AZZ 10-Q Quarterly Report Nov. 30, 2017 | Alphaminr
ALPHAMINR

AZZ 10-Q Quarter ended Nov. 30, 2017

Balance Sheet
Cash Flow
Income Statement
Debt
AZZ INC
10-Ks and 10-Qs
10-Q
Quarter ended Aug. 31, 2025
10-Q
Quarter ended May 31, 2025
10-K
Fiscal year ended Feb. 28, 2025
10-Q
Quarter ended Nov. 30, 2024
10-Q
Quarter ended Aug. 31, 2024
10-Q
Quarter ended May 31, 2024
10-K
Fiscal year ended Feb. 29, 2024
10-Q
Quarter ended Nov. 30, 2023
10-Q
Quarter ended Aug. 31, 2023
10-Q
Quarter ended May 31, 2023
10-K
Fiscal year ended Feb. 28, 2023
10-Q
Quarter ended Nov. 30, 2022
10-Q
Quarter ended Aug. 31, 2022
10-Q
Quarter ended May 31, 2022
10-K
Fiscal year ended Feb. 28, 2022
10-Q
Quarter ended Nov. 30, 2021
10-Q
Quarter ended Aug. 31, 2021
10-Q
Quarter ended May 31, 2021
10-K
Fiscal year ended Feb. 28, 2021
10-Q
Quarter ended Nov. 30, 2020
10-Q
Quarter ended Aug. 31, 2020
10-Q
Quarter ended May 31, 2020
10-K
Fiscal year ended Feb. 29, 2020
10-Q
Quarter ended Nov. 30, 2019
10-Q
Quarter ended Aug. 31, 2019
10-Q
Quarter ended May 31, 2019
10-K
Fiscal year ended Feb. 28, 2019
10-Q
Quarter ended Nov. 30, 2018
10-Q
Quarter ended Aug. 31, 2018
10-Q
Quarter ended May 31, 2018
10-K
Fiscal year ended Feb. 28, 2018
10-Q
Quarter ended Nov. 30, 2017
10-Q
Quarter ended Aug. 31, 2017
10-Q
Quarter ended May 31, 2017
10-K
Fiscal year ended Feb. 28, 2017
10-Q
Quarter ended Nov. 30, 2016
10-Q
Quarter ended Aug. 31, 2016
10-Q
Quarter ended May 31, 2016
10-K
Fiscal year ended Feb. 29, 2016
10-Q
Quarter ended Nov. 30, 2015
10-Q
Quarter ended Aug. 31, 2015
10-Q
Quarter ended May 31, 2015
10-K
Fiscal year ended Feb. 28, 2015
10-Q
Quarter ended Nov. 30, 2014
10-Q
Quarter ended Aug. 31, 2014
10-Q
Quarter ended May 31, 2014
10-K
Fiscal year ended Feb. 28, 2014
10-Q
Quarter ended Nov. 30, 2013
10-Q
Quarter ended Aug. 31, 2013
10-Q
Quarter ended May 31, 2013
10-K
Fiscal year ended Feb. 28, 2013
10-Q
Quarter ended Nov. 30, 2012
10-Q
Quarter ended Aug. 31, 2012
10-Q
Quarter ended May 31, 2012
10-K
Fiscal year ended Feb. 29, 2012
10-Q
Quarter ended Nov. 30, 2011
10-Q
Quarter ended Aug. 31, 2011
10-Q
Quarter ended May 31, 2011
10-K
Fiscal year ended May 12, 2011
10-Q
Quarter ended Nov. 30, 2010
10-Q
Quarter ended Aug. 31, 2010
10-Q
Quarter ended June 25, 2010
10-K
Fiscal year ended May 12, 2010
10-Q
Quarter ended Jan. 8, 2010
PROXIES
DEF 14A
Filed on July 8, 2025
DEF 14A
Filed on May 27, 2025
DEF 14A
Filed on July 9, 2024
DEF 14A
Filed on May 28, 2024
DEF 14A
Filed on May 30, 2023
DEF 14A
Filed on July 12, 2022
DEF 14A
Filed on June 1, 2022
DEF 14A
Filed on June 1, 2021
DEF 14A
Filed on May 27, 2020
DEF 14A
Filed on May 28, 2019
DEF 14A
Filed on May 25, 2018
DEF 14A
Filed on May 24, 2017
DEF 14A
Filed on May 23, 2016
DEF 14A
Filed on May 28, 2015
DEF 14A
Filed on May 29, 2014
DEF 14A
Filed on June 4, 2013
DEF 14A
Filed on June 4, 2012
DEF 14A
Filed on June 3, 2011
DEF 14A
Filed on June 1, 2010
DEF 14A
Filed on None
10-Q 1 a2017113010q.htm 10-Q Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2017
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-12777
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, including 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)
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 ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes ý 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. (Check one):
Large accelerated filer
ý
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 ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Title of each class:
Outstanding at May 2, 2018:
Common Stock, $1.00 par value per share
26,024,006


AZZ INC.
INDEX

PAGE
NO.
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


PART I. FINANCIAL INFORMATION


Item 1. Financial Statements

AZZ INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
November 30, 2017
February 28, 2017
Assets
Current assets:
Cash and cash equivalents
$
10,651

$
11,302

Accounts receivable (net of allowance for doubtful accounts of $3,300 as of November 30, 2017 and $347 as of February 28, 2017)
148,260

138,470

Inventories:
Raw material
93,883

80,169

Work-in-process
5,834

6,832

Finished goods
11,655

7,006

Costs and estimated earnings in excess of billings on uncompleted contracts
59,365

50,262

Deferred income taxes
—

249

Prepaid expenses and other
5,495

2,762

Total current assets
335,143

297,052

Property, plant and equipment, net
219,173

228,610

Goodwill
317,364

306,579

Intangibles and other assets, net
157,577

146,113

Total assets
$
1,029,257

$
978,354

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable
$
45,668

$
49,816

Income tax payable
481

778

Accrued salaries and wages
14,982

23,429

Other accrued liabilities
22,730

24,042

Customer deposits
3,449

1,459

Billings in excess of costs and estimated earnings on uncompleted contracts
34,570

20,617

Debt due within one year
14,286

16,629

Total current liabilities
136,166

136,770

Debt due after one year, net
292,566

254,800

Other long-term liabilities
728

—

Deferred income taxes
56,021

53,648

Total liabilities
485,481

445,218

Commitments and contingencies


Shareholders’ equity:
Common stock, $1 par, shares authorized 100,000; 25,954 shares issued and outstanding at November 30, 2017 and 25,964 shares issued and outstanding at February 28, 2017
25,954

25,964

Capital in excess of par value
37,138

37,739

Retained earnings
506,943

498,527

Accumulated other comprehensive loss
(26,259
)
(29,094
)
Total shareholders’ equity
543,776

533,136

Total liabilities and shareholders' equity
$
1,029,257

$
978,354

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

3



AZZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended November 30,
Nine Months Ended November 30,
2017
2016
2017
2016
(Restated)
(Restated)
Net sales
$
208,158

$
228,116

$
609,770

$
679,272

Cost of sales
177,041

176,819

487,471

520,742

Gross margin
31,117

51,297

122,299

158,530



Selling, general and administrative
29,563

25,082

83,335

80,898

Operating income
1,554

26,215

38,964

77,632

Interest expense
3,507

3,654

10,267

11,159

Net loss (gain) on sale of property, plant and equipment and insurance proceeds
22

(57
)
576

26

Other income, net
(7
)
(759
)
(486
)
(949
)
Income before income taxes
(1,968
)
23,377

