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Assets Held for Sale
 9 Months Ended
Nov. 30, 2022
Discontinued Operations and Disposal Groups [Abstract]  
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 contributed its AZZ Infrastructure Solutions segment (“AIS”) to AIS Investment Holdings LLC (the “AIS JV”), and sold a 60% interest in the AIS JV to Fernweh at an implied enterprise value of AIS of $300.0 million.

Management previously committed to a plan to divest substantially all of the AIS segment and classified the AIS business as held for sale in the accompanying interim consolidated balance sheets as of August 31, 2022. As part of recognizing the business as held for sale in accordance with GAAP, the Company was required to measure AIS at the lower of its carrying amount or fair value less cost to sell. As a result of this analysis, during the second quarter of fiscal 2023, the Company recognized an estimated non-cash, pre-tax loss on disposal of $114.9 million. The 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. During the three months ended November 30, 2022, the Company completed the sale of the AIS segment, and recorded an additional pre-tax loss of $45.0 million, which is included in "Loss on disposal of discontinued operations" in the consolidated statements of operations. The additional loss includes $27.8 million from the derecognition of the cumulative translation adjustment related to its investment in foreign entities within the AIS segment, as well as an adjustment of $17.2 million for the change in net assets for the period between August 31, 2022, when the estimated loss was recorded, and September 30, 2022, when the transaction closed.
On September 30, 2022, the AIS JV transaction closed; as a result, the joint venture was deconsolidated and the Company retained a 40% interest in the joint venture, which is now accounted for under the equity method of accounting. The proceeds from the sale consisted of approximately $108.0 million, as well as $120.0 million that was funded by committed debt financing taken on by the AIS JV immediately prior to the closing of the sale. The debt financing of the AIS JV did not impact the Company's existing credit facility. The Company used the cash received from the AIS JV to repay a portion of the Term Loan B, the Revolving Credit Facility and for general corporate purposes. See Note 9.
The divestiture of the AZZ Infrastructure Solutions segment represents an intentional strategic shift in our operations and will allow the Company to become a focused provider of coating and galvanizing solutions for critical applications. As a result, the results of the AIS segment were classified as discontinued operations in our condensed statements of operations and excluded from both continuing operations and segment results for all periods presented.
We have separately reported the assets and liabilities of the discontinued operations in the consolidated balance sheets. The assets and liabilities have been reflected as discontinued operations in the consolidated balance sheets as of November 30, 2022 and February 28, 2022, and consist of the following (in thousands):
November 30, 2022February 28, 2022
Current assets of discontinued operations:
Cash and cash equivalents$— $3,000 
Accounts receivable— 81,911 
Inventories
Raw materials— 36,581 
Work-in-process— 6,445 
Finished goods— 77 
Contract assets— 71,762 
Prepaid expenses and other— 1,888 
Total current assets of discontinued operations— 201,664 
Long-term assets of discontinued operations:
Property, plant and equipment— 37,490 
Right-of-use asset— 29,332 
Goodwill— 195,222 
Intangibles and other assets, net— 42,442 
Deferred tax asset— 1,726 
Total non-current assets of discontinued operations— 306,212 
Total assets of discontinued operations$— $507,876 
Current liabilities of discontinued operations:
Accounts payable$— $19,146 
Income tax payable— (264)
Accrued salaries and wages— 11,301 
Other accrued liabilities— 11,219 
Customer deposits— 387 
Contract liabilities— 42,465 
Lease liability, short-term— 4,029 
Total current liabilities of discontinued operations— 88,283 
Long-term liabilities of discontinued operations:
Lease liability, long-term— 24,207 
Total long-term liabilities of discontinued operations— 24,207 
Total liabilities of discontinued operations$— $112,490 
The results of operations from discontinued operations for the three and nine months ended November 30, 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 November 30,Nine Months Ended November 30,
2022202120222021
Sales$42,300 $96,654 $256,224 $282,278 
Cost of sales35,020 77,263 202,707 222,432 
Gross margin7,280 19,391 53,517 59,846 
Selling, general and administrative4,074 10,589 26,186 35,192 
Loss on disposal of discontinued operations45,010 — 159,910 — 
Operating income (loss) from discontinued operations(41,804)8,802 (132,579)24,654 
Interest expense2 2863
Other (income) expense, net2,002 1,504 6,270 1,468 
Income (loss) from discontinued operations before income tax(43,808)7,296 (138,857)23,123 
Income tax (benefit) expense(4,827)(682)(25,910)(289)
Net income (loss) from discontinued operations$(38,981)$7,978 $(112,947)$23,412 
Earnings per common share from discontinued operations:
Basic earnings (loss) per share$(1.57)$0.32 $(4.55)$0.94 
Diluted earnings (loss) per share$(1.56)$0.32 $(4.52)$0.93 

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 nine months ended November 30, 2022 and 2021, consists of the following (in thousands):
Nine Months Ended November 30,
20222021
Amortization and depreciation$7,279 $5,189 
Purchase of property, plant and equipment$4,831 $3,373 
Non-cash loss on disposal of discontinued operations$159,910 $—