Company Quick10K Filing
Price45.20 EPS2
Shares26 P/E21
MCap1,184 P/FCF18
Net Debt283 EBIT84
TTM 2019-05-31, in MM, except price, ratios
10-Q 2020-05-31 Filed 2020-07-09
10-K 2020-02-29 Filed 2020-04-29
10-Q 2019-11-30 Filed 2020-01-09
10-Q 2019-08-31 Filed 2019-12-26
10-Q 2019-05-31 Filed 2019-07-08
10-K 2019-02-28 Filed 2019-05-17
10-Q 2018-11-30 Filed 2019-01-08
10-Q 2018-08-31 Filed 2018-10-09
10-Q 2018-05-31 Filed 2018-07-03
10-K 2018-02-28 Filed 2018-05-15
10-Q 2017-11-30 Filed 2018-05-15
10-Q 2017-08-31 Filed 2017-10-03
10-Q 2017-05-31 Filed 2017-07-06
10-K 2017-02-28 Filed 2017-04-20
10-Q 2016-11-30 Filed 2017-01-06
10-Q 2016-08-31 Filed 2016-10-05
10-Q 2016-05-31 Filed 2016-07-05
10-K 2016-02-29 Filed 2016-04-21
10-Q 2015-11-30 Filed 2016-01-08
10-Q 2015-08-31 Filed 2015-09-29
10-Q 2015-05-31 Filed 2015-07-01
10-K 2015-02-28 Filed 2015-04-22
10-Q 2014-11-30 Filed 2015-01-09
10-Q 2014-08-31 Filed 2014-10-01
10-Q 2014-05-31 Filed 2014-06-27
10-K 2014-02-28 Filed 2014-04-28
10-Q 2013-11-30 Filed 2014-01-08
10-Q 2013-08-31 Filed 2013-10-02
10-Q 2013-05-31 Filed 2013-07-03
10-K 2013-02-28 Filed 2013-04-29
10-Q 2012-11-30 Filed 2013-01-09
10-Q 2012-08-31 Filed 2012-10-01
10-Q 2012-05-31 Filed 2012-07-03
10-K 2012-02-29 Filed 2012-05-10
10-Q 2011-11-30 Filed 2012-01-06
10-Q 2011-08-31 Filed 2011-09-30
10-Q 2011-05-31 Filed 2011-07-01
10-K 2011-05-12 Filed 2011-05-12
10-Q 2010-11-30 Filed 2011-01-07
10-Q 2010-08-31 Filed 2010-10-01
10-Q 2010-06-25 Filed 2010-06-25
10-K 2010-05-12 Filed 2010-05-12
10-Q 2010-01-08 Filed 2010-01-08
8-K 2020-07-09 Earnings, Regulation FD, Exhibits
8-K 2020-07-07 Regulation FD, Exhibits
8-K 2020-07-02 Other Events, Exhibits
8-K 2020-07-02 Officers, Exhibits
8-K 2020-06-29 Other Events
8-K 2020-05-01
8-K 2020-04-29
8-K 2020-04-22
8-K 2020-02-11
8-K 2020-02-05
8-K 2020-01-27
8-K 2020-01-16
8-K 2020-01-09
8-K 2020-01-09
8-K 2019-12-05
8-K 2019-10-25
8-K 2019-10-03
8-K 2019-10-03
8-K 2019-07-09
8-K 2019-07-08
8-K 2019-07-02
8-K 2019-05-20
8-K 2019-05-17
8-K 2019-04-04
8-K 2019-01-17
8-K 2019-01-08
8-K 2018-10-09
8-K 2018-10-05
8-K 2018-07-10
8-K 2018-07-03
8-K 2018-06-29
8-K 2018-05-15
8-K 2018-04-05
8-K 2018-04-03
8-K 2018-03-26
8-K 2018-01-19
8-K 2018-01-09

AZZ 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 ex31120200531.htm
EX-31.2 ex31220200531.htm
EX-32.1 ex32120200531.htm
EX-32.2 ex32220200531.htm

AZZ Earnings 2020-05-31

Balance SheetIncome StatementCash Flow
Assets, Equity
Rev, G Profit, Net Income
Ops, Inv, Fin


Washington, D.C. 20549
For the quarterly period ended May 31, 2020
Commission file number: 1-12777
AZZ Inc.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
One Museum Place, Suite 500
3100 West 7th Street
Fort Worth,Texas 76107
(Address of principal executive offices) (Zip Code)
(817) 810-0095
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common StockAZZNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  
Large Accelerated FilerAccelerated filerNon-accelerated filer
Smaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)   Yes    No 
As of June 30, 2020 the registrant had outstanding 26,195,048 shares of common stock; $1.00 par value per share. 

