AZZ INC (AZZ) FY 2025 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion together with "Item 8. Financial Statements and Supplementary Data." This discussion contains forward-looking statements regarding our business and operations; see "Forward-Looking Statements" at the beginning of this Annual Report on Form 10-K. Our actual results may differ materially from those we currently anticipate as a result of the factors we describe under "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form 10-K.

A discussion regarding our financial condition and results of operations as well as our liquidity and capital resources for fiscal year 2024 compared to fiscal year 2023 can be found under "Item 7. Management's Discussion and Analysis" in our Annual Report on Form 10-K for the fiscal year ended February 29, 2024, filed with the SEC on April 22, 2024, which such discussion is hereby incorporated by reference.

Overview

We are a provider of hot-dip galvanizing and coil coating solutions to a broad range of end-markets in North America. We operate three distinct business segments, the AZZ Metal Coatings segment, the AZZ Precoat Metals segment, and the AZZ Infrastructure Solutions segment, which consists of the Company's 40% investment in a joint venture, AIS Investment Holdings LLC (the "AVAIL JV"). Our discussion and analysis of financial condition and results of operations is presented for each of our segments, along with corporate costs and other costs not specifically identifiable to a segment. For a reconciliation of segment operating income (loss) from continuing operations to consolidated operating income, see "Item 8. Financial Statements and Supplementary Data—Note 18". References herein to fiscal years are to the twelve-month periods that end in February of the relevant calendar year. For example, the twelve-month period ended February 28, 2025 is referred to as "fiscal 2025," "fiscal year 2025", "current year" or "current period", and the twelve-month period ended February 29, 2024 is referred to as "fiscal 2024," "fiscal year 2024," "prior year" or "prior year period."

Business Operations Update

Our results for the year ended February 28, 2025 were favorably impacted by the growth in demand for our manufactured solutions, primarily in the construction industry.

The demand for our manufactured solutions was the primary contributor to net income available to common shareholders of $52.4 million for the year ended February 28, 2025. Our operating results for fiscal 2025, including operating results by segment, are described in the summary on the following page, and detailed descriptions can be found below under “Results of Operations.”

Our operations generated $249.9 million of cash in fiscal 2025. The components of our liquidity and descriptions of our cash flows, capital investments, and other matters impacting our liquidity and capital resources can be found below under “Liquidity and Capital Resources.”

Outlook

While it is difficult to predict future North American economic activity and its impact on the demand for our galvanizing and coil coating solutions, as well the impact that political or regulatory developments may have on us, we have noted several factors below that have impacted or may impact our results of operations during the first quarter of fiscal 2026.

•Sales prices in our AZZ Metal Coatings segment are expected to remain consistent with current levels.

•Sales prices in our AZZ Precoat Metals segment are expected to remain consistent with current levels, with expected seasonal fluctuations in mix due to an increase in construction business, which may impact the average selling price.

•Demand in our AZZ Metal Coatings and AZZ Precoat Metals segments is expected to follow our typical seasonal patterns.

•Customer inventories for our AZZ Metal Coatings segment remain consistent, which should support the continued demand for our metal coatings solutions.

•Customer inventories for our AZZ Precoat Metals segment remain at historical levels, which should support the continued demand for our coil coating solutions.

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Results of Operations

Net income (loss) from continuing operations by segment for fiscal 2025 and 2024 were as follows (in thousands):

See notes on page 25.

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For the fiscal year ended February 28, 2025, we recorded sales of $1,577.7 million, compared to prior year’s sales of $1,537.6 million. Of total sales for fiscal 2025, 42.2% were generated from the AZZ Metal Coatings segment and 57.8% of sales were generated from the AZZ Precoat Metals segment. Net income from continuing operations for fiscal 2025 was $128.8 million, compared to $101.6 million for fiscal 2024. Net income from continuing operations as a percentage of sales was 8.2% for fiscal 2025 as compared to 6.6% for fiscal 2024. Diluted earnings per common share from continuing operations decreased by 48.3%, to $1.79 per share for fiscal 2025, compared to $3.46 per share for fiscal 2024. The decrease was primarily due to the redemption of the Series A Preferred Stock. See "Liquidity and Capital Resources—Series A Convertible Preferred Stock."