28,607

67,396

Income tax (benefit) expense
(1,802
)
6,731

6,925

18,402

Net income (loss)
$
(166
)
$
16,646

$
21,682

$
48,994

Earnings (loss) per common share
Basic earnings per share
$
(0.01
)
$
0.64

$
0.83

$
1.89

Diluted earnings per share
$
(0.01
)
$
0.64

$
0.83

$
1.88

Cash dividends declared per common share
$
0.17

$
0.17

$
0.51

$
0.47

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


4

AZZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Three Months Ended November 30,
Nine Months Ended November 30,
2017
2016
2017
2016
(Restated)
(Restated)
Net income (loss)
$
(166
)
$
16,646

$
21,682

$
48,994

Other comprehensive income (loss):
Foreign currency translation adjustments, net of income tax of $0
(1,453
)
(2,918
)
2,876

(235
)
Interest rate swap, net of income tax of $7, $7, $22, and $22, respectively.
(13
)
(14
)
(41
)
(41
)
Other comprehensive income (loss)
(1,466
)
(2,932
)
2,835

(276
)
Comprehensive income (loss)
$
(1,632
)
$
13,714

$
24,517

$
48,718

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


5

AZZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended November 30,
2017
2016
(Restated)
Cash Flows From Operating Activities
Net income
$
21,682

$
48,994

Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts
2,940

18

Amortization and depreciation
37,840

37,964

Deferred income taxes
2,362

(538
)
Net loss on disposition of property, plant and equipment due to impairment
8,285

6,602

Net loss on sale of property, plant and equipment and insurance proceeds
576

26

Amortization of deferred borrowing costs
450

952

Share-based compensation expense
4,810

4,408

Effects of changes in assets and liabilities:
Accounts receivable
(15,754
)
(33,706
)
Inventories
(11,744
)
(6,795
)
Prepaid expenses and other
(2,518
)
(1,554
)
Other assets
(57
)
(2,451
)
Net change in billings related to costs and estimated earnings on uncompleted contracts
4,896

(3,277
)
Accounts payable
(5,867
)
7,588

Other accrued liabilities and income taxes payable
(9,191
)
(956
)
Net cash provided by operating activities
38,710

57,275

Cash Flows From Investing Activities
Proceeds from sale or insurance settlement of property, plant and equipment
200

543

Purchase of property, plant and equipment
(21,533
)
(29,135
)
Acquisition of subsidiaries, net of cash acquired
(32,841
)
(22,679
)
Net cash used in investing activities
(54,174
)
(51,271
)
Cash Flows From Financing Activities
Proceeds from revolving loan
273,000

150,000

Payments on revolving loan
(174,500
)
(144,000
)
Payments on long term debt
(63,505
)
(20,848
)
Purchases of treasury shares
(7,518
)
(5,282
)
Payments of dividends
(13,266
)
(12,216
)
Net cash provided by (used in) financing activities
14,211

(32,346
)
Effect of exchange rate changes on cash
602

(370
)
Net decrease in cash and cash equivalents
(651
)
(26,712
)
Cash and cash equivalents at beginning of period
11,302

40,191

Cash and cash equivalents at end of period
$
10,651

$
13,479

Supplemental disclosures
Cash paid for interest
$
8,948

$
9,291

Cash paid for income taxes
$
8,416

$
17,768

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

6

AZZ INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Capital in
Excess of
Par Value
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Common Stock
Shares
Amount
Balance at February 28, 2017
25,964

$
25,964

$
37,739

$
498,527

$
(29,094
)
$
533,136

Stock compensation
16

16

4,794

—

—

4,810

Restricted stock units
43

43

(1,259
)
—

—

(1,216
)
Stock issued for SARs
1

1

(5
)
—

—

(4
)
Employee stock purchase plan
77

77

3,240

—

—

3,317

Retirement of treasury shares
(147
)
(147
)
(7,371
)
—

—

(7,518
)
Cash dividends paid
—

—

—

(13,266
)
—

(13,266
)
Net income
—

—

—

21,682

—

21,682

Foreign currency translation, net of $0 income tax
—

—

—

—

2,876

2,876

Interest rate swap, net of $22 income tax
—

—

—

—

(41
)
(41
)
Balance at November 30, 2017
25,954

$
25,954

$
37,138

$
506,943

$
(26,259
)
$
543,776

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


7

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. We are a global provider of galvanizing services, welding solutions, specialty electrical equipment and highly engineered services to the power generation, transmission, distribution, refining and industrial markets. We have two distinct operating segments: the Energy Segment and 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.
As of March 1, 2017, our Galvanizing Segment was rebranded to the Metal Coatings Segment to more closely align the description of the segment with its current offerings and served markets. There have been no changes to the underlying information reported under this operating segment for prior periods, however, the new description will be included in the operating results for future filings and include the new powder coating offerings for the current and future periods.

Presentation
The accompanying condensed consolidated balance sheet as of February 28, 2017 , 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, 2017 , included in the Company’s Annual Report on Form 10-K/A 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 ended February 28, 2018 is referred to as fiscal 2018.
In the opinion of management, the accompanying unaudited 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, 2017 , the results of its operations for the three and nine months ended November 30, 2017 and 2016 , and cash flows for the nine months ended November 30, 2017 and 2016 . These interim results are not necessarily indicative of results for a full year.

Accounting Standards Recently Adopted
In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes . ASU 2015-17 simplifies the presentation of deferred taxes in a classified statement of financial position and was adopted by the Company on March 1, 2017. As a result of the adoption, the Company is required to offset deferred tax liabilities and assets, as well as any related valuation allowance, and present as a single non-current amount. However, the Company shall not offset deferred tax liabilities and assets attributable to different tax-paying components of the entity or to different tax jurisdictions. The adoption was on a prospective basis and therefore had no impact on the prior year.

Recently Issued Accounting Pronouncements
In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other Topics (Topic 350)-Simplifying the Test for Goodwill Impairment. This guidance simplifies the measurement of goodwill by eliminating the Step 2 impairment test. The new guidance requires companies to perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The amendment is required to be adopted prospectively. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company elected to adopt the guidance early effective for its annual goodwill impairment test performed in the fourth quarter of fiscal year 2018 and the adoption did not have a material impact on its consolidated financial statements.

8

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments , which clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. The Company will adopt the new standard effective in the first quarter of fiscal year 2019 and the adoption is not expected to have a material impact on its consolidated statements of cash flows.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . Under the new guidance, a lessee will be required to recognize assets and liabilities for all leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as finance or operating lease. This ASU will be effective for the Company in the first quarter of its fiscal year 2020 and early adoption is permitted. The ASU requires adoption based upon a modified retrospective transition approach. The Company has not yet selected a transition method, has not yet determined whether it will elect early adoption and is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers: Topic 606 ("ASU 2014-09") which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition . The core principle of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The standard will be effective for the Company beginning in fiscal 2019 and provides the option to adopt the guidance on a full retrospective basis or a modified retrospective basis.
The Company has substantially completed its assessment of the impacts that the standard will have on its financial statements, and determined that the adoption is not expected to have a significant impact on its results of operations, cash flows, or financial position. Based on the Company’s evaluation process completed and review of its contracts with customers, the timing and amount of revenue recognized under the new standard is generally consistent with its revenue recognition policy under previous guidance. For its Metal Coatings segment, the Company will recognize revenue over time as the metal coating is applied to the customer owned material while revenue was recognized at the completion of the service under the prior guidance. However, the change is not expected to significantly impact the timing of revenue recognition except for uncompleted jobs at the end of each quarter. For its Energy segment, the Company will recognize revenues for custom built products over time if the goods do not have an alternative use to the Company and the Company has an unconditional right to payment for work completed to date plus the applicable margin. This is generally consistent with the revenue recognition pattern under the prior guidance, however the Company continues to monitor its contracts to ensure that it has an unconditional right to payment and, in the circumstances when it does not, per the guidance, it will recognize revenues at a point-in-time upon transfer of the good to the customer. For bespoke services within its Energy segment, the Company will continue to recognize revenues over time as the services are rendered, and for off-the-shelf products, the Company will continue to recognize revenue at a point-in-time upon the transfer of the goods to the customer. The Company will adopt the new standard effective in the first quarter of fiscal year 2019, using the modified retrospective approach, and will expand its consolidated financial statement disclosures in order to comply with the new standard.

