AZZ 10-K & 10-Q changes, risk factors and insider trading

The occurrence of catastrophic eventsevents, ranging fromincluding acts of war andwar, terrorism, or geopolitical conflict; severe weather events and other natural conditions such as earthquakes, tsunamis, hurricanes and other severe weather conditions,conditions; or the outbreaks of epidemic, pandemicpandemic, or contagious diseasesdiseases, could potentiallydisrupt causeeconomic futureactivity disruptionand inadversely affect our business. AtWhile thiswe time,operate exclusively in the United States and Canada and do not ship products to foreign locations, ongoing armed conflictsconflicts, including those in Ukraine, IsraelIran, Israel, and the broader Middle EastEast, havecould notindirectly materially impactedimpact our operations.operations However,through anydisruptions disruptionexperienced ofby our customers or supplierssuppliers, andincluding their respective contract manufacturersmanufacturers, fromas thewell ongoingas conflictsthrough broader macroeconomic effects such as volatility in energy and commodity markets, inflationary pressures, or newreduced conflictscustomer could likely impact our future sales and operating results. In addition, the spread of contagious diseases could adversely affect the economies and financial markets of many countries, and result in an economic downturn that could affect the demand for our manufactured solutions. These situations are outside of the Company’s control and any of these events could have a material adverse effect on our business, financial condition, results of operations, or cash flows.demand.

We seek to maintain our operating margins by increasing the price of our manufactured solutions in response to increased costs, but we may not be successful in passing these increased costs of operation through to our customers. Even if successful, there is no guarantee the increased price would not negatively affect the volume of future orders. While we are exposed to inflationary pressures for zinc and energy, we evaluate market conditions and follow a general practice of locking in the fixed premiums associated with zinc on annual contracts unless market conditions dictate otherwise, and we enter into energy contracts for gasnatural and electricitygas, normally for durations of six to twelve months to reduce risks associated with large fluctuations in these commodities.

A failure in our operational information systems, or the occurrence of cyber incidents or cyber securitycybersecurity attacks at any of our facilities or those of our third-party suppliers and service providers, may adversely affect our financial results. Such incidents or cyber security attacks may also result in faulty business decisions, operational inefficiencies, damage to our reputation or our employee and business relationships, and/or subject us to costs, fines, or lawsuits.

•hire and retain employees:; and

The Company’sCompany's debt instruments, consisting of a term loan andloan, a revolving credit facility, and a receivables securitization facility, contain covenants which restrict or prohibit certain actions ("negative covenants"). These restrictions include, but are not limited to, the Company's ability to incur debt, restrictions or limitations on certain liens, capital spending limits, the ability to engage in certain merger, acquisition, or divestiture actions, or to increase dividends beyond a specific level. The Company’sCompany's debt instruments also contain covenants requiring the Company to, among other things, maintain specified financial ratios ("affirmative covenants").ratios. Failure to comply with these negative covenants and affirmative covenants could result in an event of default that, if not cured or waived, could restrict the Company’sCompany's liquidity and have a material adverse effect on the Company’sCompany's business or prospects. If the Company does not have enough cash to service its debt or fund other liquidity needs, the Company may be required to take actions such as requesting a waiver from lenders, reducing or delaying capital expenditures, selling assets, restructuring or refinancing all or part of the existing debt, or seeking additional equity capital. The Company cannot assure that any of these remedies can be effected on commercially reasonable terms or at all.

Our level of indebtedness could adversely affect us, includingus by decreasing our business flexibility. Our Creditcredit Agreementagreement contains a number of restrictive covenants that impose significant operating and financial restrictions on us. These covenants may limit our ability to optimally operate our business. In addition, our Creditcredit Agreementagreement requires that we meet certain financial tests, includingspecifically, a leverage ratio test. Our increased indebtedness and these restrictive covenants could adversely affect our ability to:

