AZZ INCAZZ
AZZ INC Leases Disclosure
9. Leases
We are a lessee under various leases for facilities and equipment. See Note 1 for a description of our accounting policy for leases.
As of February 28, 2026, we were the lessee for 145 operating leases and 139 finance leases with terms of 12 months or more. These leases are reflected in "Right-of-use assets," "Lease liability—short-term" and "Lease liability—long-term" in our consolidated balance sheets.
Our leases are primarily for (i) operating facilities, (ii) vehicles and equipment used in operations, (iii) facilities used for back-office functions, (iv) equipment used for back-office functions, and (v) temporary storage. The majority of our vehicle and equipment leases have both a fixed and variable component.
Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets and we recognize lease expense for these leases on a straight-line basis over the lease term. We have a significant number of short-term leases, including month-to-month agreements. Our short-term lease agreements include expenses incurred hourly, daily, monthly and for other durations of time of one year or less. Our future lease commitments as of February 28, 2026 do not reflect all of our short-term lease commitments.
In January 2026, we executed a 20-year extension of a leased facility in Columbia, South Carolina, which resulted in a remeasurement of the related lease liability and right-of-use asset in accordance with ASC 842, Lease Accounting. As a result, we recorded an increase of $28.6 million to "Right-of-use assets" and "Lease liability—long-term" on the consolidated balance sheets.
The following table outlines the classification of right-of-use ("ROU") assets and lease liabilities in the consolidated balance sheets for fiscal 2026 and 2025 (in thousands):
| As of | |||||||||||||||||
| February 28, 2026 | February 28, 2025 | ||||||||||||||||
| Assets | Balance Sheet Classification | ||||||||||||||||
| Operating right-of-use assets | $ | 46,261 | $ | 19,471 | |||||||||||||
| Finance right-of-use assets | $ | 13,303 | $ | 6,480 | |||||||||||||
| Liabilities | |||||||||||||||||
| Lease liability—short-term | $ | 5,413 | $ | 6,373 | |||||||||||||
| Lease liability—long-term | $ | 41,489 | $ | 13,741 | |||||||||||||
| Lease liability—short-term | $ | 3,266 | $ | 1,376 | |||||||||||||
| Lease liability—long-term | $ | 10,480 | $ | 5,271 | |||||||||||||
Supplemental information related to our leases was as follows (in thousands, except years and percentages):
| As of | |||||||||||
| February 28, 2026 | February 28, 2025 | ||||||||||
| Operating cash flows from operating leases included in lease liabilities | $ | 7,592 | $ | 7,213 | |||||||
| Lease liabilities obtained from new ROU assets—operating leases | $ | 32,800 | $ | 6,073 | |||||||
| Weighted-average remaining lease term—operating leases | 14.71 years | 3.79 years | |||||||||
| Weighted-average discount rate—operating leases | 6.10 | % | 5.06 | % | |||||||
| Decrease in ROU assets related to lease terminations | $ | (856) | $ | — | |||||||
| Financing cash flows from finance leases included in lease liabilities | $ | 2,542 | $ | 988 | |||||||
| Operating cash flows from finance leases included in lease liabilities | $ | 787 | $ | 341 | |||||||
| Lease liabilities obtained from new ROU assets—finance leases | $ | 9,105 | $ | 3,781 | |||||||
| Weighted-average remaining lease term—finance leases | 4.01 years | 4.57 years | |||||||||
| Weighted-average discount rate—finance leases | 6.59 | % | 6.86 | % | |||||||
The weighted-average remaining lease term for operating leases increased to 14.71 years, primarily due to the 20-year extension of the Columbia facility lease executed during fiscal 2026.
The following table outlines our lease expense in the consolidated statements of operations for fiscal 2026, 2025, and 2024 (in thousands):
| Year Ended | |||||||||||||||||
| February 28, 2026 | February 28, 2025 | February 29, 2024 | |||||||||||||||
| Operating lease expense: | |||||||||||||||||
| Cost of sales | $ | 7,233 | $ | 6,117 | $ | 6,008 | |||||||||||
| Selling, general and administrative | 1,975 | 1,932 | 1,947 | ||||||||||||||
| Total operating lease expense | 9,208 | 8,049 | 7,955 | ||||||||||||||
| Financing lease expense: | |||||||||||||||||
| Cost of sales | 2,839 | 1,117 | 468 | ||||||||||||||
| Interest expense | 787 | 341 | 109 | ||||||||||||||
| Total financing lease expense | 3,626 | 1,458 | 577 | ||||||||||||||
| Variable lease expense: | |||||||||||||||||
| Cost of sales | 945 | 471 | 454 | ||||||||||||||
| Total variable lease expense | 945 | 471 | 454 | ||||||||||||||
| Short-term lease expense: | |||||||||||||||||
| Cost of sales | 6,254 | 6,402 | 5,416 | ||||||||||||||
| Selling, general and administrative | 117 | 33 | 52 | ||||||||||||||
| Total short-term lease expense | 6,371 | 6,435 | 5,468 | ||||||||||||||
| Total lease expense | $ | 20,150 | $ | 16,413 | $ | 14,454 | |||||||||||
As of February 28, 2026, maturities of our lease liabilities were as follows (in thousands):
| Fiscal year: | Operating Leases | Finance Leases | Total | ||||||||||||||
| 2027 | $ | 8,054 | $ | 4,051 | $ | 12,105 | |||||||||||
| 2028 | 7,194 | 3,954 | 11,148 | ||||||||||||||
| 2029 | 6,510 | 3,721 | 10,231 | ||||||||||||||
| 2030 | 4,468 | 3,027 | 7,495 | ||||||||||||||
| 2031 | 3,609 | 828 | 4,437 | ||||||||||||||
| Thereafter | 44,672 | 3 | 44,675 | ||||||||||||||
| Total lease payments | 74,507 | 15,584 | 90,091 | ||||||||||||||
| Less imputed interest | (27,605) | (1,838) | (29,443) | ||||||||||||||
| Total | $ | 46,902 | $ | 13,746 | $ | 60,648 | |||||||||||
We sublease multiple buildings in Columbia, South Carolina to multiple subtenants. The Columbia sublease agreements are by and between AZZ Precoat Metals and multiple subtenants. Sublease income is recognized over the term of the sublease on a straight-line basis and is reported in the consolidated statement of operations as a reduction to "Cost of sales."
| Year Ended | |||||||||||||||||
| February 28, 2026 | February 28, 2025 | February 29, 2024 | |||||||||||||||
| Sublease income | $ | 1,063 | $ | 1,055 | $ | 1,002 | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Apr 22, 2026 | Showing above |
| 2025 | Apr 21, 2025 | |
| 2024 | Apr 22, 2024 | |
| 2023 | Apr 25, 2023 | |
| 2022 | Apr 22, 2022 | |
| 2021 | Apr 23, 2021 | |
| 2020 | Apr 29, 2020 | |
| 2019 | May 17, 2019 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.