Company Quick10K Filing
AZZ
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 26 $1,184
10-Q 2020-01-09 Quarter: 2019-11-30
10-Q 2019-12-26 Quarter: 2019-08-31
10-Q 2019-07-08 Quarter: 2019-05-31
10-K 2019-05-17 Annual: 2019-02-28
10-Q 2019-01-08 Quarter: 2018-11-30
10-Q 2018-10-09 Quarter: 2018-08-31
10-Q 2018-07-03 Quarter: 2018-05-31
10-K 2018-05-15 Annual: 2018-02-28
10-Q 2018-05-15 Quarter: 2017-11-30
10-Q 2017-10-03 Quarter: 2017-08-31
10-Q 2017-07-06 Quarter: 2017-05-31
10-K 2017-04-20 Annual: 2017-02-28
10-Q 2017-01-06 Quarter: 2016-11-30
10-Q 2016-10-05 Quarter: 2016-08-31
10-Q 2016-07-05 Quarter: 2016-05-31
10-K 2016-04-21 Annual: 2016-02-29
10-Q 2016-01-08 Quarter: 2015-11-30
10-Q 2015-09-29 Quarter: 2015-08-31
10-Q 2015-07-01 Quarter: 2015-05-31
10-K 2015-04-22 Annual: 2015-02-28
10-Q 2015-01-09 Quarter: 2014-11-30
10-Q 2014-10-01 Quarter: 2014-08-31
10-Q 2014-06-27 Quarter: 2014-05-31
10-K 2014-04-28 Annual: 2014-02-28
10-Q 2014-01-08 Quarter: 2013-11-30
10-Q 2013-10-02 Quarter: 2013-08-31
10-Q 2013-07-03 Quarter: 2013-05-31
10-K 2013-04-29 Annual: 2013-02-28
10-Q 2013-01-09 Quarter: 2012-11-30
10-Q 2012-10-01 Quarter: 2012-08-31
10-Q 2012-07-03 Quarter: 2012-05-31
10-K 2012-05-10 Annual: 2012-02-29
10-Q 2012-01-06 Quarter: 2011-11-30
10-Q 2011-09-30 Quarter: 2011-08-31
10-Q 2011-07-01 Quarter: 2011-05-31
10-K 2011-05-12 Annual: 2011-05-12
10-Q 2011-01-07 Quarter: 2010-11-30
10-Q 2010-10-01 Quarter: 2010-08-31
10-Q 2010-06-25 Quarter: 2010-06-25
10-K 2010-05-12 Annual: 2010-05-12
10-Q 2010-01-08 Quarter: 2010-01-08
8-K 2020-01-16 Other Events, Exhibits
8-K 2020-01-09 Officers, Exhibits
8-K 2020-01-09 Earnings, Regulation FD, Exhibits
8-K 2019-12-05 Earnings, Regulation FD, Exhibits
8-K 2019-10-25 Officers, Exhibits
8-K 2019-10-03 Officers, Exhibits
8-K 2019-10-03 Other Events, Exhibits
8-K 2019-07-09 Shareholder Vote
8-K 2019-07-08 Earnings, Regulation FD, Exhibits
8-K 2019-07-02 Other Events, Exhibits
8-K 2019-05-20 Earnings, Regulation FD, Exhibits
8-K 2019-05-17 Accountant, Exhibits
8-K 2019-04-04 Other Events, Exhibits
8-K 2019-01-17 Officers, Other Events, Exhibits
8-K 2019-01-08 Earnings, Regulation FD, Exhibits
8-K 2018-10-09 Earnings, Regulation FD, Exhibits
8-K 2018-10-05 Other Events, Exhibits
8-K 2018-07-10 Shareholder Vote
8-K 2018-07-03 Earnings, Regulation FD, Exhibits
8-K 2018-06-29 Other Events, Exhibits
8-K 2018-05-15 Earnings, Regulation FD, Exhibits
8-K 2018-04-05 Other Events, Exhibits
8-K 2018-04-03 Officers
8-K 2018-03-26 Earnings, Amendment, Exhibits
8-K 2018-01-19 Other Events, Exhibits
8-K 2018-01-09 Other Events, Exhibits
AZZ 2019-11-30
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 ex31120191130.htm
EX-31.2 ex31220191130.htm
EX-32.1 ex32120191130.htm
EX-32.2 ex32220191130.htm

