Acquisitions

12 Months Ended

Feb. 29, 2024

Business Combination and Asset Acquisition [Abstract]

Acquisitions

7. Acquisitions

Precoat Acquisition

On May 13, 2022, we acquired Precoat Metals for a purchase price of approximately $1.3 billion (the "Precoat Acquisition"). AZZ Precoat Metals is the leading independent provider of metal coil coating solutions in North America. The

acquisition represented the continued transition of AZZ to a focused provider of coating and galvanizing services for critical applications.

We completed the final purchase accounting valuation during the first quarter of fiscal year 2024. We accounted for the Precoat Acquisition as a business combination under the acquisition method of accounting. Goodwill from the acquisition of $527.8 million represents the excess purchase price over the estimated value of net tangible and intangible assets and liabilities assumed and is expected to be deductible for income tax purposes. Goodwill from the acquisition was allocated to the AZZ Precoat Metals segment. Assets acquired and liabilities assumed in the Precoat Acquisition were recorded at their estimated fair values as of the acquisition date.

When determining the fair values of assets acquired and liabilities assumed, management made significant estimates, judgments and assumptions. We engaged third-party valuation experts to assist in determination of fair value of property and equipment, intangible assets, pension benefit obligation and certain other assets and liabilities. Management believes that the current information provides a reasonable basis for the fair values of assets acquired and liabilities assumed. During the first quarter of fiscal 2024, we made purchase price allocation adjustments that impacted goodwill, contract assets and accrued expenses.

The following table represents the summary of the assets acquired and liabilities assumed, in aggregate, related to the Precoat Acquisition, as of the date of the acquisition (in thousands):

	May 13, 2022		Measurement Period Adjustments		As Adjusted
Assets
Accounts receivable, net	$	77,422	$	—	$	77,422
Inventories	43,369		—		43,369
Contract assets	70,731		(2,417)		68,314
Prepaid expenses and other	2,247		—		2,247
Property, plant and equipment	305,503		—		305,503
Right-of-use assets	13,753		—		13,753
Goodwill	524,816		2,977		527,793
Deferred tax asset	8,660		—		8,660
Intangible assets, net	446,000		—		446,000
Other assets	546		—		546
Total fair value of assets acquired	$	1,493,047	$	560	$	1,493,607
Liabilities
Accounts payable	99,223		—		99,223
Accrued expenses	31,201		560		31,761
Other accrued liabilities	5,330		—		5,330
Lease liability, short-term	2,440		—		2,440
Lease liability, long-term	11,313		—		11,313
Deferred tax liabilities	3,100		(3,100)		—
Other long-term liabilities	56,991		3,100		60,091
Total fair value of liabilities assumed	$	209,598	$	560	$	210,158
Total purchase price, net of cash acquired	$	1,283,449	$	—	$	1,283,449

Intangible assets include customer relationships, tradenames and technology. Other long-term liabilities include the pension liability and certain environmental liabilities. See Notes 16 and 17 for more information about these long-term liabilities.

DAAM Acquisition

On February 28, 2022, we entered into an agreement to acquire all the outstanding shares of DAAM Galvanizing Co. Ltd. ("DAAM"), a privately held hot-dip galvanizing company based in Edmonton, Alberta Canada, for approximately $35.5 million. DAAM currently operates two galvanizing facilities in Canada; one located in Edmonton, Alberta and a second in Saskatoon, Saskatchewan, as well as a service depot in Calgary, Alberta. The addition of DAAM expanded our geographical coverage in the Northwest and enhanced the scope of metal coatings solutions offered in Canada. The business is included in the AZZ Metal Coatings segment. The goodwill arising from this acquisition was allocated to the AZZ Metal Coatings segment, and we estimate that approximately 50% of the goodwill amount is expected to be deductible for income tax purposes.

We engaged third-party valuation experts to assist with the purchase price allocation, the recorded valuation of property, plant and equipment, intangible assets and certain other assets and liabilities. Estimates from third-party experts along with the analysis and expertise of management have formed the basis for the allocation. During the third quarter of fiscal 2023, the purchase price allocation was finalized. We settled the working capital adjustment and received cash of $0.7 million during fiscal 2023, and adjusted other acquired assets and liabilities, which resulted in net decrease in the purchase price.

The following table represents the summary of the assets acquired and liabilities assumed, in aggregate, related to the DAAM acquisition, as of the date of the acquisition (in thousands):

	February 28, 2022
Assets
Accounts receivable	$	3,082
Other receivables	171
Inventories	2,451
Property, plant and equipment	11,462
Goodwill	13,691
Intangibles and other assets	9,975
Total fair value of assets acquired	$	40,832
Liabilities
Accounts payable and other accrued liabilities	3,910
Deferred tax liabilities	1,422
Total fair value of liabilities assumed	$	5,332
Total purchase price, net of cash acquired	$	35,500

Unaudited Pro Forma Information

The following unaudited pro forma financial information for fiscal 2023 and 2022 combines the historical results of AZZ and the acquisition of Precoat Metals, assuming that the companies were combined as of March 1, 2021. The pro forma financial information includes business combination accounting effects from the Precoat Acquisition, including amortization expense from acquired intangible assets, depreciation expense from acquired property, plant and equipment, interest expense from financing transactions which occurred to fund the Precoat Acquisition, acquisition-related transaction costs and tax-related effects. The pro forma information as presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition of Precoat Metals had taken place on March 1, 2021 or of future operating performance.

	Year Ended February 28,
	2023		2022
Sales	$	1,516,669	$	1,265,953
Net income from continuing operations (1)	85,440		62,167
(1) Net income for the year ended February 28, 2022 includes acquisition costs of approximately $45.0 million, of which     $11.5 million was incurred by AZZ and $33.5 million was incurred by Precoat Metals prior to the acquisition.

Steel Creek Acquisition

On January 3, 2022, we completed the acquisition of all the assets of Steel Creek Galvanizing Company, LLC ("Steel Creek"), a privately held hot-dip galvanizing company based in Blacksburg, South Carolina, for approximately $25.0 million. The acquisition expanded our geographical reach in metal coatings solutions and extends its ability to support customers in the Southeast region of the United States. The business is included in the AZZ Metal Coatings segment. The goodwill arising from this acquisition was allocated to the AZZ Metal Coatings segment and is expected to be deductible for income tax purposes.

The purchase price allocation was finalized during fiscal 2023. The following table summarizes the fair values of the allocation of assets acquired and liabilities assumed, in aggregate, related to the Steel Creek acquisition, as of the date of the acquisition (in thousands):

	January 3, 2022
Assets
Accounts receivable	$	575
Inventories	3,593
Property, plant and equipment	15,796
Intangibles	872
Goodwill	7,755
Total fair value of assets acquired	$	28,591
Liabilities
Accounts payable and other accrued liabilities	765
Contingent consideration	2,826
Total fair value of liabilities assumed	$	3,591
Total purchase price, net of cash acquired	$	25,000

In addition to the initial cash payment upon closing, contingent consideration of up to $2.8 million is payable based on the achievement of specified operating results over the three-year period following completion of the acquisition. As of February 29, 2024, the contingent consideration liability was $0.9 million.