Sales

Sales for the AZZ Metal Coatings segment increased $8.9 million, or 1.4%, to $665.1 million, from the prior year’s sales of $656.2 million. The increase in sales was primarily due to a higher volume of steel processed which contributed $17.8 million, partially offset by a decrease in selling price, which decreased sales by $4.6 million. In addition, other sales decreased by $4.3 million.

Sales for the AZZ Precoat Metals segment increased $31.2 million, or 3.5%, to $912.6 million, from the prior year's sales of $881.4 million. The increase in sales was due to an increase in volume of metal coated during fiscal 2025 compared to the prior year, partially offset by a slight decrease in selling price, due to product mix.

Operating Income

Operating income for the AZZ Metal Coatings segment increased $13.7 million, or 8.3%, for fiscal 2025, to $178.5 million, as compared to $164.7 million for the prior year. The increase is due to net increase in sales as described above, lower cost of sales and lower selling, general and administrative expenses. Cost of sales decreased $0.9 million, primarily due to a decrease in zinc costs, offset by higher labor and overhead costs. The decrease in selling, general and administrative expense was primarily due to a legal accrual and related expenses of $5.5 million recognized in the prior year.

Operating income for the AZZ Precoat Metals segment increased $8.3 million, or 5.9%, for fiscal 2025, to $147.8 million, as compared to $139.6 million for the prior year. The increase is primarily due to the increase in sales as described above, partially offset by an increase in cost of sales, primarily driven by higher cost of labor and materials (mainly due to higher volume). Selling, general and administrative expense increased due to higher employee related costs, travel, other indirect costs.

Operating loss for the AZZ Infrastructure solutions segment increased $0.5 million, or 7.9%, for fiscal 2025, to $(6.7) million, as compared to $(6.2) million for the prior year. The increase is due to the recognition of $1.2 million in litigation fees and the write-off of $5.2 million for a disputed receivable that was retained following the sale of the AIS business, following an unfavorable resolution of the litigation matter. For additional detail, see "Item 8. Financial Statements and Supplementary Data—Note 22."

Corporate Expenses

Corporate expenses increased $6.7 million, to $83.2 million for fiscal 2025, compared to $76.5 million for fiscal 2024. The increase is primarily due to: an increase in salaries and wages, due to retirement and other severance expense for certain executive management employees; increased incentive expense, due to improved performance of the Company; an increase in expenses related to the Company's employee stock purchase plan, due to the increase in AZZ's common stock price; a legal

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settlement and other legal expenses related to a non-operating entity of $3.5 million; and transition services agreement fees associated with the AVAIL JV, which were received in the prior year, with no comparable receipt in the current year.

Interest Expense

Interest expense for fiscal 2025 decreased $25.8 million, to $81.3 million, as compared to $107.1 million in fiscal 2024. The decrease is primarily attributable to a decrease of $110.3 million in our weighted average debt outstanding and a decrease in the weighted average interest rate of 121 basis points. The decrease is also due to higher capitalized interest of $4.4 million in the current year period associated with the new facility under construction in Washington, Missouri. See "Liquidity and Capital Resources—Greenfield Aluminum Coil Coating Facility" below for more information.

Equity in Earnings of Unconsolidated Entities

Equity in earnings of unconsolidated subsidiaries for the current period increased $0.8 million, to $16.2 million, compared to $15.4 million in the prior year period. The increase is due to higher earnings from the AVAIL JV, primarily in their electrical business. See "Item 8. Financial Statements and Supplementary Data—Note 19" for more information about the AVAIL JV.

Other (Income) Expense, Net

Other expense, net was $0.6 million for fiscal 2025, compared to other income, net of $0.2 million for fiscal 2024. The increase in expense is primarily due to foreign currency losses primarily attributed to our operations in Canada, partially offset by interest income.

