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Discontinued Operations
 6 Months Ended
Aug. 31, 2022
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
3. Discontinued Operations
In fiscal 2023, the Company continued to execute its plan to divest of non-core businesses. On June 23, 2022, the Company and Fernweh Group LLC ("Fernweh"), jointly entered into a definitive agreement whereby AZZ will contribute its AZZ Infrastructure Solutions segment (“AIS”) to AIS Investment Holdings LLC (the “AIS JV”), and sell a 60% interest in the AIS JV to Fernweh at an implied enterprise value of AIS of $300.0 million.

Management has committed to a plan to divest substantially all of the AIS segment prior to August 31, 2022, and has classified the AIS business as held for sale in the accompanying interim consolidated balance sheets. As part of recognizing the business as held for sale in accordance with GAAP, the Company is required to measure AIS at the lower of its carrying amount or fair value less cost to sell. As a result of this analysis, for the three months ended August 31, 2022, the Company recognized an estimated non-cash, pre-tax loss on disposal of approximately $114.9 million, which is included in "Estimated loss on disposal of discontinued operations" in the consolidated statements of operations. The estimated loss was determined by comparing the fair value of the consideration received for the sale of a 60% interest in the AIS JV and the fair value of the Company’s retained 40% investment in the AIS JV with the net assets of the AIS JV immediately prior to the transaction. The fair value of the Company’s retained investment in the AIS JV was determined in a manner consistent with the transaction price received for the sale of the 60% interest in the AIS JV.
Upon closing of the transaction (which occurred on September 30, 2022), the AIS JV will be deconsolidated and the Company's retained 40% interest in the joint venture will be accounted for under the equity method of accounting. The transaction closed on September 30, 2022. The proceeds from the sale consisted of approximately $108.0 million, as well as $120.0 million that was funded by committed debt financing taken on by the AIS JV immediately prior to the closing of the sale. See Note 13 for further information.
The divestiture of the AZZ Infrastructure Solutions segment represents a strategic shift in our operations and will allow us to become a predominantly metal coatings focused company. As a result, the results of the AIS segment were classified as discontinued operations in our condensed statements of operations and excluded from both continuing operations and segment results for all periods presented.
We have separately reported the assets and liabilities of the discontinued operations in the consolidated balance sheets. The assets and liabilities have been reflected as discontinued operations in the consolidated balance sheets as of August 31, 2022 and February 28, 2022, and consist of the following (in thousands):
August 31, 2022February 28, 2022
Current assets of discontinued operations:
Cash and cash equivalents$3,000 $3,000 
Accounts receivable67,321 81,911 
Inventories
Raw materials47,665 36,581 
Work-in-process11,072 6,445 
Finished goods1 77 
Contract assets80,214 71,762 
Prepaid expenses and other5,795 1,888 
Total current assets of discontinued operations215,068 201,664 
Long-term assets of discontinued operations:
Property, plant and equipment35,841 37,490 
Right-of-use asset26,322 29,332 
Goodwill195,222 195,222 
Intangibles and other42,454 42,442 
Deferred tax asset1,569 1,726 
Less: Impairment of carrying amount of net assets held for sale to estimated sales price(114,900)— 
Total non-current assets of discontinued operations186,508 306,212 
Total assets of discontinued operations$401,576 $507,876 
Current liabilities of discontinued operations:
Accounts payable$24,204 $19,146 
Income tax payable46 (264)
Accrued salaries and wages8,769 11,301 
Other accrued liabilities9,250 11,219 
Customer deposits309 387 
Contract liabilities33,508 42,465 
Lease liability, short-term3,846 4,029 
Total current liabilities of discontinued operations79,932 88,283 
Long-term liabilities of discontinued operations:
Lease liability, long-term21,621 24,207 
Total long-term liabilities of discontinued operations21,621 24,207 
Total liabilities of discontinued operations$101,553 $112,490 
The results of operations from discontinued operations for the three and six months ended August 31, 2022 and 2021, have been reflected as discontinued operations in the consolidated statements of operations and consist of the following (in thousands):
Three Months Ended August 31,Six Months Ended August 31,
2022202120222021
Sales$106,660 $85,013 $213,924 $185,624 
Cost of sales84,826 66,341 167,686 145,169 
Gross margin21,834 18,672 46,238 40,455 
Selling, general and administrative9,710 12,106 22,114 24,603 
Estimated loss on disposal of discontinued operations114,900 — 114,900 — 
Operating income (loss) from discontinued operations(102,776)6,566 (90,776)15,852 
Interest expense5 23661
Other (income) expense, net3,443 8734,268 (36)
Income (loss) from discontinued operations before income tax(106,224)5,670 (95,050)15,827 
Income tax (benefit) expense(23,534)960 (21,072)393 
Net income (loss) from discontinued operations$(82,690)$4,710 $(73,978)$15,434 
Earnings per common share from discontinued operations:
Basic earnings (loss) per share$(3.33)$0.19 $(2.99)$0.62 
Diluted earnings (loss) per share$(2.85)$0.19 $(2.70)$0.61 

We have included the net cash provided by discontinued operations in the consolidated statements of cash flows. The depreciation, amortization, capital expenditures, and significant operating and investing non-cash items of the discontinued operation for the six months ended August 31, 2022 and 2021, consists of the following (in thousands):
Six Months Ended August 31,
20222021
Amortization and depreciation$6,248 $6,171 
Purchase of property, plant and equipment$2,878 $2,458 
Estimated non-cash loss on disposal of discontinued operations$114,900 $—