2.
Restatement of Previously Issued Financial Statements
As previously disclosed, the Company determined that for certain contracts within its Energy Segment for which revenue was historically recognized upon contract completion and transfer of title, the Company instead should have applied the percentage-of-completion method in accordance with the FASB’s Accounting Standards Codification No. 605-35, Construction-Type and Production-Type Contracts . In general, the percentage-of-completion method results in a revenue recognition pattern over time as a project progresses as opposed to deferring revenues until contract completion.
The Company concluded that the impact of applying the percentage-of-completion method to its revenue contracts was materially different from its previously reported results under its historical practice. As a result, the Company is restating its condensed consolidated financial statements for the periods impacted. The following financial tables reconcile the previously reported amounts to the restated amounts for each condensed consolidated financial statement .

9

The table below sets forth the condensed consolidated statements of income, including the balances originally reported, corrections and the as restated balances for each restated period (in thousands):

Three Months Ended November 30,
Nine Months Ended November 30,
2016
2016
As
Reported
Correction
As
Restated
As
Reported
Correction
As
Restated
Net Sales
$
227,459

$
657

$
228,116

$
665,171

$
14,101

$
679,272

Cost of Sales
173,593

3,226

176,819

506,091

14,651

520,742

Gross Profit
53,866

(2,569
)
51,297

159,080

(550
)
158,530

Operating Income
28,784

(2,569
)
26,215

78,182

(550
)
77,632

Income Before Income Taxes
25,946

(2,569
)
23,377

67,946

(550
)
67,396

Income Tax Expense
7,695

(964
)
6,731

18,609

(207
)
18,402

Net Income
$
18,251

$
(1,605
)
$
16,646

$
49,337

$
(343
)
$
48,994

Earnings Per Common Share
Basic Earnings Per Share
$
0.70

$
(0.06
)
$
0.64

$
1.90

$
(0.01
)
$
1.89

Diluted Earnings Per Share
$
0.70

$
(0.06
)
$
0.64

$
1.89

$
(0.01
)
$
1.88

The table below sets forth the condensed consolidated statements of comprehensive income, including the balances originally reported, corrections and the as restated balances for each restated period (in thousands):
Three Months Ended November 30,
Nine Months Ended November 30,
2016
2016
As
Reported
Correction
As
Restated
As
Reported
Correction
As
Restated
Net Income
$
18,251

$
(1,605
)
$
16,646

$
49,337

$
(343
)
$
48,994

Comprehensive Income
15,319

(1,605
)
13,714

49,061

(343
)
48,718

The table below sets forth the condensed consolidated statements of cash flows from operating activities, including the balances originally reported, corrections and the as restated balances for each restated period (in thousands):
Nine Months Ended November 30,
2016
As
Reported
Correction
As
Restated
Cash flows from operating activities:
Net income
$
49,337

$
(343
)
$
48,994

Deferred income taxes
(331
)
(207
)
(538
)
Inventories
(20,760
)
13,965

(6,795
)
Net change in billings related to costs and estimated earnings on uncompleted contracts
8,853

(12,130
)
(3,277
)
Other accrued liabilities and income taxes payable
329

(1,285
)
(956
)
Net cash provided by operating activities:
$
57,275

$
—

$
57,275

In addition to the restated condensed consolidated financial statements, the information contained in Notes 3 and 5 has been restated.

10


3.
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 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,
2017
2016
2017
2016
(Restated)
(Restated)
Numerator:
Net income (loss) for basic and diluted earnings per common share
$
(166
)
$
16,646

$
21,682

$
48,994

Denominator:
Denominator for basic earnings per common share–weighted average shares
25,965

26,005

25,982

25,974

Effect of dilutive securities:
Employee and director stock awards
—

128

67

130

Denominator for diluted earnings per common share
25,965

26,133

26,049

26,104

Earnings (loss) per share basic and diluted:
Basic earnings (loss) per common share
$
(0.01
)
$
0.64

$
0.83

$
1.89

Diluted earnings (loss) per common share
$
(0.01
)
$
0.64

$
0.83

$
1.88

For the three months ended November 30, 2017, 0.1 million shares related to employee and director stock awards were excluded from the diluted shares outstanding count as the effect was anti-dilutive.
4.
Share-based Compensation
The Company has one share-based compensation plan, the 2014 Long Term Incentive Plan (the “Plan”). The purpose of the Plan is to promote the growth and prosperity of the Company by permitting the Company to grant to its employees, directors and advisors various types of restricted stock unit awards, performance share units, stock options, and stock appreciation rights to purchase common stock of the Company. The maximum number of shares that may be issued under the Plan is 1,500,000 shares. As of November 30, 2017 , the Company has approximately 1,304,407 shares available for future issuance under the Plan.
Restricted Stock Unit Awards
Restricted stock unit awards are valued at the market price of our common stock on the grant date. Awards issued prior to fiscal 2015 generally have a three year cliff vesting schedule and awards issued subsequent to fiscal 2015 generally vest ratably over a period of three years but these awards may vest early in accordance with the Plan’s accelerated vesting provisions.

The activity of our non-vested restricted stock unit awards for the nine month period ended November 30, 2017 is as follows:
Restricted
Stock Units
Weighted
Average Grant
Date Fair Value
Non-vested balance as of February 28, 2017
134,547

$
51.10

Granted
46,436

60.01

Vested
(62,576
)
47.26

Forfeited
(8,630
)
56.64

Non-vested balance as of November 30, 2017
109,777

$
56.62



11

Performance Share Unit Awards
Performance share unit awards are valued at the market price of our common stock on the grant date. These awards have a three year performance cycle and will vest and become payable, if at all, on the third anniversary of the award date. The awards are subject to the Company’s degree of achievement of a target annual average adjusted return on assets during these three year periods. In addition, a multiplier may be applied to the total awards granted which is based on the Company’s total shareholder return during such three year period in comparison to a defined specific industry peer group as set forth in the plan. The activity of our non-vested performance share unit awards for the nine month period ended November 30, 2017 is as follows:
Performance
Stock Units
Weighted
Average Grant
Date Fair Value
Non-vested balance as of February 28, 2017
51,426

$
51.70

Granted
26,157

60.20

Vested
—

—

Forfeited
(7,553
)
54.31

Non-vested balance as of November 30, 2017
70,030

$
54.59

Stock Appreciation Rights
Stock appreciation rights are 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 vest ratably over a period of three years although some may vest immediately on issuance. These awards are valued using the Black-Scholes option pricing model.
A summary of the Company’s stock appreciation rights activity for the nine month period ended November 30, 2017 is as follows:
SARs
Weighted Average
Exercise Price
Outstanding as of February 28, 2017
170,139

$
42.02

Granted
—

—

Exercised
(8,350
)
43.31

Forfeited
(2,145
)
45.36

Outstanding as of November 30, 2017
159,644

$
41.91

Exercisable as of November 30, 2017
159,644

$
41.91


The average remaining contractual term for those stock appreciation rights outstanding at November 30, 2017 is 2.77 years, with an aggregate intrinsic value of $1.0 million . The average remaining contractual terms for those stock appreciation rights that are exercisable as of November 30, 2017 is 2.77 years, with an aggregate intrinsic value of $1.0 million .
Employee Stock Purchase Plan
The Company also has an employee stock purchase plan, which allows employees of the Company to purchase common stock of the Company through accumulated payroll deductions. Offerings under this plan have a duration of 24 months (the "offering period"). 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 our 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. For the nine month period ended November 30, 2017 , the Company issued 76,898 shares under the Employee Stock Purchase Plan.