AZZ Earnings 2019-11-30

AZZ 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
AZZ 1,184 1,136 516 954 206 57 121 1,467 22% 12.1 5%
CCF 1,043 300 36 289 105 34 64 1,012 36% 15.8 11%
PGTI 979 922 507 761 273 49 64 1,273 36% 19.9 5%
VSLR 888 2,511 2,071 267 62 -76 186 2,007 23% 10.8 -3%
GFF 714 2,111 1,623 2,181 588 20 187 1,837 27% 9.8 1%
LYTS 131 201 329 74 -15 -8 170 22% -20.9 -7%
RVLT 89 170 94 149 41 -52 -45 88 27% -2.0 -31%
OESX 86 68 46 94 21 -0 2 85 23% 37.5 -0%
BW 80 772 1,115 998 11 -416 -228 219 1% -1.0 -54%
EFOI 5 15 9 15 1 -10 -10 3 9% -0.3 -68%

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2019
or 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-12777

 azz2dblue2016.jpg
AZZ Inc.
(Exact name of registrant as specified in its charter)
 
Texas
 
75-0948250
(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)
NONE
(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 class
  
Trading Symbol
 
Name of each exchange on which registered
Common Stock
  
AZZ
 
New 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 Filer
  
  
Accelerated filer
 
 
Non-accelerated filer
 
Smaller reporting company
  
  
Emerging 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 January 5, 2020 the registrant had outstanding 26,239,787 shares of common stock; $1.00 par value per share. 


Table of Contents

AZZ INC.
INDEX

 
 
PAGE
NO.
PART I.
 
Item 1.
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
PART II.
 
Item 1.
Item 1A.
Item 2.
Item 6.
 
 
 
 
 
 
 


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
AZZ INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
 
 
November 30, 2019
 
February 28, 2019
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
14,289

 
$
24,005

Accounts receivable (net of allowance for doubtful accounts of $4,558 as of November 30, 2019 and $2,267 as of February 28, 2019)
 
174,647

 
144,887

Inventories:
 
 
 
 
Raw material
 
97,651

 
94,410

Work-in-process
 
18,053

 
19,067

Finished goods
 
3,734

 
11,370

Contract assets
 
98,773

 
75,561

Prepaid expenses and other
 
7,474

 
9,245

Total current assets
 
414,621

 
378,545

Property, plant and equipment, net
 
211,691

 
210,227

Operating lease right-of-use assets
 
48,733

 
45,870

Goodwill
 
361,326

 
323,756

Intangibles and other assets, net
 
136,197

 
130,172

Total assets
 
$
1,172,568

 
$
1,088,570

Liabilities and Shareholders’ Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
71,842

 
$
53,047

Income tax payable
 
12,437

 
632

Accrued salaries and wages
 
31,965

 
30,395

Other accrued liabilities
 
31,845

 
17,631

Customer deposits
 
716

 
481

Contract liabilities
 
26,867

 
56,928

Lease liability, short-term
 
6,701

 
5,657

Total current liabilities
 
182,373

 
164,771

Debt due after one year, net
 
254,845

 
240,745

Lease liability, long-term
 
43,231

 
41,190

Other long-term liabilities
 
3,578

 
1,513

Deferred income taxes
 
35,298

 
36,623

Total liabilities
 
519,325

 
484,842

Commitments and contingencies
 
 
 
 
Shareholders’ equity:
 
 
 
 
Common stock, $1 par, shares authorized 100,000; 26,240 shares issued and outstanding at November 30, 2019 and 26,115 shares issued and outstanding at February 28, 2019
 
26,240

 
26,115

Capital in excess of par value
 
51,484

 
46,141

Retained earnings
 
605,746

 
560,224

Accumulated other comprehensive loss
 
(30,227
)
 
(28,752
)
Total shareholders’ equity
 
653,243

 
603,728

Total liabilities and shareholders' equity
 
$
1,172,568

 
$
1,088,570

The accompanying notes are an integral part of the condensed consolidated financial statements.