The covenant restrictions related to our indebtedness could impact our ability to expand our business, which could have a material adverse effect on our business, financial condition and results of operations. As a result of these restrictions, we could be limited as to how we conduct our business and we may be unable to raise additional debt or equity financing to compete effectively or take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot provide assurance that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants. Our failure to comply with the restrictive covenants described above and/or the terms of any future indebtedness from time to time could result in an event of default which, if not cured or waived, could result in our being required to repay these borrowings before their due date and the termination of future funding commitments by our lenders. Historically, we have successfully refinanced our long-term debt to lower interest rates; however, if we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings in the future, our results of operations and financial condition could be adversely affected. The Creditcredit Agreementagreement contains cross-default provisions that could result in the acceleration of all of our indebtedness. A breach of the covenants under our Creditcredit Agreementagreement could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness to which cross-acceleration or cross-default provision applies. In addition, an event of default under the Creditcredit Agreementagreement would permit the lenders under the Creditcredit Agreementagreement to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay amounts due and payable under the Creditcredit Agreement,agreement, those lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders accelerate the repayment of our borrowings, we and our guarantors may not have sufficient assets to repay that indebtedness. Additionally, we may not be able to borrow money from other lenders to enable us to refinance our indebtedness. Increased levels of indebtedness could also create competitive disadvantages for us relative to other companies with lower debt levels.

Our On September 30, 2022, we completed a disposition of 60% of the equity of AIS Investment Holdings LLC, a Delaware limited liability company (the "AVAIL JV"), which consists of our former AZZ Infrastructure Solutions Segment (excluding AZZ Crowley Tubing) (the "AIS Business"), with Fernweh AIS Acquisition LP, a Delaware limited partnership. Pursuant to the terms of the agreement, AZZ no longer has a controlling interest in the AVAIL JV, and therefore the AVAIL JV is operating and will continue to operate independently. As the non-controlling interest holder in the AVAIL JV, our influence on all aspects of the AIS Business will continue to diminish. Accordingly, we might not be able to prevent the AVAIL JV from taking actions adverse to our interests in the AVAIL JV. We cannot exercise sole decision-making authority regarding the AIS Business, including, but not limited to, hiring and retaining employees and executive officers, management of and payments into its multiemployermulti-employer pension plans, governance issues, entering into new markets or exiting existing markets, making certain acquisitions or dispositions, and other material strategic transactions. Each of these cases could create the potential risk of creating operational issues and/or impasses on decisions at the AVAIL JV-level that are not in our best interest. Additionally, investments in joint ventures or partnerships, such as the AVAIL JV, may, under certain circumstances, involve risks not present when a third-party is not involved, including the possibility that joint venture partners may become bankrupt, fail to fund their share of required capital contributions to various parties, or otherwise struggle operationally or financially. Disputes between AZZ Inc, and our joint venture partner could result in litigation or arbitration that would increase our expense and distract our executive officers and directors from focusing their time and efforts on AZZ Inc.'s business and could result in subjecting the AIS Business to additional risk.

We have a defined benefit pension plan which is frozen with respect to benefits and the addition of participants. The funded status and our ability to satisfy the future obligations of the plan is affected by, among other things, changes in interest rates, returns from plan asset investments, and actuarial assumptions including the life expectancies of the plan’splan's participants. As of February 28, 2025,2026, the plan was underfunded, and we have a net pension benefit obligation liability of $24.6$15.1 million on our consolidated balance sheet. Our ability to adequately fund or meet our future obligations with respect to the plan could have a material adverse effect on our business, results of operations, financial condition, or cash flows.

As of February 28, 2025,2026, we have $900.3$515.0 million of gross debt outstanding that bears interest at variable rates that reset periodically and are generally based on the Secured Overnight Financing Rate ("SOFR") or Base Rate, as defined in the Creditcredit Agreement.agreement. We utilize interest rate swaps to mitigate the interest rate risk, and we have hedged approximately one-half of our gross debt outstanding with an interest rate swap that expires on SeptemberJune 30, 2025.2027. Approximately one-half of our gross debt outstanding is unhedged. If interest rates increase, so will our interest costs, which could adversely affect cash flow and the ability to pay principal and interest on our debt and the ability to make distributions to shareholders. In addition, rising interest rates could limit our ability to refinance existing debt when it matures. An increase in interest rates could also affect our ability to make new investments on favorable terms or at all.