Table of Contents
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

Table of Contents

Item 1. Financial Statements
(In thousands, except par value)
May 31, 2020February 29, 2020
Current assets:
Cash and cash equivalents$26,414  $36,687  
Accounts receivable (net of allowance for doubtful accounts of $4,772 as of May 31, 2020 and $4,951 as of February 29, 2020)130,047  139,214  
Raw material90,092  88,837  
Work-in-process8,145  5,543  
Finished goods5,746  5,461  
Contract assets65,044  70,093  
Prepaid expenses and other9,541  8,727  
Total current assets335,029  354,562  
Property, plant and equipment, net214,965  213,104  
Operating lease right-of-use assets41,767  43,208  
Goodwill355,808  356,225  
Intangibles and other assets, net103,204  106,732  
Total assets$1,050,773  $1,073,831  
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable$45,895  $61,987  
Income tax payable6,239  2,876  
Accrued salaries and wages12,376  38,882  
Other accrued liabilities25,778  26,868  
Customer deposits626  255  
Contract liabilities17,365  18,418  
Lease liability, short-term6,338  6,327  
Debt due within one year125,000  125,000  
Total current liabilities239,617  280,613  
Debt due after one year, net93,911  77,878  
Lease liability, long-term38,290  38,114  
Other long-term liabilities7,604  4,934  
Deferred income taxes35,695  37,926  
Total liabilities415,117  439,465  
Commitments and contingencies
Shareholders’ equity:
Common stock, $1 par, shares authorized 100,000; 26,195 shares issued and outstanding at May 31, 2020 and 26,148 shares issued and outstanding at February 29, 202026,195  26,148  
Capital in excess of par value67,883  66,703  
Retained earnings573,530  572,414  
Accumulated other comprehensive loss(31,952) (30,899) 
Total shareholders’ equity635,656  634,366  
Total liabilities and shareholders' equity$1,050,773  $1,073,831  
The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents
(In thousands, except per share data)
 Three Months Ended May 31,
Net sales$213,293  $289,123  
Cost of sales171,085  223,016  
Gross margin42,208  66,107  

Selling, general and administrative27,890  35,133  
Operating income14,318  30,974  
Interest expense2,634  3,584  
Other expense, net1,456  424  
Income before income taxes10,228  26,966  
Income tax expense4,687  5,682  
Net income$5,541  $21,284  
Earnings per common share
Basic earnings per share$0.21  $0.81  
Diluted earnings per share$0.21  $0.81  
Cash dividends declared per common share$0.17  $0.17  
The accompanying notes are an integral part of the condensed consolidated financial statements.


Table of Contents
(In thousands)
 Three Months Ended May 31,
Net income$5,541  $21,284  
Other comprehensive income (loss):
Foreign currency translation adjustments, net of income tax of $0(1,039) (1,960) 
Interest rate swap, net of income tax of $7 and $7, respectively.(14) (14) 
Other comprehensive loss(1,053) (1,974) 
Comprehensive income$4,488  $19,310  
The accompanying notes are an integral part of the condensed consolidated financial statements.