3

Table of Contents

AZZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
 
 
 
Three Months Ended November 30,
 
Nine Months Ended November 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Net sales
 
$
291,139

 
$
239,516

 
$
816,452

 
$
724,539

Cost of sales
 
223,808

 
189,761

 
630,328

 
569,175

Gross margin
 
67,331

 
49,755

 
186,124

 
155,364



 
 
 
 
 
 
 
 
Selling, general and administrative
 
33,903

 
26,986

 
99,515

 
91,794

Operating income
 
33,428

 
22,769

 
86,609

 
63,570

 
 
 
 
 
 
 
 
 
Interest expense
 
3,301

 
3,723

 
10,433

 
11,541

Other (income) expense, net
 
(743
)
 
309

 
367

 
(839
)
Income before income taxes
 
30,870

 
18,737

 
75,809

 
52,868

Income tax expense
 
8,835

 
3,342

 
16,932

 
10,511

Net income
 
$
22,035

 
$
15,395

 
$
58,877

 
$
42,357

Earnings per common share
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
0.84

 
$
0.59

 
$
2.25

 
$
1.63

Diluted earnings per share
 
$
0.84

 
$
0.59

 
$
2.24

 
$
1.62

 
 
 
 
 
 
 
 
 
Cash dividends declared per common share
 
$
0.17

 
$
0.17

 
$
0.51

 
$
0.51

The accompanying notes are an integral part of the condensed consolidated financial statements.


4

Table of Contents

AZZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
 
 
Three Months Ended November 30,
 
Nine Months Ended November 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Net income
 
$
22,035

 
$
15,395

 
$
58,877

 
$
42,357

Other comprehensive income loss:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of income tax of $0
 
(215
)
 
(2,187
)
 
(1,434
)
 
(3,988
)
Interest rate swap, net of income tax of $7, $7, $22 and $22, respectively.
 
(14
)
 
(14
)
 
(41
)
 
(41
)
Other comprehensive loss
 
(229
)
 
(2,201
)
 
(1,475
)
 
(4,029
)
Comprehensive income
 
$
21,806

 
$
13,194

 
$
57,402

 
$
38,328

The accompanying notes are an integral part of the condensed consolidated financial statements.


5

Table of Contents

AZZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
Nine Months Ended November 30,
 
 
2019
 
2018 (1)
Cash Flows From Operating Activities
 
 
 
 
Net income
 
$
58,877

 
$
42,357

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Provision for doubtful accounts
 
2,316

 
2,039

Amortization and depreciation
 
37,208

 
38,068

Deferred income taxes
 
(4,486
)
 
1,533

Net loss on property, plant and equipment due to impairment
 

 
810

Net gain on sale of property, plant and equipment
 
(305
)
 
(191
)
Amortization of deferred borrowing costs
 
404

 
407

Share-based compensation expense
 
4,904

 
3,335

Effects of changes in assets and liabilities, net of acquisitions:
 
 
 
 
Accounts receivable
 
(28,088
)
 
(13,955
)
Inventories
 
6,245

 
1,564

Prepaid expenses and other
 
1,491

 
(953
)
Other assets
 
286

 
(1,006
)
Net change in contract assets and liabilities
 
(54,149
)
 
(9,496
)
Accounts payable
 
18,386

 
(8,037
)
Other accrued liabilities and income taxes payable
 
28,965

 
1,629

Net cash provided by operating activities
 
72,054

 
58,104

Cash Flows From Investing Activities
 
 
 
 
Proceeds from sale of property, plant and equipment
 
337

 
362

Purchase of property, plant and equipment
 
(22,543
)
 
(13,691
)
Acquisition of subsidiaries, net of cash acquired
 
(60,628
)
 
(8,000
)
Net cash used in investing activities
 
(82,834
)
 
(21,329
)
Cash Flows From Financing Activities
 
 
 
 
Proceeds from issuance of common stock
 
1,781

 
2,845

Payments for taxes related to net share settlement of equity awards
 
(1,217
)
 
(554
)
Proceeds from revolving loan
 
320,500

 
212,000

Payments on revolving loan
 
(306,500
)
 
(226,000
)
Payments on long term debt
 

 
(14,286
)
Payments of dividends
 
(13,355
)
 
(13,279
)
Net cash provided by (used in) financing activities
 
1,209

 
(39,274
)
Effect of exchange rate changes on cash
 
(145
)
 
(941
)
Net decrease in cash and cash equivalents
 
(9,716
)
 
(3,440
)
Cash and cash equivalents at beginning of period
 
24,005

 
20,853

Cash and cash equivalents at end of period
 
$
14,289

 
$
17,413

 
 
 
 
 
Supplemental disclosures
 
 
 
 
Cash paid for interest
 
$
8,426

 
$
9,957

Cash paid for income taxes
 
$
7,985

 
$
2,398

(1) Certain prior year amounts have been reclassified to conform with the current period presentation. See Note 1 for more information.
The accompanying notes are an integral part of the condensed consolidated financial statements.