Income Taxes

The provision for income taxes from continuing operations was 24.5% for fiscal 2025 compared to 21.9% for fiscal 2024. The increase in the effective tax rate is primarily attributable to favorable adjustments for fiscal 2024 related to uncertain tax positions, partially offset by higher tax deductions for stock compensation in fiscal 2025. The increase is also attributable to non-deductible items such as compensation limited by IRC Sec. 162(m) and meals & entertainment subject to the 50% limitation under IRC Sec. 274(n). The increase also relates to higher state tax expense, net of federal benefit, and lower R&D tax credits following the divestiture of the AIS business.

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Liquidity and Capital Resources

We have historically met our cash needs through a combination of cash flows from operating activities along with bank and bond market debt. Our cash requirements generally include cash dividend payments, capital improvements, debt repayment and acquisitions. Based on our current financial condition and current operations, we believe that our cash position, cash flows from operating activities and our expectation of continuing availability to draw upon our credit facilities are sufficient to meet our cash flow needs for the next twelve months and beyond.

As of February 28, 2025, our total liquidity of $356.1 million consisted of available capacity on our Revolving Credit Facility of $354.6 million plus cash and cash equivalents of $1.5 million.

Cash Flows

The following table summarizes our cash flows by category for the periods presented (in thousands):

Net cash provided by operating activities of continuing operations for fiscal 2025 was $249.9 million, driven primarily by: net income from continuing operations of $128.8 million, adjusted to exclude non-cash charges, net of non-cash income of $96.5 million; a decrease in cash from changes in other long-term assets and long-term liabilities of $13.1 million; an increase in cash from deferred tax of $8.0 million; an increase in cash resulting from a decrease in working capital of $17.1 million; and cash distributions on the investment in the AVAIL JV of $12.6 million. The decrease in working capital is primarily due to an increase in accounts payable, accrued expenses and income taxes payable, as well as a decrease in inventories, other receivables and accounts receivable, due to improved management of collections of trade and other receivables, and due to improved management of inventory needs. These decreases were offset by an increase in contract assets, which increased working capital. Net cash provided by operating activities was used to fund $115.9 million of capital expenditures, make net payments on long term debt and finance leases liabilities of $111.0 million, make dividend payments of $23.1 million and make payments for taxes related to net share settlement of equity awards of $5.2 million. We also completed a secondary public offering of 4.6 million shares of our common stock, which provided cash, net of offering costs of $13.3 million, which was used to redeem our 240,000 shares of Series A Preferred Stock for $308.9 million.

Net cash provided by operating activities of continuing operations for fiscal 2024 was $244.5 million, driven primarily by net income from continuing operations of $101.6 million, adjusted to exclude non-cash charges, net of non-cash income, of $85.7 million, an increase in cash resulting from a reduction in working capital of $54.0 million, and a cash distribution on the investment in the AVAIL JV of $3.1 million. The reduction in working capital is due primarily to a reduction in accounts receivable, other receivables and inventories due to improved management of collections of trade and other receivables, and due to improved management of inventory needs. Net cash provided by operating activities was used to fund $95.1 million of capital expenditures, make net payments on long term debt and finance leases liabilities of $115.4 million and make dividend payments of $31.4 million.

See "Financing and Capital" section below for additional information.

Financing and Capital

2022 Credit Agreement and Term Loan B

We have a credit agreement with a syndicate of financial institutions as lenders that was entered into on May 13, 2022 and was subsequently amended on August 17, 2023, December 20, 2023, March 20, 2024, September 24, 2024 and February 27, 2025 (collectively referred to herein as the "2022 Credit Agreement").