Table of Contents
(In thousands)
 Three Months Ended May 31,
Cash Flows From Operating Activities
Net income$5,541  $21,284  
Adjustments to reconcile net income to net cash used in operating activities:
Provision for doubtful accounts129  2,616  
Amortization and depreciation11,668  12,326  
Deferred income taxes(2,147) 668  
Net (gain) loss on sale of property, plant and equipment40  (200) 
Amortization of deferred borrowing costs135  136  
Share-based compensation expense1,766  1,350  
Effects of changes in assets and liabilities, net of acquisitions:
Accounts receivable8,721  (14,228) 
Inventories(4,449) 7,681  
Prepaid expenses and other(941) (1,240) 
Other assets123  185  
Net change in contract assets and liabilities3,168  (55,088) 
Accounts payable(15,328) 7,068  
Other accrued liabilities and income taxes payable(19,610) (454) 
Net cash used in operating activities(11,184) (17,896) 
Cash Flows From Investing Activities
Proceeds from sale of property, plant and equipment  210  
Purchase of property, plant and equipment(10,847) (4,686) 
Acquisition of subsidiaries, net of cash acquired  (38,993) 
Net cash used in investing activities(10,847) (43,469) 
Cash Flows From Financing Activities
Payments for taxes related to net share settlement of equity awards(539) (691) 
Proceeds from revolving loan76,000  187,000  
Payments on revolving loan(60,000) (131,000) 
Payments of dividends(4,425) (4,440) 
Net cash provided by financing activities11,036  50,869  
Effect of exchange rate changes on cash722  77  
Net decrease in cash and cash equivalents(10,273) (10,419) 
Cash and cash equivalents at beginning of period36,687  24,005  
Cash and cash equivalents at end of period$26,414  $13,586  
Supplemental disclosures
Cash paid for interest$869  $1,600  
Cash paid for income taxes$11  $567  
The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents
(In thousands)
Three Months Ended May 31, 2020
 Capital in
Excess of
Par Value
 Common Stock
Balance at February 29, 202026,148  $26,148  $66,703  $572,414  $(30,899) $634,366  
Share-based compensation    1,766  —  —  1,766  
Common stock issued from stock plans, net of shares withheld for employee taxes47  47  (586) —  —  (539) 
Cash dividends paid—  —  —  (4,425) —  (4,425) 
Net income—  —  —  5,541  —  5,541  
Foreign currency translation—  —  —  —  (1,039) (1,039) 
Interest rate swap—  —  —  —  (14) (14) 
Balance at May 31, 202026,195  $26,195  $67,883  $573,530  $(31,952) $635,656  

Three Months Ended May 31, 2019
 Capital in
Excess of
Par Value
 Common Stock
Balance at February 28, 201926,115  $26,115  $46,141  $560,224  $(28,752) $603,728  
Share-based compensation    1,350  —  —  1,350  
Common stock issued from stock plans, net of shares withheld for employee taxes37  37  (728) —  —  (691) 
Cash dividends paid—  —  —  (4,440) —  (4,440) 
Net income—  —  —  21,284  —  21,284  
Foreign currency translation—  —  —  —  (1,960) (1,960) 
Interest rate swap—  —  —  —  (14) (14) 
Balance at May 31, 201926,152  $26,152  $46,763  $577,068  $(30,726) $619,257  
The accompanying notes are an integral part of the condensed consolidated financial statements.

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1.The Company and Basis of Presentation
AZZ Inc. (“AZZ”, the “Company”, "our" or “we”) was established in 1956 and incorporated under the laws of the state of Texas. The Company is a global provider of metal coating solutions, welding solutions, specialty electrical equipment and highly engineered services to the power generation, transmission, distribution, refining and industrial markets. The Company has two distinct operating segments: the Metal Coatings segment and the Energy segment. AZZ Metal Coatings provides hot dip 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. AZZ Energy is dedicated to delivering safe and reliable transmission of power from generation sources to end customers, and automated weld overlay solutions for corrosion and erosion mitigation to critical infrastructure in the energy markets worldwide.
The accompanying condensed consolidated balance sheet as of February 29, 2020, which was derived from audited financial statements, and the unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. These financial statements should be read in conjunction with the audited financial statements and related notes for the fiscal year ended February 29, 2020, included in the Company’s Annual Report on Form 10-K covering such period. 
Our fiscal year ends on the last day of February and is identified as the fiscal year for the calendar year in which it ends. For example, the fiscal year ending February 28, 2021 is referred to as fiscal 2021.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, which are necessary to present fairly the financial position of the Company as of May 31, 2020, the results of its operations for the three months ended May 31, 2020 and 2019, and cash flows for the three months ended May 31, 2020 and 2019. These interim results are not necessarily indicative of results for a full year.
Coronavirus (COVID-19)
In March 2020, the World Health Organization declared the viral strain of coronavirus ("COVID-19") a global pandemic and recommended containment and mitigation measures worldwide. The spread of COVID-19 and the resulting economic contraction has resulted in increased business uncertainty. The consequences of a prolonged economic decline could include, but are not limited to, reduced revenues, increased instances of uncollectible customer receivables, and increased asset impairments in future periods. Accordingly, the Company cannot reasonably estimate the length or severity of this pandemic, or the extent to which the disruption may materially impact its consolidated balance sheet, statements of income or statements of cash flows for fiscal year 2021.
Recently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which modifies the measurement of expected credit losses of certain financial instruments, including the Company's accounts receivable and contract assets. The Company adopted ASU 2016-13 in the first quarter of its fiscal 2021 utilizing the modified retrospective transition method. The adoption of ASU 2016-13 did not have a material impact on its consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"), which aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software, in order to determine the applicable costs to capitalize and the applicable costs to expense as incurred. The Company adopted ASU 2018-15 in the first quarter of its fiscal 2021 and the adoption did not have a material impact on its consolidated financial statements.