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AZZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)
 
 
Nine Months Ended November 30, 2019
 
 
 
 
Capital in
Excess of
Par Value
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
 
 
Common Stock
 
 
 
Shares
 
Amount
 
Balance at February 28, 2019
 
26,115

 
$
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 taxes
 
37

 
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, 2019
 
26,152

 
$
26,152

 
$
46,763

 
$
577,068

 
$
(30,726
)
 
$
619,257

Share-based compensation
 

 

 
1,736

 

 

 
1,736

Common stock issued from stock plans, net of shares withheld for employee taxes
 
18

 
18

 
(18
)
 

 

 

Common stock issued under employee stock purchase plan
 
51

 
51

 
1,730

 

 

 
1,781

Cash dividends paid
 

 

 

 
(4,454
)
 

 
(4,454
)
Net income
 

 

 

 
15,558

 

 
15,558

Foreign currency translation
 

 

 

 

 
741

 
741

Interest rate swap
 

 

 

 

 
(13
)
 
(13
)
Balance at August 31, 2019
 
26,221

 
$
26,221

 
$
50,211

 
$
588,172

 
$
(29,998
)
 
$
634,606

Share-based compensation
 

 

 
1,818

 

 

 
1,818

Common stock issued from stock plans, net of shares withheld for employee taxes
 
19

 
19

 
(545
)
 

 

 
(526
)
Cash dividends paid
 

 

 

 
(4,461
)
 

 
(4,461
)
Net income
 

 

 

 
22,035

 

 
22,035

Foreign currency translation
 

 

 

 

 
(215
)
 
(215
)
Interest rate swap
 

 

 

 

 
(14
)
 
(14
)
Balance at November 30, 2019
 
26,240

 
$
26,240

 
$
51,484

 
$
605,746

 
$
(30,227
)
 
$
653,243

The accompanying notes are an integral part of the condensed consolidated financial statements.


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AZZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)

 
 
Nine Months Ended November 30, 2018
 
 
 
 
Capital in
Excess of
Par Value
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
 
 
Common Stock
 
 
 
Shares
 
Amount
 
Balance at February 28, 2018
 
25,959

 
$
25,959

 
$
38,446

 
$
526,018

 
$
(25,220
)
 
$
565,203

Impact of ASC 606 adoption
 

 

 

 
716

 

 
716

Share-based compensation
 

 

 
1,358

 

 

 
1,358

Common stock issued from stock plans, net of shares withheld for employee taxes
 
31

 
31

 
(549
)
 

 

 
(518
)
Common stock issued under employee stock purchase plan
 
37

 
37

 
1,290

 

 

 
1,327

Cash dividends paid
 

 

 

 
(4,418
)
 

 
(4,418
)
Net income
 

 

 

 
15,718

 

 
15,718

Foreign currency translation
 

 

 

 

 
(2,256
)
 
(2,256
)
Interest rate swap
 

 

 

 

 
(14
)
 
(14
)
Balance at May 31, 2018
 
26,027

 
$
26,027

 
$
40,545

 
$
538,034

 
$
(27,490
)
 
$
577,116

Share-based compensation
 

 

 
2,301

 

 

 
2,301

Common stock issued from stock plans, net of shares withheld for employee taxes
 
23

 
23

 
(59
)
 

 

 
(36
)
Cash dividends paid
 

 

 

 
(4,426
)
 

 
(4,426
)
Net income
 

 

 

 
11,244

 

 
11,244

Foreign currency translation
 

 

 

 

 
455

 
455

Interest rate swap
 

 

 

 

 
(13
)
 
(13
)
Balance at August 31, 2018
 
26,050

 
$
26,050

 
$
42,787

 
$
544,852

 
$
(27,048
)
 
$
586,641

Share-based compensation
 

 

 
(324
)
 

 

 
(324
)
Common stock issued under employee stock purchase plan
 
37

 
37

 
1,481

 

 

 
1,518

Cash dividends paid
 

 

 