12

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):
Nine Months Ended November 30,

2017
2016
Compensation expense
$
4,810

$
4,408

Income tax benefits
$
1,684

$
1,411

Unrecognized compensation cost related to restricted stock units, performance share unit awards, stock appreciation rights, and the employee stock purchase plan at November 30, 2017 totals $7.5 million .
The Company’s policy is to issue shares required under these plans from the Company’s treasury shares or from the Company’s authorized but unissued shares.
5.
Segments
Segment Information
Net sales and operating income by segment for each period were as follows (in thousands):
Three Months Ended November 30,
Nine Months Ended November 30,
2017
2016
2017
2016
(Restated)
(Restated)
Net Sales:
Energy
$
107,021

$
136,210

$
317,526

$
385,357

Metal Coatings
101,137

91,906

292,244

293,915

Total net sales
208,158

228,116

609,770

679,272

Operating Income (loss):
Energy
$
(12,103
)
$
12,865

$
(3,029
)
$
41,833

Metal Coatings
21,681

21,345

66,332

60,679

Corporate
(8,024
)
(7,995
)
(24,339
)
(24,880
)
Total operating income
$
1,554

$
26,215

$
38,964

$
77,632


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

November 30, 2017
February 28, 2017
Total assets:
Energy
$
568,607

$
536,557

Metal Coatings
447,749

428,330

Corporate
12,901

13,467

Total
$
1,029,257

$
978,354


For the three and nine months ended November 30, 2017, the Company recognized impairment charges of $8.3 million, classified within costs of sales on the consolidated statement of income, related to property, plant and equipment in the Energy segment that was retired prior to the end of its useful life.

13

Financial Information About Geographical Areas
The following table presents revenue by geographic region for each period (in thousands):
Three Months Ended November 30,
Nine Months Ended November 30,
2017
2016
2017
2016
(Restated)
(Restated)
Net sales:
United States
$
176,631

$
192,183

$
505,955

$
551,185

International
32,355

35,933

104,747

128,243

Eliminations
(828
)
—

(932
)
(156
)
Total
$
208,158

$
228,116

$
609,770

$
679,272

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

November 30, 2017
February 28, 2017
Property, plant and equipment, net:




United States
$
195,931

$
205,079

Canada
17,668

18,002

Other countries
5,574

5,529

Total
$
219,173

$
228,610


6.
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 consolidated balance sheet. 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 changes in the warranty reserves since the end of fiscal 2017 (in thousands):
Warranty Reserve
Balance at February 28, 2017
$
2,098

Warranty costs incurred
(1,424
)
Additions charged to income
1,167

Balance at November 30, 2017
$
1,841



14

7.
Debt

The Company's debt consisted of the following for each of the periods presented (in thousands):
November 30, 2017
February 28, 2017
Senior Notes, due in balloon payment in January 2021
$
125,000

$
125,000

Senior Notes, due in annual installments of $14,286 beginning in March 2012 through March 2018
14,286

28,571

Term Note, due in quarterly installments beginning in June 2013 through March 2018
—

49,219

Revolving line of credit with bank
168,000

69,500

Total debt
307,286

272,290

Unamortized debt issuance costs for Senior Notes and Term Note
(434
)
(861
)
Total debt, net
306,852

271,429

Less amount due within one year
(14,286
)
(16,629
)
Debt due after one year, net
$
292,566

$
254,800


On March 21, 2017, we executed the Amended and Restated Credit Agreement (the “2017 Credit Agreement”) with Bank of America and other lenders. The 2017 Credit Agreement amended the Credit Agreement entered into on March 27, 2013 by the following: (i) extending the maturity date until March 21, 2022, (ii) providing for a senior revolving credit facility in a principal amount of up to $450 million, with an additional $150 million accordion, (iii) including a $75 million sublimit for the issuance of standby and commercial letters of credit, (iv) including a $30 million sublimit for swing line loans, (v) restricting indebtedness incurred in respect of capital leases, synthetic lease obligations and purchase money obligations not to exceed $20 million, (vi) restricting investments in any foreign subsidiaries not to exceed $50 million in the aggregate, and (vii) including various financial covenants and certain restricted payments relating to dividends and share repurchases as specifically set forth in the 2017 Credit Agreement. The balance due on the $75.0 million term facility under the previous Credit Agreement was paid in full as a result of the execution of the 2017 Credit Agreement. The financial covenants, as defined in the 2017 Credit Agreement, require us to maintain on a consolidated basis a Leverage Ratio not to exceed 3.25:1.0 and an Interest Coverage Ratio of at least 3.00:1.0. The 2017 Credit Agreement will be used to finance working capital needs, capital improvements, dividends, future acquisitions, letter of credit needs and share repurchases.
Interest rates for borrowings under the 2017 Credit Agreement are based on either a Eurodollar Rate or a Base Rate plus a margin ranging from 0.875% to 1.875% depending on our Leverage Ratio (as defined in the 2017 Credit Agreement). The Eurodollar Rate is defined as LIBOR for a term equivalent to the borrowing term (or other similar interbank rates if LIBOR is unavailable). The Base Rate is defined as the highest of the applicable Fed Funds rate plus 0.50%, the Prime rate, or the Eurodollar Rate plus 1.0% at the time of borrowing. The 2017 Credit Agreement also carries a Commitment Fee for the unfunded portion ranging from 0.175% to 0.30% per annum, depending on our Leverage Ratio.
8.
Acquisitions

On September 6, 2017, we completed the acquisition of all the assets and outstanding shares of Powergrid Solutions, Inc. ("PSI"), a privately held company, based in Oshkosh, Wisconsin. PSI designs, engineers and manufactures customized low and medium-voltage power quality, power generation and distribution equipment. PSI’s product portfolio includes metal-enclosed, metal-clad and padmount switchgear, serving the utility, commercial, industrial and renewable energy markets since 1982. The acquisition of PSI is a key addition to our electrical switchgear portfolio. The addition of PSI’s low-voltage and padmount switchgear allows AZZ to offer a comprehensive portfolio of customized switchgear solutions to both existing and new customers in a diverse set of industries.
On June 30, 2017, we completed the acquisition of the assets of Enhanced Powder Coating Ltd., (“EPC”), a privately held, high specification, National Aerospace and Defense Contractors Accreditation Program, ("NADCAP"), certified provider of powder coating, plating and anodizing services based in Gainesville, Texas. EPC, founded in 2003, offers a full spectrum of finish technology including powder coating, abrasive blasting and plating for heavy industrial, transportation, aerospace and light commercial industries. The acquisition of EPC is consistent with our strategic initiative to grow our Metal Coatings segment with products and services that complement our industry-leading galvanizing business.
These acquisitions were not significant individually or in the aggregate. Accordingly, disclosures of the purchase price allocations and unaudited pro forma results of operations have not been provided.