Table of Contents
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. This standard is intended to simplify the accounting and disclosure requirements for income taxes by eliminating various exceptions in accounting for income taxes as well as clarifying and amending existing guidance to improve consistency in the application of ASC 740. The standard will be effective for the Company in the first quarter of its fiscal 2022 and early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.

2.Earnings Per Share
Earnings per share is based on the weighted average number of shares outstanding during each period, adjusted for the dilutive effect of Company stock awards.
The following table sets forth the computation of basic and diluted earnings per share (in thousands, expect per share data):
 Three Months Ended May 31,
Net income for basic and diluted earnings per common share$5,541  $21,284  
Denominator for basic earnings per common share–weighted average shares26,157  26,124  
Effect of dilutive securities:
Employee and director equity awards35  69  
Denominator for diluted earnings per common share26,192  26,193  
Earnings per share basic and diluted:
Basic earnings per common share$0.21  $0.81  
Diluted earnings per common share$0.21  $0.81  

Disaggregated Revenue
The following table presents disaggregated revenue by customer industry (in thousands):
 Three Months Ended May 31,
Net sales:
Industrial - oil and gas, construction, and general$130,109  $164,800  
Transmission and distribution49,057  72,281  
Power generation34,127  52,042  
Total net sales$213,293  $289,123  
See Note 4 for revenue information by segment.


Table of Contents
Contract Liabilities
The following table shows the changes in contract liabilities for the three months ended May 31, 2020 and 2019, respectively (in thousands):
May 31, 2020May 31, 2019
Balance at beginning of period$18,418  $56,928  
Contract liabilities added during the period4,796  10,970  
Revenue recognized during the period(5,849) (45,579) 
Balance at end of period$17,365  $22,319  
The Company did not record any revenues for the three months ended May 31, 2020 or 2019 related to performance obligations satisfied in prior periods. The increases or decreases in accounts receivable, contract assets, and contract liabilities during the three months ended May 31, 2020 and 2019 were due primarily to normal timing differences between the Company’s performance and customer payments. The acquisitions described in Note 10 had no impact on contract assets or liabilities as of the date of acquisitions.
The Company expects to recognize revenues of approximately $10.3 million, $4.6 million, $2.3 million and $0.2 million in fiscal 2021, 2022, 2023 and 2024, respectively, related to the $17.4 million balance of contract liabilities as of May 31, 2020.

Segment Information
Net sales and operating income (loss) by segment for each period were as follows (in thousands):
 Three Months Ended May 31,
Net sales:
Metal Coatings$118,991  $122,154  
Energy94,302  166,969  
Total net sales$213,293  $289,123  
Operating income (loss):
Metal Coatings$25,085  $29,392  
Energy(1,048) 12,571  
Corporate(9,719) (10,989) 
Total operating income$14,318  $30,974  

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

May 31, 2020February 29, 2020
Total assets:
Metal Coatings$497,742  $504,632  
Energy525,125  548,032  
Corporate27,906  21,167  
Total$1,050,773  $1,073,831  

Table of Contents
Financial Information About Geographical Areas
The following table presents revenues by geographic region for each period (in thousands):
 Three Months Ended May 31,
Net sales:
United States$190,842  $230,337  
International 22,451  58,786  
Total$213,293  $289,123  

The following table presents fixed assets by geographic region for each period (in thousands):
May 31, 2020February 29, 2020
Property, plant and equipment, net:
United States$194,012  $190,365  
Canada15,647  16,385  
Other countries5,306  6,354  
          Total$214,965  $213,104  