 
(4,435
)
 

 
(4,435
)
Net income
 

 

 

 
15,395

 

 
15,395

Foreign currency translation
 

 

 

 

 
(2,187
)
 
(2,187
)
Interest rate swap
 

 

 

 

 
(14
)
 
(14
)
Balance at November 30, 2018
 
26,087

 
$
26,087

 
$
43,944

 
$
555,812

 
$
(29,249
)
 
$
596,594

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AZZ INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 Energy segment and the Metal Coatings segment. 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. AZZ Metal Coatings is a leading provider of metal finishing solutions for corrosion protection, including hot dip galvanizing to the North American steel fabrication industry.
Presentation
The accompanying condensed consolidated balance sheet as of February 28, 2019, 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 28, 2019, 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 29, 2020 is referred to as fiscal 2020.
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 November 30, 2019, the results of its operations for the three and nine months ended November 30, 2019 and 2018, and cash flows for the nine months ended November 30, 2019 and 2018. These interim results are not necessarily indicative of results for a full year.
Reclassifications
Certain prior fiscal year balances in the condensed consolidated statements of cash flows have been reclassified to conform to the current fiscal year presentation. In particular, payments for employee taxes related to net share settlement of equity awards and proceeds from the issuance of shares under the Company's Employee Stock Purchase Plan have been reclassified from operating activities to financing activities. Such reclassifications were not material.
Recently Issued 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 will adopt ASU 2016-13 in the first quarter of its fiscal 2021 utilizing the modified retrospective transition method. Based on the composition of the Company’s accounts receivable and contract assets, current market conditions, and historical credit loss activity, the adoption of ASU 2016-13 is not expected to 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 will adopt ASU 2018-15 in the first quarter of its fiscal 2021. The standard can be applied either prospectively to implementation costs incurred after the date of adoption or retrospectively to all arrangements. The Company intends to adopt ASU 2018-15 using the prospective approach and the adoption is not expected to have a material impact on its consolidated financial statements.

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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 November 30,
 
Nine Months Ended November 30,
 
 
2019
 
2018
 
2019
 
2018
Numerator:
 
 
 
 
 
 
 
 
Net income for basic and diluted earnings per common share
 
$
22,035

 
$
15,395

 
$
58,877

 
$
42,357

Denominator:
 
 
 
 
 
 
 
 
Denominator for basic earnings per common share–weighted average shares
 
26,234

 
26,064

 
26,185

 
26,022

Effect of dilutive securities:
 
 
 
 
 
 
 
 
Employee and director equity awards
 
29

 
87

 
61

 
70

Denominator for diluted earnings per common share
 
26,263

 
26,151

 
26,246

 
26,092

Earnings per share basic and diluted:
 
 
 
 
 
 
 
 
Basic earnings per common share
 
$
0.84

 
$
0.59

 
$
2.25

 
$
1.63

Diluted earnings per common share
 
$
0.84

 
$
0.59

 
$
2.24

 
$
1.62



3.
Revenues
Disaggregated Revenue
The following table presents disaggregated revenue by customer industry (in thousands):
 
 
Three Months Ended November 30,
 
Nine Months Ended November 30,
 
 
2019
 
2018
 
2019
 
2018
Net sales:
 
 
 
 
 
 
 
 
Industrial - oil and gas, construction, and general
 
$
195,063

 
$
143,710

 
$
499,215

 
$
415,323

Transmission and distribution
 
55,316

 
35,927

 
184,283

 
162,033

Power generation
 
40,760

 
59,879

 
132,954

 
147,183

Total net sales
 
$
291,139

 
$
239,516

 
$
816,452

 
$
724,539


See Note 4 for revenue information by segment.
Contract Liabilities
The following table shows the changes in contract liabilities for the nine months ended November 30, 2019 and 2018, respectively (in thousands):
 
 
November 30, 2019
 
November 30, 2018
Balance at beginning of period
 
$
56,928

 
$
22,698

Contract liabilities added during the period
 
22,237

 
30,186

Revenue recognized during the period
 
(52,298
)
 
(20,140
)
Balance at end of period
 
$
26,867

 
$
32,744



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The Company did not record any revenues for the nine months ended November 30, 2019 or 2018 related to performance obligations satisfied in prior periods. The increases or decreases in accounts receivable, contract assets, and contract liabilities during the nine months ended November 30, 2019 and 2018 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 $7.8 million, $14.0 million, $2.8 million and $2.3 million in fiscal 2020, 2021, 2022 and 2023, respectively, related to the $26.9 million balance of contract liabilities as of November 30, 2019.