15


9.
Subsequent Events
On March 31, 2018, the Company made the final principal payment of $14.3 million to fully settle the 2008 Senior Notes on the scheduled maturity date.
On March 12, 2018, the Company purchased certain assets through a bankruptcy sales process from Lectrus Corporation, a privately-held corporation based in Chattanooga, Tennessee. Lectrus designs and manufactures custom metal enclosures and provides electrical and mechanical integration. The acquisition will complement AZZ's current metal enclosure and switchgear businesses.
On February 1, 2018, the Company completed the acquisition of all the assets and outstanding shares of Rogers Brothers Company ("Rogers Brothers"), a privately held company, based in Rockford, Illinois. Rogers Brothers provides galvanizing services to a multi-state area within the Midwest. The acquisition supports AZZ's goal of continued geographic expansion as well as portfolio expansion of its metal coatings services. The goodwill arising from this acquisition was allocated to the Metal Coatings Segment and is not deductible for income tax purposes.


16

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 Quarterly Report on Form 10-Q may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand and response to products and services offered by AZZ, including demand by the power generation markets, electrical transmission and distribution markets, the industrial markets, and the hot dip galvanizing markets; prices and raw material cost, including zinc and natural gas which are used in the hot dip galvanizing process; changes in the political stability and economic conditions of the various markets that AZZ serves, foreign and domestic, customer requested delays of shipments, acquisition opportunities, currency exchange rates, adequacy of financing, and availability of experienced management and employees to implement AZZ’s continued growth strategy; a downturn in market conditions in any industry relating to the products we inventory or sell or the services that we provide; the continuing economic volatility in the U.S. and other markets in which we operate; acts of war or terrorism inside the United States or abroad; natural disasters in the countries in which we operate; and other changes in economic and financial conditions. AZZ has provided additional information regarding risks associated with the business in AZZ’s Annual Report on Form 10-K/A for the fiscal year ended February 28, 2017 and other filings with the SEC, available for viewing on AZZ’s website at www.azz.com and on the SEC’s website at www.sec.gov.
You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. These statements are based on information as of the date hereof and AZZ assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
The following discussion should be read in conjunction with management’s discussion and analysis contained in our Annual Report on Form 10-K/A for the fiscal year ended February 28, 2017 , and with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.
Restatement of Previously Issued Financial Statements
As previously disclosed, we determined that for certain contracts within our Energy Segment for which revenue was historically recognized upon contract completion and transfer of title, we instead should have applied the percentage-of-completion method in accordance with the FASB’s Accounting Standards Codification No. 605-35, Construction-Type and Production-Type Contracts . In general, the percentage-of-completion method results in a revenue recognition pattern over time as a project progresses as opposed to deferring revenues until contract completion.
We concluded that the impact of applying the percentage-of-completion method to our revenue contracts was materially different from its previously reported results under our historical practice. As a result, we are restating our consolidated financial statements for the periods impacted. See Note 2 to the Condensed Consolidated Financial Statements within Item 1 for additional information and a reconciliation of the previously reported amounts to the restated amounts.
RESULTS OF OPERATIONS
We have two distinct operating segments, the Energy Segment and the Metal Coatings Segment, as defined in our Annual Report on Form 10-K/A for the fiscal year ended February 28, 2017 . Management believes that the most meaningful analysis of our results of operations is to analyze our performance by segment. We use revenue and operating income by segment to evaluate our segments. Segment operating income consists of net sales less cost of sales and selling, general and administrative expenses that are specifically identifiable to a segment. For a reconciliation of segment operating income to consolidated operating income, see Note 5 to our quarterly consolidated financial statements included in this Quarterly Report on Form 10-Q.

17

Orders and Backlog
Our entire backlog relates to our Energy Segment and was $283.2 million as of November 30, 2017 , a decrease of $34.8 million , or 10.9% , as compared to $317.9 million as of February 28, 2017 . Our backlog decreased $26.2 million , or 8.5% , as compared to the same period in the prior fiscal year. Both of these decreases were primarily the result of a softer market in the first three quarters of fiscal 2018 and the $11.0 million de-booking from the cancellation of the Westinghouse VC Summer project noted further below during the third quarter of fiscal year 2018. For the three months ended November 30, 2017 , our book-to-bill ratio decreased to 0.86 to 1 from 0.97 to 1 when compared to same period of fiscal 2017 and our incoming net orders decreased by $42.1 million , or 19.0% .
The table below includes the progression of the backlog (in thousands, unaudited, restated):
Period Ended
Period Ended
Backlog
2/28/2017
$
317,922

02/29/2016
$
310,623

Net bookings
193,754

250,479

Acquired backlog
—

11,903

Shipments
205,283

250,366

Backlog
5/31/2017
306,393

5/31/2016
322,639

Book to ship ratio
0.94

1.00

Net bookings
190,055

193,712

Shipments
196,329

200,790

Backlog
8/31/2017
300,119

8/31/2016
315,561

Book to Ship Ratio
0.97

0.96

Net bookings
179,783

221,874

Acquired backlog
11,417

—

Shipments
208,158

228,116

Backlog
11/30/2017
283,161

11/30/2016
309,319

Book to Ship Ratio
0.86

0.97

Segment Revenues
For the three and nine months ended November 30, 2017 , consolidated revenues decreased $20.0 million , or 8.7% , and $69.5 million , or 10.2% as compared to the same periods in fiscal 2017.
The following table reflects the breakdown of revenue by segment (in thousands):
Three Months Ended November 30,
Nine Months Ended November 30,
2017
2016
2017
2016
(Restated)
(Restated)
Net sales:
Energy
$
107,021

$
136,210

$
317,526

$
385,357

Metal Coatings
101,137

91,906

292,244

293,915

Total net sales
$
208,158

$
228,116

$
609,770

$
679,272

Revenues for the Energy Segment decreased 21.4% for the three months ended November 30, 2017 , to $107.0 million as compared to the same period in fiscal 2017. The decrease in revenue during the third quarter was caused by several factors including reduced turnarounds in the U.S. refinery market, continued softness in the petrochemical market, negative impacts from the Atlantic hurricane activity, cancellations and delays in the release of several large projects in the U.S. and overseas. Revenues decreased 17.6% for the nine months ended November 30, 2017 , to $317.5 million as compared to the same period in fiscal 2017, primarily on the turnaround softness in the first half of the year and the effects on the nuclear market from the Westinghouse Electric Company bankruptcy filed on March 29, 2017.
Revenues for the Metal Coatings Segment increased 10.0% for the three months ended November 30, 2017 , to $101.1 million as compared to the same period in fiscal 2017. The increase was a result of higher selling prices and higher volumes in steel processed during the period driven primarily by improvements in various markets. Revenues decreased 0.6% for the nine months ended

