cash Flows 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] Financing and Capital 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][174] - A new $150.0 million Receivables Securitization Facility was entered into, with proceeds used to pay down the Term Loan B[176][177][179] - 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] - The company was in compliance with all debt covenants, including a maximum Total Net Leverage Ratio of 4.5 (actual 1.7x)[181][207] Capital Commitments—Greenfield Aluminum Coil Coating Facility 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] - 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] AVAIL JV 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] - AZZ recognized a $275.2 million gain from the sale, offset by a $45.9 million impairment loss on the AVAIL JV investment[189][190] - Total equity in earnings from unconsolidated subsidiaries for the six months ended August 31, 2025, was $232.9 million[189] Share Repurchase Program 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] - $53.2 million remains available under the 2020 Share Authorization for future repurchases[191] Other Exposures 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] - Mitigation strategies include fixed-premium agreements with zinc suppliers, fixed-price natural gas contracts, and price increases to customers[191] Off Balance Sheet Arrangements and Contractual Obligations 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] Critical Accounting Policies and Estimates 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] Recent Accounting Pronouncements 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] Non-GAAP Disclosures 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] - 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] Adjusted Net Income and Adjusted Earnings Per Share 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 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 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][205] - Adjusted EBITDA for Precoat Metals was $45.9 million (3 months) and $94.4 million (6 months)[203][205] - Infrastructure Solutions Adjusted EBITDA was negative $(2.3) million (3 months) and positive $5.3 million (6 months), reflecting the AVAIL JV adjustments[203][205] Debt Leverage Ratio Reconciliation 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - No material changes in internal control over financial reporting occurred during the period[210] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, other information, exhibits, and signatures Item 1. Legal Proceedings 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] - A $5.5 million legal accrual was recorded for a breach of contract verdict against AZZ Beaumont, which is currently under appeal[212][126] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - $53.2 million remains available under the 2020 Share Authorization[215] Item 5. Other Information 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] - 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] Item 6. Exhibits 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] - Certifications from the CEO and CFO (pursuant to Sarbanes-Oxley Act Sections 302 and 906) are filed/furnished[219] 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]