The 2022 Credit Agreement includes the following significant terms:

i.provides for a senior secured initial term loan in the aggregate principal amount of $1.3 billion (the "Term Loan B"), due May 13, 2029, which is secured by substantially all of the assets of the Company; as of February 28, 2025, the outstanding balance of the Term Loan B was $870.3 million;

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ii.provides for a maximum senior secured Revolving Credit Facility in the aggregate principal amount of $400.0 million (the "Revolving Credit Facility"), due May 13, 2027;

iii.includes a letter of credit sub-facility of up to $100.0 million, which is part of, and not in addition to, the Revolving Credit Facility;

iv.borrowings under the Term Loan B bear an interest rate of Secured Overnight Financing Rate ("SOFR") plus 2.50% (following the repricings on March 20, 2024 and September 24, 2024 as described below) and the Revolving Credit Facility bears a leverage-based rate with various tiers between 1.75% and 2.75%; following the repricing on February 27, 2025, as described below, the interest rate as of February 28, 2025, was SOFR plus 2.25%;

v.includes customary affirmative and negative covenants, and events of default; including restrictions on the incurrence of non-ordinary course debt, investment and dividends, subject to various exceptions; and,

vi.includes a maximum quarterly leverage ratio financial covenant, with reporting requirements to our banking group at each quarter-end.

During fiscal 2025, we repriced our Revolving Credit Facility and Term Loan B, which amended the 2022 Credit Agreement as follows:

i.On March 20, 2024, we repriced our Term Loan B. The repricing reduced the margin from SOFR plus 3.75% to SOFR plus 3.25%.

ii.On September 24, 2024, we repriced the Term Loan B. The repricing reduced the margin from SOFR plus 3.25% to SOFR plus 2.50%.

iii.On February 27, 2025, we repriced the Revolving Credit Facility, which has a leverage-based rate with various tiers. The repricing reduced the interest rate tiers from SOFR plus 2.75% to 3.50% to SOFR plus 1.75% to 2.75%.

During fiscal 2024, we repriced our Revolving Credit Facility and Term Loan B, which amended the 2022 Credit Agreement as follows:

i.On August 17, 2023, we repriced the Term Loan B. The repricing reduced the margin from SOFR plus 4.25% to SOFR 3.75% and removed the Credit Spread Adjustment, as defined in the 2022 Credit Agreement, of 10 basis points.

ii.On December 20, 2023, we repriced the Revolving Credit Facility. The repricing reduced the margin from 4.25% to a leverage-based rate with various tiers ranging from SOFR plus 2.75% to 3.50%.

We primarily utilize proceeds from the Revolving Credit Facility to finance working capital needs, capital improvements, quarterly cash dividends, acquisitions and other general corporate purposes.

As defined in the 2022 Credit Agreement, quarterly prepayments were due against the outstanding principal of the Term Loan B and were payable on the last business day of each May, August, November and February, beginning August 31, 2022, in a quarterly aggregate principal amount of $3.25 million, with the entire remaining principal amount due on May 13, 2029, the maturity date. Additional prepayments made against the Term Loan B contribute to these required quarterly payments. Due to prepayments made against the Term Loan B since August 31, 2022, the quarterly mandatory principal payment requirement has been met, and the quarterly payments of $3.25 million are no longer required.

The weighted average interest rate for our outstanding debt, including the Revolving Credit Facility and the Term Loan B, was 7.54% and 8.58% as of February 28, 2025 and February 29, 2024, respectively. We are also obligated to pay a leverage-based commitment fee with various tiers between 0.20% and 0.30% per year for unused amounts under the Revolving Credit Facility. As of February 28, 2025, the commitment fee rate was 0.225%.

Our 2022 Credit Agreement requires us to maintain a maximum Total Net Leverage Ratio (as defined in the loan agreement) no greater than 4.5. As of February 28, 2025, we were in compliance with all covenants and other requirements set forth in the 2022 Credit Agreement.

April 2024 Secondary Public Offering

On April 30, 2024, we completed a secondary public offering in which we sold 4.6 million shares of our common stock at $70.00 per share (the "April 2024 Secondary Public Offering"). We received gross proceeds of $322.0 million, and paid offering expenses of $13.3 million, for net proceeds of $308.7 million. The proceeds from the April 2024 Offering were used to redeem the Series A Preferred Stock.

Series A Convertible Preferred Stock

On May 9, 2024, we fully redeemed our 240,000 shares of 6.0% Series A Convertible Preferred Stock for $308.9 million. The payment was calculated as the face value of the Series A Preferred Stock of $240.0 million, multiplied by

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the Return Factor (as defined below) of 1.4, less dividends paid to date of $27.1 million. The redemption premium of $75.2 million, which was calculated as the difference between the redemption amount and the book value of $233.7 million, was recorded as a deemed dividend, and reduces net income available to common shareholders. The Series A Preferred Stock was redeemed using proceeds from the April 2024 Secondary Public Offering.