18

November 30, 2017 , to $292.2 million as compared to the same period in fiscal 2017 due to lower volumes in the first half of fiscal 2018, somewhat offset by higher selling prices.
Segment Operating Income
Operating income for the Energy Segment decreased by $25.0 million , or 194.1% , to a loss of $12.1 million for the three months ended November 30, 2017 as compared to the same period in fiscal 2017. This decrease is attributable to the reduction in refinery turnarounds described above, which typically carry a higher margin, coupled with margin degradations on certain large projects in the U.S. and overseas. Operating income decreased $44.9 million , or 107.2% , to a loss of $3.0 million for the nine months ended November 30, 2017 as compared to the same period in fiscal 2017. This decrease is attributable to the same impact of the market as discussed for the quarterly comparison and also due to job cancellations associated with the Westinghouse bankruptcy. In addition, for the three and nine months ended November 30, 2017, the Company recognized an impairment charge of $8.3 million related to property, plant and equipment that was retired prior to the end of its useful life and a provision for doubtful accounts of $2.9 million resulting from an adverse court decision related to certain outstanding accounts receivables. No such charges were recorded in the prior year comparable periods.
Operating income for the Metal Coatings Segment increased by $0.3 million , or 1.6% , for the three months ended November 30, 2017 as compared to the same period in fiscal 2017. The slight increase was attributable to higher volumes in the third quarter of fiscal 2018, partially offset by lower margins due to an increase in the price of zinc. Operating income increased by $5.7 million , or 9.3% , for the nine months ended November 30, 2017 as compared to the same period of fiscal 2017. Excluding the impact of the realignment charges of $7.3 million taken in the second quarter of fiscal 2017, the decrease is primarily attributable to lower volumes in the first half of fiscal 2018 as compared to the prior year.
Corporate Expenses
Corporate expenses were relatively flat for the three months ended November 30, 2017 as compared to the prior year comparable period. For nine months ended November 30, 2017, corporate expenses decreased by $0.5 million or 2.2% as compared to the prior year comparable period due primarily to lower employee compensation costs, partially offset by the higher costs for outside professional services.
Interest Expense
Interest expense for the three and nine month periods ended November 30, 2017 was $3.5 million and $10.3 million , respectively. Interest expense for the three and nine month periods ended November 30, 2016 was $3.7 million and $11.2 million , respectively. The decrease in interest expense in comparison to the same respective periods in the prior year was the result of a lower average outstanding debt balance. As of November 30, 2017 , our gross outstanding debt was $307.3 million , compared to $312.1 million outstanding as of November 30, 2016 . Our gross debt to equity ratio was 0.57 to 1 as of November 30, 2017 , compared to 0.59 to 1 as of November 30, 2016 .
Net Loss On Sale of Property, Plant and Equipment and Insurance Proceeds
For the nine months ended November 30, 2017 , the amounts recorded were primarily driven from the realized loss from a property sale in the second fiscal quarter and the amounts recorded for the three months ended November 30, 2017 were insignificant. For the three and nine months ended November 30, 2016, the amounts recorded were insignificant.
Other Income, Net
For the three and nine months ended November 30, 2017 , the amounts recorded to other income were primarily attributable to net foreign exchange gains and royalty income. For the three and nine months ended November 30, 2016, the amounts recorded to other income were primarily attributable to an insurance receivable of $0.6 million and net foreign exchange gains.
Income Taxes
The provision for (benefit from) income taxes reflects an effective tax rate of ( 91.6% ) for the three months ended November 30, 2017 as compared to 28.8% for the comparable period in fiscal 2017. The difference in rate is primarily attributable to tax credits and the decline in net income.
The provision for income taxes reflects an effective tax rate of 24.2% for the nine months ended November 30, 2017 as compared to 27.3% for the comparable period in fiscal 2017. The difference in rate is primarily attributable to state tax benefits.

19

Income Taxes - Forward Looking Statement
In December 2017, subsequent to the period covered by this Form 10-Q, the President of the U.S. signed the Tax Cuts and Jobs Act of 2017 (the “Act”). Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the elimination of certain deductions and imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries. The Act also includes international provisions, which generally establish a territorial-style system for taxing foreign source income of domestic multinational corporations. In the fourth quarter of our fiscal year 2018, the period in which the legislation was enacted, we recorded a $23.2 million reduction in tax expense related to the Act. The provisional benefit related to the remeasurement of certain deferred tax assets and liabilities was $25.0 million. The provisional expense related to the one-time tax on the mandatory deemed repatriation of foreign earnings was $1.8 million. SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act ("SAB 118"), allows us to provide a provisional estimate of the impacts of the Tax Act due to the complexities involved in accounting for the enactment of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the enactment of the Tax Act to complete the accounting under ASC 740, Income Taxes . We have calculated our best estimate of the impact of the Act in our fiscal year 2018 annual income tax provision based on our understanding of the Act and guidance available at the date of this filing.
Westinghouse Electric Company Bankruptcy Case
We had existing contracts with subsidiaries of Westinghouse Electric Company (“WEC”). WEC and the relevant subsidiaries (the "Debtors") filed relief under Chapter 11 of the Bankruptcy Code on March 29, 2017 in the United States Bankruptcy Court for the Southern District of New York, jointly administered as In re Westinghouse Electric Company, et al., Case No. 17-10751 (the "Bankruptcy Case"). To date, WEC has continued to operate under a Debtor-in-Possession Financing Facility and we continue to honor their executory contracts. The Company has been collecting on post-petition amounts due and owed. On February 22, 2018, the United States Bankruptcy Court for the Southern District of New York approved the Debtors’ Modified First Amended Disclosure Statement for the Joint Chapter 11 Plan of Reorganization. In the Disclosure Statement, the Debtors estimated a 98.9% to 100% distribution on Allowed General Unsecured Claims. We have approximately $12 million of such claims filed with the court, which includes 100% of our pre-petition claims. The total claims filed exceed the book value of our exposure.
At time of the Bankruptcy Case, we were subcontractors on various WEC engagements, including the VC Summer and Vogtle Bridge projects. The ownership of VC Summer halted work earlier in the year and, during the third quarter of fiscal 2018, we de-booked $11.0 million from backlog related to this project. Also during the third quarter of fiscal 2018, we received a notice of cancellation for the Vogtle Bridge project, which negatively impacted our sales and margin for the second half of fiscal year 2018 by approximately $6.1 million and $1.2 million, respectively.
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 are generally for operating activities, cash dividend payments, capital improvements, debt repayment, acquisitions and share repurchases. 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 foreseeable future.
For the nine month period ended November 30, 2017 , net cash provided by operating activities was $38.7 million , net cash used in investing activities was $54.2 million , net cash provided by financing activities was $14.2 million , and an increase of $0.6 million from the net effect of exchange rate changes on cash resulting in a net decrease in cash and cash equivalents of $0.7 million . In comparison to fiscal 2017, the results in the statement of cash flows for operating activities for the nine months ended November 30, 2017 , are primarily attributable to a decrease in net income, partially offset by more favorable impacts of changes in working capital and increased non-cash charges. The Company's use of cash for investing activities was higher due to increased spending for acquisitions year over year, partially offset by lower capital expenditures. Cash provided by financing activities was higher during the nine months ended November 30, 2017 due to increased net borrowings, which was partially offset by higher debt repayments.
Our working capital was $199.0 million as of November 30, 2017 , as compared to $185.2 million at November 30, 2016 .
On March 21, 2017, we executed the Amended and Restated Credit Agreement (the “2017 Credit Agreement”) with Bank of America and other lenders. The 2017 Credit Agreement amended the Credit Agreement entered into on March 27, 2013 by the following: (i) extending the maturity date until March 21, 2022, (ii) providing for a senior revolving credit facility in a principal amount of up to $450 million, with an additional $150 million accordion, (iii) including a $75 million sublimit for the issuance of standby and commercial letters of credit, (iv) including a $30 million sublimit for swing line loans, (v) restricting indebtedness