5.Warranty Reserves
A reserve has been established to provide for the estimated future cost of warranties on a portion of the Company’s delivered products and is classified within other accrued liabilities on the condensed consolidated balance sheets. Management periodically reviews established reserves and makes adjustments based upon the progression of activities with our customers. Warranties typically cover non-conformance to specifications and defects in material and workmanship.
The following table shows the changes in the warranty reserves for the three months ended May 31, 2020 (in thousands):
Beginning of period$3,702  
Warranty costs incurred(509) 
Additions charged to income327  
End of period$3,520  
The Company's debt consisted of the following for each of the periods presented (in thousands):
May 31, 2020February 29, 2020
2017 Revolving Credit Facility$94,000  $78,000  
2011 Senior Notes125,000  125,000  
Total debt, gross219,000  203,000  
Unamortized debt issuance costs(89) (122) 
Total debt, net218,911  202,878  
Less amount due within one year(125,000) (125,000) 
Debt due after one year, net$93,911  $77,878  


Table of Contents

The Company is a lessee under various operating leases for facilities and equipment. Supplemental information related to the Company's portfolio of operating leases was as follows (in thousands, except years and percentages):
 Three Months Ended May 31,
Operating lease cost$4,474  $4,266  
Operating cash flows from operating leases included in lease liabilities2,119  2,275  
ROU assets obtained in exchange for new operating lease liabilities204  2,506  
May 31, 2020February 29, 2020
Weighted-average remaining lease term - operating leases7.59 years7.94 years
Weighted-average discount rate - operating leases4.95 %4.89 %
As of May 31, 2020, maturities of the Company's lease liabilities were as follows (in thousands):
Fiscal year:
2021 (remaining 9 months)$6,224  
Total lease payments51,808  
Less imputed interest(8,789) 
8.Income Taxes
In response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures include deferring the due dates of tax payments and other changes to their income and non-income-based tax laws as well as providing direct government assistance through grants and forgivable loans. The CARES Act, which was enacted on March 27, 2020 in the U.S., includes measures to assist companies, including temporary changes to income and non-income-based tax laws. With respect to the CARES Act, the Company currently expects to benefit from the deferral of certain payroll taxes through the end of calendar year 2020 and the technical correction with respect to qualified improvement property.
The provision for income taxes reflects an effective tax rate of 45.8% for the three months ended May 31, 2020 as compared to 21.1% for the respective prior year comparable period. The increase in the effective tax rate is primarily attributable to losses in foreign jurisdictions for which the Company does not anticipate being able to recognize the benefit and additional uncertain tax positions that were recorded in the quarter related to research and development tax credits.

9.Share-based Compensation
The Company has two share-based compensation plans, the 2014 Long Term Incentive Plan (the "2014 Plan") and the Amended and Restated 2005 Long Term Incentive Plan (the “2005 Plan”).
The 2014 Plan provides for broad-based equity grants to employees, including executive officers, and members of the board of directors and permits the granting of restricted shares, restricted stock units, performance awards, stock appreciation rights and other stock-based awards. The maximum number of shares that may be issued under the 2014 Plan is 1.5 million shares and, as of May 31, 2020, the Company had approximately 1.2 million shares reserved for future issuance under this plan.


Table of Contents
The 2005 Plan permitted the granting of stock appreciation rights and other equity-based awards to certain employees. This plan was terminated upon the effective date of the 2014 Plan and no future grants may be made under the 2005 Plan. There were stock appreciation rights granted under the 2005 Plan prior to its termination that remain outstanding, and if exercised, such awards will be settled from the balance of shares available for issuance under the 2005 Plan. As of May 31, 2020, there were 0.1 million shares available for issuance under the 2005 Plan. The 2005 Plan will be formally retired when all remaining outstanding stock appreciation rights are exercised, forfeited or expire. All outstanding stock appreciation rights will expire on or before March 1, 2021.
Restricted Stock Unit Awards
Restricted stock unit ("RSU") awards are valued at the market price of our common stock on the grant date. Awards generally vest ratably over a period of three years but these awards may vest earlier in accordance with the Plan’s vesting provisions. RSU awards have dividend equivalent rights (“DERs”), which entitle holders of RSUs to the same dividend value per share as holders of common stock. DERs are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs. DERs are accumulated and paid when the underlying awards vest.