4.
Segments
Segment Information
Net sales and operating income (loss) by segment for each period were as follows (in thousands):
 
 
 
Three Months Ended November 30,
 
Nine Months Ended November 30,
 
 
2019
 
2018
 
2019
 
2018
Net sales:
 
 
 
 
 
 
 
 
Energy
 
$
161,943

 
$
132,025

 
$
440,259

 
$
385,526

Metal Coatings
 
129,196

 
107,491

 
376,193

 
339,013

Total net sales
 
$
291,139

 
$
239,516

 
$
816,452

 
$
724,539

 
 
 
 
 
 
 
 
 
Operating income (loss):
 
 
 
 
 
 
 
 
Energy
 
$
17,421

 
$
11,532

 
$
34,231

 
$
25,763

Metal Coatings
 
27,258

 
18,321

 
85,323

 
65,581

Corporate
 
(11,251
)
 
(7,084
)
 
(32,945
)
 
(27,774
)
Total operating income
 
$
33,428

 
$
22,769

 
$
86,609

 
$
63,570



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

 
 
November 30, 2019
 
February 28, 2019
Total assets:
 
 
 
 
Energy
 
$
645,918

 
$
630,134

Metal Coatings
 
509,778

 
440,090

Corporate
 
16,872

 
18,346

Total
 
$
1,172,568

 
$
1,088,570


For the nine months ended November 30, 2018, the Company recognized impairment charges of $0.8 million, which were classified within cost of sales in the consolidated statement of income and were related to property, plant and equipment in the Metal Coatings segment that was vacated or abandoned upon the consolidation of two galvanizing facilities in the Gulf Coast region of the United States. As part of the consolidation of facilities, the Company also recognized $0.5 million in employee severance and other disposal costs for the nine months ended November 30, 2018, which were also classified within cost of sales in the consolidated statement of income. No such charges were recorded during the three and nine months ended November 30, 2019.

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Financial Information About Geographical Areas
The following table presents revenues by geographic region for each period (in thousands):
 
 
Three Months Ended November 30,
 
Nine Months Ended November 30,
 
 
2019
 
2018
 
2019
 
2018
Net sales:
 
 
 
 
 
 
 
 
United States
 
$
214,577

 
$
203,788

 
$
655,582

 
$
605,672

International
 
76,562

 
35,728

 
160,870

 
118,867

Total
 
$
291,139

 
$
239,516

 
$
816,452

 
$
724,539


    
The following table presents fixed assets by geographic region for each period (in thousands):

 
 
November 30, 2019
 
February 28, 2019
Property, plant and equipment, net:
 


 


United States
 
$
190,529

 
$
189,281

Canada
 
16,864

 
16,961

Other countries
 
4,298

 
3,985

          Total
 
$
211,691

 
$
210,227



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 the reserves and makes adjustments accordingly. Warranties cover such factors as non-conformance to specifications and defects in material and workmanship. 
The following table shows the changes in the warranty reserves for the nine month period ended November 30, 2019 (in thousands):
 
 
Warranty Reserve
Balance at February 28, 2019
$
1,751

Warranty costs incurred
(1,759
)
Additions charged to income
3,572

Balance at November 30, 2019
$
3,564


6.
Debt
The Company's debt consisted of the following for each of the periods presented (in thousands):
 
November 30, 2019
 
February 28, 2019
2017 Revolving Credit Facility
$
130,000

 
$
116,000

2011 Senior Notes
125,000

 
125,000

Total debt, gross
255,000

 
241,000

Unamortized debt issuance costs
(155
)
 
(255
)
Total debt, net
$
254,845

 
$
240,745



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7.
Leases
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 November 30,
 
Nine Months Ended November 30,
 
 
2019
 
2018
 
2019
 
2018
Operating lease cost
 
$
4,803

 
$
3,977

 
$
13,717

 
$
11,949

Operating cash flows from operating leases included in lease liabilities
 
2,234

 
1,998

 
6,640

 
5,851

ROU assets obtained in exchange for new operating lease liabilities
 
4,385

 
528

 
7,534

 
4,694

 
 
