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Assets Held for Sale | 9 Months Ended
--- | ---
Nov. 30, 2022
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | In fiscal 2023, the Company continued to execute its plan to divest of non-core businesses. On June 23, 2022, the Company and Fernweh Group LLC ("Fernweh"), jointly entered into a definitive agreement whereby AZZ contributed its AZZ Infrastructure Solutions segment (“AIS”) to AIS Investment Holdings LLC (the “AIS JV”), and sold a 60% interest in the AIS JV to Fernweh at an implied enterprise value of AIS of $300.0 million. Management previously committed to a plan to divest substantially all of the AIS segment and classified the AIS business as held for sale in the accompanying interim consolidated balance sheets as of August 31, 2022. As part of recognizing the business as held for sale in accordance with GAAP, the Company was required to measure AIS at the lower of its carrying amount or fair value less cost to sell. As a result of this analysis, during the second quarter of fiscal 2023, the Company recognized an estimated non-cash, pre-tax loss on disposal of $114.9 million. The loss was determined by comparing the fair value of the consideration received for the sale of a 60% interest in the AIS JV and the fair value of the Company’s retained 40% investment in the AIS JV with the net assets of the AIS JV immediately prior to the transaction. The fair value of the Company’s retained investment in the AIS JV was determined in a manner consistent with the transaction price received for the sale of the 60% interest in the AIS JV. During the three months ended November 30, 2022, the Company completed the sale of the AIS segment, and recorded an additional pre-tax loss of $45.0 million, which is included in "Loss on disposal of discontinued operations" in the consolidated statements of operations. The additional loss includes $27.8 million from the derecognition of the cumulative translation adjustment related to its investment in foreign entities within the AIS segment, as well as an adjustment of $17.2 million for the change in net assets for the period between August 31, 2022, when the estimated loss was recorded, and September 30, 2022, when the transaction closed. On September 30, 2022, the AIS JV transaction closed; as a result, the joint venture was deconsolidated and the Company retained a 40% interest in the joint venture, which is now accounted for under the equity method of accounting. The proceeds from the sale consisted of approximately $108.0 million, as well as $120.0 million that was funded by committed debt financing taken on by the AIS JV immediately prior to the closing of the sale. The debt financing of the AIS JV did not impact the Company's existing credit facility. The Company used the cash received from the AIS JV to repay a portion of the Term Loan B, the Revolving Credit Facility and for general corporate purposes. See Note 9. The divestiture of the AZZ Infrastructure Solutions segment represents an intentional strategic shift in our operations and will allow the Company to become a focused provider of coating and galvanizing solutions for critical applications. As a result, the results of the AIS segment were classified as discontinued operations in our condensed statements of operations and excluded from both continuing operations and segment results for all periods presented. We have separately reported the assets and liabilities of the discontinued operations in the consolidated balance sheets. The assets and liabilities have been reflected as discontinued operations in the consolidated balance sheets as of November 30, 2022 and February 28, 2022, and consist of the following (in thousands):
| November 30, 2022 |  | February 28, 2022
Current assets of discontinued operations: |  |  |
Cash and cash equivalents | $ | — |  |  | $ | 3,000 |
Accounts receivable | — |  |  | 81,911 |
Inventories |  |  |
Raw materials | — |  |  | 36,581 |
Work-in-process | — |  |  | 6,445 |
Finished goods | — |  |  | 77 |
Contract assets | — |  |  | 71,762 |
Prepaid expenses and other | — |  |  | 1,888 |
Total current assets of discontinued operations | — |  |  | 201,664 |
Long-term assets of discontinued operations: |  |  |
Property, plant and equipment | — |  |  | 37,490 |
Right-of-use asset | — |  |  | 29,332 |
Goodwill | — |  |  | 195,222 |
Intangibles and other assets, net | — |  |  | 42,442 |
Deferred tax asset | — |  |  | 1,726 |
Total non-current assets of discontinued operations | — |  |  | 306,212 |
Total assets of discontinued operations | $ | — |  |  | $ | 507,876 |
Current liabilities of discontinued operations: |  |  |
Accounts payable | $ | — |  |  | $ | 19,146 |
Income tax payable | — |  |  | (264) |
Accrued salaries and wages | — |  |  | 11,301 |
Other accrued liabilities | — |  |  | 11,219 |
Customer deposits | — |  |  | 387 |
Contract liabilities | — |  |  | 42,465 |
Lease liability, short-term | — |  |  | 4,029 |
Total current liabilities of discontinued operations | — |  |  | 88,283 |
Long-term liabilities of discontinued operations: |  |  |
Lease liability, long-term | — |  |  | 24,207 |
Total long-term liabilities of discontinued operations | — |  |  | 24,207 |
Total liabilities of discontinued operations | $ | — |  |  | $ | 112,490 |
The results of operations from discontinued operations for the three and nine months ended November 30, 2022 and 2021, have been reflected as discontinued operations in the consolidated statements of operations and consist of the following (in thousands):
| Three Months Ended November 30, |  | Nine Months Ended November 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Sales | $ | 42,300 |  |  | $ | 96,654 |  |  | $ | 256,224 |  |  | $ | 282,278 |
Cost of sales | 35,020 |  |  | 77,263 |  |  | 202,707 |  |  | 222,432 |
Gross margin | 7,280 |  |  | 19,391 |  |  | 53,517 |  |  | 59,846 |
Selling, general and administrative | 4,074 |  |  | 10,589 |  |  | 26,186 |  |  | 35,192 |
Loss on disposal of discontinued operations | 45,010 |  |  | — |  |  | 159,910 |  |  | — |
Operating income (loss) from discontinued operations | (41,804) |  |  | 8,802 |  |  | (132,579) |  |  | 24,654 |
Interest expense | 2 |  |  | 2 |  | 8 |  | 63
Other (income) expense, net | 2,002 |  |  | 1,504 |  |  | 6,270 |  |  | 1,468 |
Income (loss) from discontinued operations before income tax | (43,808) |  |  | 7,296 |  |  | (138,857) |  |  | 23,123 |
Income tax (benefit) expense | (4,827) |  |  | (682) |  |  | (25,910) |  |  | (289) |
Net income (loss) from discontinued operations | $ | (38,981) |  |  | $ | 7,978 |  |  | $ | (112,947) |  |  | $ | 23,412 |
Earnings per common share from discontinued operations: |  |  |  |  |  |  |
Basic earnings (loss) per share | $ | (1.57) |  |  | $ | 0.32 |  |  | $ | (4.55) |  |  | $ | 0.94 |
Diluted earnings (loss) per share | $ | (1.56) |  |  | $ | 0.32 |  |  | $ | (4.52) |  |  | $ | 0.93 |
We have included the net cash provided by discontinued operations in the consolidated statements of cash flows. The depreciation, amortization, capital expenditures, and significant operating and investing non-cash items of the discontinued operation for the nine months ended November 30, 2022 and 2021, consists of the following (in thousands):
| Nine Months Ended November 30,
| 2022 |  | 2021
Amortization and depreciation | $ | 7,279 |  |  | $ | 5,189 |
Purchase of property, plant and equipment | $ | 4,831 |  |  | $ | 3,373 |
Non-cash loss on disposal of discontinued operations | $ | 159,910 |  |  | $ | — |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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