A summary of the Company’s non-vested restricted stock unit award activity (including DERs) for the three months ended May 31, 2020 is as follows:
Stock Units
Weighted Average
Grant Date Fair 
Value Per Share
Outstanding at beginning of period194,946  $44.34  
Granted125,770  28.61  
Vested(63,292) 45.94  
Forfeited(7,128) 42.98  
Outstanding at end of period250,296  $35.98  
Performance Share Unit Awards
The Company grants performance share unit ("PSU") awards to certain employees, which also include DERs as described above. These PSU awards have a three year performance cycle and will vest on the third anniversary of the grant date subject to various vesting conditions. Certain PSU awards have vesting conditions based on the Company’s degree of achievement of a target annual average adjusted return on assets during these three year periods relative to the performance of a predetermined group of peer companies. In addition, these PSU awards may have vesting conditions or certain vesting multipliers, which are based on the Company’s total shareholder return during such three years in comparison to a defined specific industry peer group. The Company estimates the fair value of PSU awards using a Monte Carlo simulation model on the date of grant.
A summary of the Company’ non-vested performance share unit award activity (including DERs) for the three months ended May 31, 2020 is as follows:
Stock Units
Weighted Average
Grant Date Fair
Value Per Share
Outstanding at the beginning of the period109,936  $47.75  
Granted69,955  33.22  
Forfeited(32,111) 54.00  
Outstanding at the end of the period147,780  $39.35  
The PSU awards in the table above are presented at the face value of the respective grants. However, the number of PSU awards that may ultimately vest can vary in a range 0% to 250% of the face amount of such awards depending on the outcome of the performance or market vesting conditions.

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Stock Appreciation Rights
Stock appreciation rights ('SARs") were granted with an exercise price equal to the market value of our common stock on the date of grant. These awards generally have a contractual term of 7 years and generally vest ratably over a period of three years from the date of grant although some may vest immediately on issuance. These awards are valued using the Black-Scholes option-pricing model.
A summary of the Company’s SARs activity for the three months ended May 31, 2020 is as follows:
SARsWeighted Average
Exercise Price
Outstanding at beginning of period94,826  $44.58  
Forfeited(1,362) 45.36  
Outstanding at end of the period93,464  $44.57  
Exercisable at the ending of the period93,464  $44.57  
The average remaining contractual term for SARs outstanding and SARs that were exercisable as of May 31, 2020 was 0.62 years and such awards had no intrinsic value.
Employee Stock Purchase Plan
The Company also has an Employee Stock Purchase Plan ("ESPP"), which allows employees of the Company to purchase common stock of the Company through accumulated payroll deductions. Offerings under the ESPP have a duration of 24 months (the "offering period") and commence on each January 1 and July 1, and ending on June 30 and December 31, respectively. On the first day of an offering period (the “enrollment date”) the participant is granted the option to purchase shares on each exercise date at the lower of 85% of the market value of a share of the Company's common stock on the enrollment date or the exercise date. The participant’s right to purchase common stock under the plan is restricted to no more than $25,000 per calendar year and the participant may not purchase more than 5,000 shares during any offering period. Participants may terminate their interest in a given offering or a given exercise period by withdrawing all of their accumulated payroll deductions at any time prior to the end of the offering period. The fair value of the estimated number of shares to be issued under each offering is determined using the Black-Scholes option-pricing model. The Company did not issue any shares from the ESPP during the three months ended May 31, 2020 and 2019, respectively.
Share-based Compensation Expense
Share-based compensation expense and related income tax benefits related to all the plans listed above were as follows (in thousands):
Three Months Ended May 31,
Compensation expense$1,766  $1,350  
Income tax benefits$390  $284  
Unrecognized compensation cost related to the Company's employee equity grants at May 31, 2020 totals $13.4 million and is expected to be recognized over a period of 2.25 years.
The Company’s policy is to issue shares required under these plans from the Company’s authorized but unissued shares.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
Certain statements herein about our expectations of future events or results constitute forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Such forward-looking statements are based on currently available competitive, financial and economic data and management’s views and assumptions regarding future events. Such forward-looking statements are inherently uncertain, and investors must recognize that actual results may differ from those expressed or implied in the forward-looking statements. In addition, certain factors could affect the outcome of the matters described herein. This Annual Report on Form 10-K may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand for the products and services offered by AZZ, including demand by the metal coatings market, power generation markets, electrical transmission and distribution markets, and the industrial markets, each of which may be impacted by the ongoing COVID-19 pandemic where our ability to assess the future and full impact on the Company, our customers and our suppliers is limited. We could also experience fluctuations in prices and raw material cost, including zinc and natural gas, which are used in our hot dip galvanizing process or other potential supply-chain disruptions or customer requ