November 30, 2019
 
February 28, 2019
Weighted-average remaining lease term - operating leases
 
8.26 years

 
9.23 years

Weighted-average discount rate - operating leases
 
4.95
%
 
5.13
%

As of November 30, 2019, maturities of the Company's lease liabilities were as follows (in thousands):
Fiscal year:
Operating Leases
2020 (remaining 3 months)
$
2,330

2021
8,784

2022
8,416

2023
7,887

2024
7,079

Thereafter
26,062

Total lease payments
60,558

Less imputed interest
(10,626
)
Total
$
49,932


8.
Income Taxes
The Company’s quarterly provision for income taxes is measured using an estimated annual effective tax rate, adjusted for discrete items that occur within the quarter. The following table presents income tax expense and the effective tax rate for the periods (in thousands, except percentages):
 
 
Three Months Ended November 30,
 
Nine Months Ended November 30,
 
 
2019
 
2018
 
2019
 
2018
Income tax expense
 
$
8,835

 
$
3,342

 
$
16,932

 
$
10,511

Effective tax rate
 
28.6
%
 
17.8
%
 
22.3
%
 
19.9
%

The calculation of the Company's tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across the Company's global operations. Generally accepted accounting principles in the United States of America ("GAAP") states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. The Company may (1) record unrecognized tax benefits as liabilities in accordance with GAAP and (2) adjust these liabilities when the Company's judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company's current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available.

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A reconciliation of the beginning and ending balance of total unrecognized tax benefits for the nine months ended November 30, 2019 is as follows (in thousands):
 
 
November 30, 2019
Balance at beginning of period
 
$

Tax positions taken in current period:
 


Gross increases
 
3,899

Lapse of statute of limitations
 
$
(1,548
)
Balance at end of period
 
$
2,351


After a review of its deferred tax balances as of August 31, 2019, the Company recorded unrecognized tax benefits of $3.9 million within other long-term liabilities related to the amortization of goodwill and certain book reserve balances incorrectly deducted in prior years. The amortization relates to the Company deducting more expense than permitted for tax purposes. The total unrecognized tax benefits, if recognized, would reduce income tax expense and the Company’s effective tax rate. During the three months ended November 30, 2019, the Company released $1.5 million of this unrecognized tax benefit upon the lapse of the applicable statute of limitations. Additionally, as a part of this review of its deferred tax balances, the Company corrected other current and deferred income tax expense amounts related to prior periods which netted to $1.4 million and were recorded as a tax benefit in the nine months ended November 30, 2019.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. Accrued interested and penalties included in the non-current income tax payable related to penalties and interest for prior periods was $1.1 million as of November 30, 2019.
Certain prior year tax returns are currently being examined by taxing authorities in the United States. The Company believes that it has provided adequate reserves for its income tax uncertainties in all open tax years. As the outcome of the tax audits cannot be predicted with certainty, if any issues addressed in the Company's tax audits are resolved in a manner inconsistent with management's expectations, the Company could adjust its provision for income taxes in the future.
The Company has operations and taxable presence in multiple jurisdictions in the U.S. and outside of the U.S. in Canada, the Netherlands, China, Poland and Brazil. The tax positions of the Company and its subsidiaries are subject to income tax audits by multiple tax jurisdictions around the world. The Company currently considers U.S. federal and state and Canada, to be significant tax jurisdictions. The Company’s U.S. federal and state tax returns since February 28, 2017 remain open to examination. With some exceptions, tax years prior to fiscal 2017 in jurisdictions outside of U.S. are generally closed. The statute of limitations for fiscal year end 2017 will expire in December 2020. The Company anticipates it is reasonably possible that a decrease of unrecognized tax benefits up to approximately $1.1 million may occur in the next 12 months, as the applicable statutes of limitations lapse.

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 November 30, 2019, the Company had approximately 1.3 million shares reserved for future issuance under this plan.
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 November 30, 2019, 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.

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Table of Contents

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 accelerated 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 shares vest.
A summary of the Company’s non-vested restricted stock unit award activity (including DERs) for the nine month period ended November 30, 2019 is as follows:
 
 
 
Restricted
Stock Units
 
Weighted Average
Grant Date Fair 
Value Per Share
Non-vested balance as of February 28, 2019
 
146,532

 
$
48.93

Granted
 
87,092

 
43.77

Vested
 
(