Dividends

The Series A Preferred Stock accumulated a 6.0% dividend per annum, or $15.00 per share per quarter. Dividends were payable in cash or in kind, by accreting and increasing the Series A Base Amount (“PIK Dividends”). Dividends were payable on the sum of (i) the aggregate liquidation preference amount of $240.0 million plus (ii) any PIK Dividends. Dividends were accrued daily and paid quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year. Following the calendar quarter ending June 30, 2027, we were not able to elect PIK Dividends and dividends on the Series A Preferred Stock were required to be paid in cash. All dividends were paid in cash through May 9, 2024, at which time the Series A Preferred Stock was redeemed. The dividend would have increased annually by one percentage point, beginning with the dividend payable for the calendar quarter ending September 30, 2028. Dividends declared and paid for the fiscal years ended February 28, 2025 and February 29, 2024 were $3.6 million and $14.4 million, respectively.

Letters of Credit

As of February 28, 2025, we had total outstanding letters of credit in the amount of $15.4 million. These letters of credit are issued for a number of reasons, but are most commonly issued in lieu of customer retention withholding payments covering warranty, performance periods and insurance collateral.

Interest Rate Swap

We manage our exposure to fluctuations in interest rates on our floating-rate debt by entering into interest rate swap agreements to convert a portion of our variable-rate debt to a fixed rate.

On September 27, 2022, we entered into a fixed-rate interest rate swap agreement, which was subsequently amended on October 7, 2022 (the "2022 Swap"), with banks that are parties to the 2022 Credit Agreement, to change the SOFR-based component of the interest rate. The 2022 Swap converts the SOFR portion to 4.277%. On September 24, 2024, we repriced our Term Loan B to SOFR plus 2.50%, resulting in a total fixed rate of 6.777%. The 2022 Swap had an initial notional amount of $550.0 million and a maturity date of September 30, 2025. The notional amount of the interest rate swap decreases by a pro-rata portion of any quarterly principal payments made on the Term Loan B, and the notional amount is $536.3 million as of February 28, 2025. The objective of the 2022 Swap is to eliminate the variability of cash flows in interest payments attributable to changes in benchmark one-month SOFR interest rates. The hedged risk is the interest rate risk exposure to changes in interest payments, attributable to changes in benchmark one-month SOFR interest rates over the interest rate swap term. The changes in cash flows of the interest rate swap are expected to exactly offset changes in cash flows of the variable-rate debt. We designated the 2022 Swap as a cash flow hedge at inception. Cash settlements, in the form of cash payments or cash receipts, of the 2022 Swap are recognized in interest expense.

Other

We plan to contribute $6.0 million to our pension plan during fiscal 2026. See "Item 8. Financial Statements and Supplementary Data—Note 16" for a discussion of our employee benefit plans.

As of February 28, 2025, we had $900.3 million of debt outstanding on the Revolving Credit Facility and the Term Loan B, with varying maturities through fiscal 2029. We had approximately $354.6 million of additional credit available as of February 28, 2025.

Capital Commitments—Greenfield Aluminum Coil Coating Facility

We are expanding our coatings capabilities by constructing a new 25-acre aluminum coil coating facility in Washington, Missouri that is expected to be operational in calendar year 2025 (the Company's fiscal year 2026). The new greenfield facility will be included in the AZZ Precoat Metals segment and is supported by a take-or-pay contract for approximately 75% of the output from the new plant. We expect to spend approximately $121.8 million in capital payments over the life of the project, of which $60.8 million was paid prior to fiscal 2025 and $52.8 million was paid during fiscal 2025. The remaining balance of $8.2 million is on schedule to occur by the first quarter of fiscal 2026, of which we have capital commitments of $7.5 million. The remaining payments through fiscal 2026 are expected to be funded through cash flows from operations.