20

incurred in respect of capital leases, synthetic lease obligations and purchase money obligations not to exceed $20 million, (vi) restricting investments in any foreign subsidiaries not to exceed $50 million in the aggregate, and (vii) including various financial covenants and certain restricted payments relating to dividends and share repurchases as specifically set forth in the 2017 Credit Agreement. The financial covenants, as defined in the 2017 Credit Agreement, require us to maintain on a consolidated basis a Leverage Ratio not to exceed 3.25:1.0 and an Interest Coverage Ratio of at least 3.00:1.0. The 2017 Credit Agreement will be used to finance working capital needs, capital improvements, dividends, future acquisitions, letter of credit needs and share repurchases.
Interest rates for borrowings under the 2017 Credit Agreement are based on either a Eurodollar Rate or a Base Rate plus a margin ranging from 0.875% to 1.875% depending on our Leverage Ratio (as defined in the Credit Agreement). The Eurodollar Rate is defined as LIBOR for a term equivalent to the borrowing term (or other similar interbank rates if LIBOR is unavailable). The Base Rate is defined as the highest of the applicable Fed Funds rate plus 0.50%, the Prime rate, or the Eurodollar Rate plus 1.0% at the time of borrowing. The Credit Agreement also carries a Commitment Fee for the unfunded portion ranging from 0.175% to 0.30% per annum, depending on our Leverage Ratio.
As of November 30, 2017 , we had $168.0 million of outstanding debt against the revolving credit facility provided and letters of credit outstanding in the amount of $23.7 million, which left approximately $258.3 million of additional credit available under the 2017 Credit Agreement.
On March 31, 2008, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) pursuant to which the Company issued $100.0 million aggregate principal amount of its 6.24% unsecured Senior Notes (the “2008 Notes”) due March 31, 2018 through a private placement (the “2008 Note Offering”). On March 31, 2018, the Company made the final principal payment of $14.3 million to fully settle the 2008 Senior Notes on the scheduled maturity date.
The Company entered into an additional Note Purchase Agreement on January 21, 2011 (the “2011 Agreement”), pursuant to which the Company issued $125.0 million aggregate principal amount of its 5.42% unsecured Senior Notes (the “2011 Notes”), due in January of 2021, through a private placement (the “2011 Note Offering”). Pursuant to the 2011 Agreement, the Company's payment obligations with respect to the 2011 Notes may be accelerated under certain circumstances.
The 2008 Notes and the 2011 Notes each provide for various financial covenants requiring us, among other things, to a) maintain on a consolidated basis net worth (as defined in the Note Purchase Agreement) equal to at least the sum of $116.9 million plus 50.0% of future net income; b) maintain a ratio of indebtedness to EBITDA (as defined in Note Purchase Agreement) not to exceed 3.25:1.00; c) maintain on a consolidated basis a Fixed Charge Coverage Ratio (as defined in the Note Purchase Agreement) of at least 2.0:1.0; d) not at any time permit the aggregate amount of all Priority Indebtedness (as defined in the Note Purchase Agreement) to exceed 10.0% of Consolidated Net Worth.
As of November 30, 2017 , the Company was in compliance with all of its debt covenants.
Historically, we have not experienced a significant impact on our operations from increases in general inflation other than for specific commodities. We have exposure to commodity price increases in both segments of our business, primarily copper, aluminum, steel and nickel based alloys in the Energy Segment and zinc and natural gas in the Metal Coatings Segment. We attempt to minimize these increases through escalation clauses in customer contracts for copper, aluminum, steel and nickel based alloys, when market conditions allow and through fixed cost contract purchases on zinc. 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 where competitively feasible.
OFF BALANCE SHEET TRANSACTIONS AND RELATED MATTERS
Other than operating leases discussed below, there are 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 financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources of the Company.
CONTRACTUAL COMMITMENTS
Leases
We lease various facilities under non-cancelable operating leases with an initial term in excess of one year.
Commodity pricing

21

The Company manages its exposure to commodity prices through the use of the following:
In the Energy Segment, we have exposure to commodity pricing for copper, aluminum, steel, tungsten and nickel based alloys. Because the Energy Segment does not commit contractually to minimum volumes, increases in price for these items are normally managed through escalation clauses in customer contracts, although during difficult market conditions these escalation clauses may not be obtainable. In addition, we attempt to enter into firm pricing contracts with our vendors on material at the time we receive orders from our customers to minimize risk.
In the Metal Coatings Segment, we utilize contracts with our zinc suppliers that include protective caps and fixed cost contracts to guard against rising zinc prices. We also secure firm pricing for natural gas supplies with individual utilities when possible. Management believes these agreements ensure adequate supplies and partially offset exposure to commodity price swings.
We have no contracted commitments for any commodities including steel, aluminum, natural gas, nickel based alloys, copper, zinc or any other commodity, except for those entered into under the normal course of business.
Other
As of November 30, 2017 , w e had outstanding letters of credit in the amount of $38.2 million, with $23.7 million issued under the 2017 Credit Agreement and $14.5 million issued by HSBC Bank (China).  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 or performance periods.
The following summarizes our operating leases, debt principal payments, and interest payments for the remainder of the next five years and beyond.
Operating
Leases
Long-Term
Debt
Interest
Total
Fiscal:
(In thousands)
2018
$
1,847

$
—

$
4,531

$
6,378

2019
6,888

14,286

12,161

33,335

2020
5,826

—

11,715

17,541

2021
4,932

125,000

11,715

141,647

2022
4,826

—

4,940

9,766

Thereafter
22,111

168,000

509

190,620

Total
$
46,430

$
307,286

$
45,571

$
399,287


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 condensed consolidated financial statements and the accompanying notes. On an ongoing basis, we evaluate our estimates and assumptions. These estimates and assumptions are based on current facts, historical experience, and various other factors that we believe are reasonable under the circumstances to determine reported amounts of assets, liabilities, revenue and expenses that are not readily apparent from other sources.
During the nine months ended November 30, 2017, there were no significant changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K/A for the year ended February 28, 2017.

RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1, The Company and Basis of Presentation, in Part I, Item 1. Financial Statements, of this Quarterly Report on Form 10-Q, 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.


22

Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk affecting our operations results primarily from changes in interest rates and commodity prices. We have only limited involvement with derivative financial instruments and are not a party to any leveraged derivatives.
In the Energy Segment, we have exposure to commodity pricing for copper, aluminum, steel, tungsten and nickel based alloys. Increases in price for these items are normally managed through escalation clauses in our customers' contracts, although during difficult market conditions customers' may resist these escalation clauses. In addition, we attempt to enter into firm pricing contracts with our vendors on material at the time we receive orders from our customers to minimize risk. We manage our exposures to commodity prices, primarily zinc used in our Metal Coatings Segment, by utilizing agreements with zinc suppliers that include protective caps and fixed contracts to guard against escalating commodity prices. We also secure firm pricing for natural gas supplies with individual utilities when possible. We believe these agreements ensure adequate supplies and partially offset exposure to commodity price escalation.
The Company has exposure to foreign currency exchange rates related to our operations in Canada, China, Brazil, Poland, and the Netherlands.
We do not believe that a hypothetical change of 10% of the interest rates or currency exchange rates that are currently in effect or a change of 10% of commodity prices would have a significant adverse effect on our results of operations, financial position, or cash flows as long as we are able to pass along the increases in commodity prices to our customers. However, there can be no assurance that either interest rates, exchange rates or commodity prices will not change in excess of the 10% hypothetical amount or that we would be able to pass along rising costs of commodity prices to our customers, and such hypothetical change could have an adverse effect on our results of operations, financial position, and cash flows.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, management of the Company has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, due to the material weakness described below, the Company's disclosure controls and procedures were not effective as of the end of the period covered by this Form 10-Q to provide reasonable assurance that information required to be disclosed by us in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and were not effective as of the end of the period covered by this Form 10-Q to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely discussions regarding required disclosure.
Changes in Internal Controls Over Financial Reporting
Subsequent to filing the Company’s quarterly report on Form 10-Q for the period ended August 31, 2017, an error was discovered related to the Company’s historical revenue recognition policies and procedures. In particular, the Company determined that for certain contracts within its Energy Segment for which revenue was historically recognized upon contract completion and transfer of title, the Company instead should have applied the percentage-of-completion method in accordance with the FASB’s Accounting Standards Codification No. 605-35, Construction-Type and Production-Type Contracts . This error resulted in a material misstatement of the financial statements and required restatement of the financial statements included in the Company’s Form 10-K for the fiscal year ended February 28, 2017 and in the Company’s Form 10-Q for the quarterly periods ended May 31, 2017 and August 31, 2017. This error, which was not detected timely by management, was the result of inadequate design of controls pertaining to the Company’s review and ongoing monitoring of its revenue recognition policies. The deficiency represents a material weakness in the Company’s internal control over financial reporting.
Management is actively engaged in the planning for, and implementation of, remediation efforts to address the material weakness identified above. The remediation plan includes i) the implementation of new controls designed to evaluate the appropriateness of revenue recognition policies and procedures, ii) new controls over recording revenue transactions, and iii) additional training.
Management believes the measures described above and others that may be implemented will remediate the material weaknesses that we have identified. As management continues to evaluate and improve internal control over financial reporting, we may decide to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures identified.

