Operating Segments

3 Months Ended

May 31, 2023

Segment Reporting [Abstract]

Operating Segments

6. Operating Segments

Segment Information

The Company’s 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 (loss) are the primary measures used by the CODM to evaluate segment operating performance and to allocate resources to segments. Expenses related to certain centralized administration or executive functions that are not specifically related to an operating segment are included in Corporate. As presented in Note 3, the AVAIL JV operating results for the period prior to deconsolidation are included within discontinued operations, with the exception of AZZ Crowley Tubing, which was retained by the Company and merged into the AZZ Metal Coatings segment. See Note 3 for the results of operations related to the AZZ Infrastructure Solutions segment.

A summary of each of the Company's 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 and other industries through facilities located throughout the United States and Canada. Hot-dip galvanizing is a metallurgical process in which molten zinc reacts to steel. The zinc alloying provides corrosion protection and extends the life-cycle of fabricated steel for several decades.

AZZ Precoat Metals — engages in the advanced application of protective and decorative coatings and related value-added services 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 the Company's 40% investment in the AVAIL JV, as well as other expenses directly related to AIS receivables that were retained following the divestiture of the AIS business. The AVAIL JV provides specialized products and services designed to support primarily industrial and electrical applications. The product offerings include custom switchgear, electrical enclosures, medium- and high-voltage bus ducts, explosion proof and hazardous duty lighting and tubular products. The AZZ Infrastructure Solutions segment also focuses on life-cycle extension for the power generation, refining and industrial infrastructure, through providing automated weld overlay solutions for corrosion and erosion mitigation.

Net income from continuing operations by segment for the three months ended May 31, 2023 and 2022 was as follows (in thousands):

	Three Months Ended May 31, 2023
	Metal Coatings		Precoat Metals		Infrastructure Solutions(1)		Corporate(2)(3)		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) from continuing operations	$	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 (income) expense					—		38		38
Income (loss) from continuing operations before income tax					$	1,398	(46,387)		38,172
Income tax expense							9,650		9,650
Net income (loss) from continuing operations							$	(56,037)	$	28,522

	Three Months Ended May 31, 2022
	Metal Coatings		Precoat Metals		Infrastructure Solutions(1)		Corporate(2)(3)		Total
Sales	$	163,443	$	43,691	$	—	$	—	$	207,134
Cost of sales	113,580		33,501		—		—		147,081
Gross margin	49,863		10,190		—		—		60,053
Selling, general and administrative	4,593		3,542		—		24,009		32,144
Operating income (loss) from continuing operations	$	45,270	$	6,648	—		(24,009)		27,909
Interest expense					—		7,472		7,472
Other (income) expense					—		(27)		(27)
Income (loss) from continuing operations before income tax					$	—	(31,454)		20,464
Income tax expense							5,111		5,111
Net income (loss) from continuing operations							$	(36,565)	$	15,353
(1) Infrastructure Solutions segment includes the Company’s equity in (earnings) loss from its investment in the AVAIL JV, as well as other expenses related to receivables that were retained by the Company following the sale of the AIS business.
(2) Interest expense, Other (income) expense and Income tax expense are included in the Corporate segment as these items are not allocated to the segments.
(3) For fiscal year 2024, amortization expense for acquired intangible assets is included in Corporate expenses in "Selling, general and administrative" expense as these expenses are not allocated to the segments.

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

	As of
	May 31, 2023		February 28, 2023
Assets:
Metal Coatings	$	582,664	$	588,337
Precoat Metals	1,489,635		1,488,810
Infrastructure Solutions - Investment in Joint Venture	87,068		84,760
Corporate	46,610		59,572
Total assets	$	2,205,977	$	2,221,479

Financial Information About Geographical Areas

Financial information about geographical areas for the periods presented was as follows (in thousands):

	Three Months Ended May 31,
	2023		2022
Sales:
United States	$	381,322	$	194,360
Canada	9,551		12,774
Total	$	390,873	$	207,134

	As of
	May 31, 2023		February 28, 2023
Property, plant and equipment, net:
United States	$	484,305	$	478,722
Canada	19,727		19,781
Total	$	504,032	$	498,503