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Share Repurchase Program

On November 10, 2020, our Board of Directors authorized a $100 million share repurchase program pursuant to which we may repurchase our common stock (the "2020 Authorization"). Repurchases under the 2020 Authorization will be made through open market or private transactions, in accordance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans, which allows stock repurchases when we might otherwise be precluded from doing so. Currently, share repurchases may not exceed 6% of our market capitalization per fiscal year.

During fiscal 2025, to prioritize repayments of debt, we did not repurchase shares of common stock under the 2020 Share Authorization. As of February 28, 2025, there was $53.2 million remaining to repurchase shares under the 2020 Authorization.

Other Exposures

We have exposure to commodity price increases in all three of our operating segments, primarily zinc and natural gas in the AZZ Metal Coatings segment, and natural gas, as well as steel and aluminum scrap, in the AZZ Precoat Metals segment. We attempt to minimize these increases by entering into agreements with our zinc suppliers and such agreements generally include fixed premiums, and by entering into agreements with our natural gas suppliers to fix a portion of our purchase cost. In addition to these measures, we attempt to recover other cost increases through improvements to our manufacturing process, supply chain management, and through increases in prices to match inflationary increases where competitively feasible. We have indirect exposure to copper, aluminum, steel and nickel-based alloys in the AZZ Infrastructure Solutions segment through our 40% investment in the AVAIL JV.

Off Balance Sheet Arrangements and Contractual Commitments

As of February 28, 2025, we did not have any off-balance sheet arrangements as defined under SEC rules. Specifically, there were no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on the financial condition, changes in financial condition, sales or expenses, results of operations, liquidity, capital expenditures or capital resources of the Company.

As of February 28, 2025, we had non-cancelable forward contracts to purchase approximately $98.7 million of zinc at various volumes and prices. We also had non-cancelable forward contracts to purchase approximately $6.7 million of natural gas at various volumes and prices. All such contracts expire in fiscal 2026. We had no other contracted commitments for any other commodities including steel, aluminum, copper, zinc, nickel-based alloys, natural gas, except for those entered into under the normal course of business.

As of February 28, 2025, we had outstanding letters of credit in the amount of $15.4 million. These letters of credit are issued for a number of reasons, but are most commonly issued to support collateral requirements with insurance companies.

As of February 28, 2025, we have contractual commitments related to the construction of the coil coating facility in Washington, Missouri of $7.5 million that are expected to be paid in the next 12 months. See "Greenfield Aluminum Coil Coating Facility" section above. See "Item 8. Consolidated Financial Statements and Supplementary Data—Note 22" for a discussion of our contractual commitments related to our leases.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results may differ from these estimates under different assumptions or conditions. The SEC defines critical accounting estimates as those made in accordance with U.S. GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on a company's financial condition or results of operations. We consider the following accounting estimates to meet this definition because they are dependent on our judgement and assumptions about matters that are inherently uncertain and represent our more critical estimates.

Impairment of Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination and is not amortized. We test goodwill for potential impairment annually as of December 31, or more frequently, if an event occurs or circumstances change that would more-likely-than-not reduce the reporting unit's fair value below its carrying amount.

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If no impairment indicators are present, we may first perform a qualitative assessment of goodwill to determine whether a quantitative assessment is necessary. If we perform a quantitative assessment for the annual goodwill impairment test, then we use the income approach. The income approach uses Level 3 fair value inputs, such as future cash flows and estimated terminal values for our reporting units that are discounted using a market participant perspective to determine the fair value of the reporting unit, which is then compared to the carrying value of that reporting unit to determine if there is impairment. The income approach includes assumptions about revenue growth rates, operating margins and terminal growth rates, discounted by an estimated weighted-average cost of capital derived from other publicly traded companies that are similar but not identical from an operational and economic standpoint. A significant change in events, circumstances or any of these assumptions could result in an impairment of long-lived assets, including identifiable intangible assets. Variables impacting future cash flows include, but are not limited to, the level of customer demand for and response to manufactured solutions we offer to the construction, industrial, consumer, transportation, electrical, and utility markets, changes in economic conditions of these various markets, assumptions about future sales, zinc and natural gas prices, operating costs, margins and the availability of experienced labor and management to implement our growth strategies.