23

Subject to these remediation efforts, that were implemented after November 30, 2017, there have been no significant changes in the Company's internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On January 11, 2018, Logan Mullins, acting on behalf of himself and a putative class of persons who purchased or otherwise acquired the Company's securities between April 22, 2015 and January 8, 2018, filed a class action complaint in the U.S. District Court for the Northern District of Texas against the Company and two of its executive officers, Thomas E. Ferguson and Paul W. Fehlman. Logan Mullins v. AZZ, Inc., et al., Case No. 4:18-cv-00025-Y. The complaint alleges, among other things, that the Company's SEC filings contained statements that were rendered materially false and misleading by the Company's alleged failure to properly recognize revenue related to certain contracts in its Energy Segment in purported violation of (1) Section 10(b) of the Exchange Act and Rule 10b-5 and (2) Section 20(a) of the Exchange Act. The plaintiffs seek an award of compensatory and punitive damages, interests, attorneys' fees and costs. The Company denies the allegations and believes it has strong defenses to vigorously contest them. The Company cannot predict the outcome of this action nor when it will be resolved. If the plaintiffs were to prevail in this matter, the Company could be liable for damages, which could potentially be material and could adversely affect its financial condition or results of operations.
In addition, the Company and its subsidiaries are named defendants in various routine lawsuits incidental to our business.  These proceedings include labor and employment claims, use of the Company’s intellectual property, worker’s compensation and various environmental  matters, all arising in the normal course of business.  Although the outcome of these lawsuits or other proceedings cannot be predicted with certainty, and the amount of any potential liability that could arise with respect to such lawsuits or other matters cannot be predicted at this time, management, after consultation with legal counsel, does not expect liabilities, if any, from these claims or proceedings, either individually or in the aggregate, to have a material effect on the Company’s financial position, results of operations or cash flows.
Item 1A. Risk Factors
There have been no material changes in the risk factors disclosed under Part I, Item 1A of our Annual Report on Form 10-K/A for the fiscal year ended February 28, 2017 .
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In January of 2012, our Board authorized the repurchase of up to ten percent of the outstanding shares of our Common Stock. The share repurchase authorization does not have an expiration date, and the amount and prices paid for any future share purchases under the authorization will be based on market conditions and other factors at the time of the purchase. Repurchases under this share repurchase authorization would be made through open market purchases or private transactions in accordance with applicable federal securities laws, including Rule 10b-18 under the Exchange Act.
The following tab provides information with respect to purchases of common stock of the Company made during the three months ended November 30, 2017 , by the Company or any "affiliated purchaser" as defined in Rule 10b-18(a)(3) under the Exchange act:
Period
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
Sep 1, 2017 through Sep 30, 2017
—

$
—

—

1,102,800

Oct 1, 2017 through Oct 31, 2017
24,400

46.77

24,400

1,078,400

Nov 1, 2017 through Nov 30, 2017
25,600

46.58

25,600

1,052,800

Total
50,000

$
46.67

50,000

1,052,800

Item 3. Defaults Upon Senior Securities
None.

24

Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.

25

Item 6. Exhibits
3.1
Amended and Restated Certificate of Formation of AZZ Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the Registrant on July 14, 2015)
3.2
Amended and Restated Bylaws of AZZ Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed by the Registrant on January 23, 2017)
10.1
Note Purchase Agreement dated March 31, 2008 , by and among AZZ incorporated and the purchasers listed therein (incorporated by reference to Exhibit 10(1) of the Current Report on Form 8-K filed by the registrant on April 2, 2008).
10.2
AZZ incorporated Employee Stock Purchase Plan (incorporated by reference to Appendix B of the Proxy Statement for the 2008 Annual Shareholders Meeting).
10.3
Note Purchase Agreement , dated as of January 20, 2011, by and among AZZ incorporated and the purchasers identified therein (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by the registrant on January 21, 2011).
10.4
Amended and Restated Credit Agreement by and between AZZ Inc. as borrower, Bank of America N.A. as Administrative Agent, Swing Line Lender and L/C Issuer, and the other Lender's party thereto (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed March 24, 2017).
10.5*
AZZ incorporated 2014 Long Term Incentive Plan (incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Form DEFA filed May 29, 2014).
10.6*
First Amendment to AZZ Inc. 2014 Long Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the registrant on January 21, 2016.
10.7*
AZZ Inc. Severance Pay Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on October 3, 2017).
31.1
Certification by Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed Herewith.
31.2
Certification by Chief Financial Officer Certificate pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed Herewith.
32.1
Certification by Chief Executive Officer Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed Herewith.
32.2
Chief Financial Officer Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed Herewith.
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
101.DEF
XBRL Taxonomy Definition Linkbase
101.LAB
XBRL Taxonomy Extension Label Linkbase
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
* Management contract, compensatory plan or arrangement

26

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AZZ Inc.
(Registrant)
DATE: May 15, 2018
By:
/s/ Paul W. Fehlman
Paul W. Fehlman
Senior Vice President,
Chief Financial Officer

27
TABLE OF CONTENTS
Part I. Financial InformationItem 1. Financial StatementsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II. Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits

Exhibits

3.1 Amended and Restated Certificate of Formation of AZZ Inc.(incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the Registrant on July 14, 2015) 3.2 Amended and Restated Bylaws of AZZ Inc.(incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed by the Registrant on January 23, 2017) 10.1 Note Purchase Agreement dated March 31, 2008, by and among AZZ incorporated and the purchasers listed therein (incorporated by reference to Exhibit 10(1) of the Current Report on Form 8-K filed by the registrant on April 2, 2008). 10.2 AZZ incorporated Employee Stock Purchase Plan(incorporated by reference to Appendix B of the Proxy Statement for the 2008 Annual Shareholders Meeting). 10.3 Note Purchase Agreement, dated as of January 20, 2011, by and among AZZ incorporated and the purchasers identified therein (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by the registrant on January 21, 2011). 10.4 Amended and Restated Credit Agreementby and between AZZ Inc. as borrower, Bank of America N.A. as Administrative Agent, Swing Line Lender and L/C Issuer, and the other Lender's party thereto (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed March 24, 2017). 10.5* AZZ incorporated 2014 Long Term Incentive Plan(incorporated by reference to Appendix A to the Registrants Definitive Proxy Statement on Form DEFA filed May 29, 2014). 10.6* First Amendment to AZZ Inc. 2014 Long Term Incentive Plan(incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the registrant on January 21, 2016. 10.7* AZZ Inc. Severance Pay Plan(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on October 3, 2017). 31.1 Certification by Chief Executive Officerpursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed Herewith. 31.2 Certification by Chief Financial Officer Certificatepursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed Herewith. 32.1 Certification by Chief Executive Officer Certificatepursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed Herewith. 32.2 Chief Financial Officer Certificatepursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed Herewith.