Operating Segments

3 Months Ended

May 31, 2024

Segment Reporting [Abstract]

Operating Segments

6. Operating Segments

Segment Information

Our Chief Executive Officer, who is the chief operating decision maker ("CODM"), reviews financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance. Sales and operating income are the primary measures used by the CODM to evaluate segment operating performance and to allocate resources to the AZZ Metal Coatings and the AZZ Precoat Metals segments, and net income is the primary measure used by the CODM to evaluate performance and allocate resources to the AZZ Infrastructure Solutions segment. Expenses related to certain centralized administration or executive functions that are not specifically related to an operating segment are included in Corporate.

A summary of each of our operating segments is as follows:

AZZ Metal Coatings — provides hot-dip galvanizing, spin galvanizing, powder coating, anodizing and plating, and other metal coating applications to the steel fabrication industry and other industries through facilities located throughout the United States and Canada. Hot-dip galvanizing is a metallurgical manufacturing process in which molten zinc reacts with steel, which provides corrosion protection and extends the lifecycle of fabricated steel for several decades.

AZZ Precoat Metals — engages in the advanced application of protective and decorative coatings and related value-added manufacturing for steel and aluminum coil primarily serving the construction; appliance; heating, ventilation and air conditioning (HVAC); container; transportation and other end markets.

AZZ Infrastructure Solutions — consists of the equity in earnings of our 40% investment in the AVAIL JV, as well as other expenses directly related to AIS receivables and liabilities that were retained following the divestiture of the AIS business. The AVAIL JV is a global provider of application-critical equipment, highly engineered technologies, and specialized services to the power generation, transmission, distribution, oil and gas, and industrial markets.

Net income (loss) by segment for the three months ended May 31, 2024 and 2023 was as follows (in thousands):

	Three Months Ended May 31, 2024
	Metal Coatings		Precoat Metals		Infrastructure Solutions(1)		Corporate(2)		Total
Sales	$	176,651	$	236,557	$	—	$	—	$	413,208
Cost of sales	122,735		187,803		—		—		310,538
Gross margin	53,916		48,754		—		—		102,670
Selling, general and administrative	5,984		8,660		29		18,248		32,921
Operating income (loss)	47,932		40,094		(29)		(18,248)		69,749
Interest expense	—		—		—		(22,774)		(22,774)
Equity in earnings of unconsolidated subsidiaries	—		—		3,824		—		3,824
Other income	56		—		—		148		204
Income (loss) before income tax	$	47,988	$	40,094	$	3,795	(40,874)		51,003
Income tax expense							11,401		11,401
Net income (loss)							$	(52,275)	$	39,602

See notes below.

	Three Months Ended May 31, 2023
	Metal Coatings		Precoat Metals		Infrastructure Solutions(1)		Corporate(2)		Total
Sales	$	168,794	$	222,079	$	—	$	—	$	390,873
Cost of sales	117,858		175,996		—		—		293,854
Gross margin	50,936		46,083		—		—		97,019
Selling, general and administrative	5,466		8,392		22		17,643		31,523
Operating income (loss)	45,470		37,691		(22)		(17,643)		65,496
Interest expense	—		—		—		(28,706)		(28,706)
Equity in earnings of unconsolidated subsidiaries	—		—		1,420		—		1,420
Other expense	(24)		—		—		(14)		(38)
Income (loss) before income tax	$	45,446	$	37,691	$	1,398	(46,363)		38,172
Income tax expense							9,650		9,650
Net income (loss)							$	(56,013)	$	28,522

(1) Infrastructure Solutions segment includes the equity in earnings from our investment in the AVAIL JV as well as other expenses related to

receivables and liabilities that were retained following the sale of the AIS business.

(2) Interest expense and Income tax expense are included in the Corporate segment as these items are not allocated to the segments.

Asset balances by operating segment for each period were as follows (in thousands):

	As of
	May 31, 2024		February 29, 2024
Assets:
Metal Coatings	$	550,741	$	553,505
Precoat Metals	1,534,214		1,500,122
Infrastructure Solutions - Investment in Joint Venture	101,639		98,169
Corporate	49,185		43,709
Total assets	$	2,235,779	$	2,195,505

Financial Information About Geographical Areas

Financial information about geographical areas for the periods presented was as follows (in thousands). The geographic area is based on the location of the operating facility and no customer accounted for 10 percent or more of consolidated sales.

	Three Months Ended May 31,
	2024		2023
Sales:
United States	$	403,051	$	381,322
Canada	10,157		9,551
Total	$	413,208	$	390,873

	As of
	May 31, 2024		February 29, 2024
Property, plant and equipment, net:
United States	$	536,857	$	522,693
Canada	18,498		18,959
Total	$	555,355	$	541,652