Long-lived assets and Intangible assets

Long-lived assets, including property and equipment and intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Indefinite-lived intangible assets are evaluated for impairment on an annual basis, as of December 31. Impairment is measured by a comparison of the carrying amount to the estimated undiscounted cash flows to be generated by those assets. If the undiscounted cash flows are less than the carrying amount, we record impairment losses for the excess of their carrying value over the estimated fair value.

We make estimates of projected cash flows when performing our impairment evaluation. These estimates include, but are not limited to, assumptions about future sales, zinc and natural gas prices, operating costs, margins, the use or disposition of the asset, the asset's estimated remaining useful life, and future expenditures necessary to maintain the asset's existing service potential. Due to the significant subjectivity of the assumptions used to test for recoverability, changes in market conditions could result in significant impairment charges in the future, which would impact our net income.

Accruals for Contingent Liabilities

We are subject to the possibility of various loss contingencies arising in the normal course of business. The amounts we may record for estimated claims, such as self-insurance programs, warranty, environmental, legal, and other contingent liabilities, requires us to make judgments regarding the amount of expenses that will ultimately be incurred. We use past history and experience as well as other specific circumstances surrounding these claims in evaluating the amount of liability that should be recorded. Due to the inherent limitations in estimating future events, actual amounts paid or transferred may differ from those estimates.

Business Combinations

Assets acquired and liabilities assumed as part of a business acquisition are generally recorded at their fair value at the date of acquisition. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Determining fair value of identifiable assets, particularly intangibles, and liabilities acquired also requires management to utilize assumptions and estimates, which are based upon available information that may be subject to further refinement over the purchase accounting period of one year.

Recent Accounting Pronouncements

See "Part II. Item 8. Financial Statements and Supplementary Data—Note 1" for a full description of recent accounting pronouncements, including the actual and expected dates of adoption and estimated effects on our consolidated results of operations and financial condition, which is incorporated herein by reference.

Non-GAAP Disclosures

In addition to reporting financial results in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"), we provide adjusted net income, adjusted earnings per share and Adjusted EBITDA (collectively, the "Adjusted Earnings Measures"), which are non-GAAP measures. Management believes that the presentation of these measures provides investors with greater transparency when comparing operating results across a broad spectrum of companies, which provides a more complete understanding of our financial performance, competitive position, prospects for future capital investment and debt reduction. Management also believes that investors regularly rely on non-GAAP financial measures, such as adjusted net income, adjusted earnings per share and Adjusted EBITDA to assess operating performance and that such

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measures may highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP.

Management defines adjusted net income and adjusted earnings per share to exclude intangible asset amortization, certain legal settlements and accruals, and certain expenses related to non-recurring events from the reported GAAP measure. Management defines Adjusted EBITDA as adjusted net income excluding depreciation, amortization, interest, provision for income taxes and Series A Preferred Stock dividends. Management believes Adjusted EBITDA is used by investors to analyze operating performance and evaluate the Company's ability to incur and service debt, as well as its capacity for making capital expenditures in the future.

Management provides non-GAAP financial measures for informational purposes and to enhance understanding of the Company’s GAAP consolidated financial statements. Readers should consider these measures in addition to, but not instead of or superior to, the Company's financial statements prepared in accordance with GAAP, and undue reliance should not be placed on these non-GAAP financial measures. Additionally, these non-GAAP financial measures may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

The following tables provide a reconciliation for the years ended February 28, 2025 and February 29, 2024 between the non-GAAP Adjusted Earnings Measures to the most comparable measures, calculated in accordance with GAAP (dollars in thousands, except per share data):

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Adjusted Net Income and Adjusted Earnings Per Share from Continuing Operations

See notes on page 35.

Adjusted EBITDA from Continuing Operations

See notes on page 35.

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Adjusted EBITDA from Continuing Operations by Segment

See notes on page 35.

See notes on page 35.

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Debt Leverage Ratio Reconciliation