We are a provider of hot-dip galvanizing and coil coating solutions to a broad range of end-markets in North America. We operate three distinct business segments, the AZZ Metal Coatings segment, the AZZ Precoat Metals segment, and the AZZ Infrastructure Solutions segment, which consists of the Company's 40% investment in athe AVAIL JV joint venture, AIS Investment Holdings LLC (the "AVAIL JV").venture. Our discussion and analysis of financial condition and results of operations is presented for each of our segments, along with corporate costs and other costs not specifically identifiable to a segment. For a reconciliation of segment operating income (loss) from continuing operations to consolidated operating income, see "Item 8. Financial Statements and Supplementary Data—Note 18". References herein to fiscal years are to the twelve-month periods that end in February of the relevant calendar year. For example, the twelve-month period ended February 28, 20252026 is referred to as "fiscal 2025,2026," "fiscal year 20252026", "current year" or "current period", and the twelve-month period ended February 29,28, 20242025 is referred to as "fiscal 2024,2025," "fiscal year 2024,2025," "prior year" or "prior year period."

Our results for the year ended February 28, 20252026 were favorably impacted primarily by the recognition of equity in earnings for the AVAIL JV, which included the gain from AVAIL's sale of the Electrical Products Group and the Welding Services Business, and by the growth in demand for our manufactured solutions, primarilysolutions in the electrical, construction industry.and industrial end markets.

The demandequity forin ourearnings manufacturedfrom solutionsthe AVAIL JV was the primary contributor to net income available to common shareholders of $52.4$317.3 million for the year ended February 28, 2025.2026. Our operating results for fiscal 2025,2026, including operating results by segment, are described in the summary on the following page, and detailed descriptions can be found below under “Results of Operations.”

Our operations generated $249.9$525.4 million of cash in fiscal 2025.2026. The components of our liquidity and descriptions of our cash flows, capital investments, and other utilities, construction and matters impacting our liquidity and capital resources can be found below under “"Liquidity and Capital Resources.”"

•Sales prices in our AZZ PrecoatMetal MetalsCoatings segment are expected to remain consistent with current levels,levels. Fluctuations in product mix, along with expectedcompetitive seasonalmarket fluctuations in mix due to an increase in construction business, whichpressures, may impact the average selling price.

•Customer inventoriesVolumes for our AZZ Metal Coatings segment remain consistent,at normal seasonal levels, which should support the continued demand for our metal coatings solutions.

•Customer inventories for our AZZ Precoat Metals segment remain at historicalnormal seasonal levels, which should support the continued demand for our coil coating solutions.

NetIncome before income (loss)tax fromfor continuingour operating segments and corporate operations by segment for fiscal 20252026 and 20242025 werewas as follows (in thousands):

For the fiscal year ended February 28, 2025,2026, we recorded sales of $1,577.7$1.65 million,billion, compared to prior year’syear's sales of $1,537.6$1.58 million.billion. Of total sales for fiscal 2025,2026, 42.2%46.0% were generated from the AZZ Metal Coatings segment and 57.8%54.0% of sales were generated from the AZZ Precoat Metals segment. Net income from continuing operations for fiscal 20252026 was $128.8$317.3 million, compared to $101.6$128.8 million for fiscal 2024.2025. Net income from continuing operations as a percentage of sales was 8.2%19.2% for fiscal 20252026 as compared to 6.6%8.2% for fiscal 2024.2025. Diluted earnings per common share from continuing operations decreasedincreased by 48.3%,486.6%, to $10.50 per share for fiscal 2026, compared to $1.79 per share for fiscal 2025, compared to $3.46 per share for fiscal 2024.2025. The decreaseincrease was primarily due to equity in earnings from the AVAIL JV and the redemption of the Series A Preferred Stock.Stock in the prior year. See "Liquidity and Capital Resources—AVAIL JV and —Series A Convertible Preferred Stock."

Sales for the AZZ Metal Coatings segment increased $8.9$93.6 million, or 1.4%,14.1%, to $665.1$758.7 million, from the prior year’syear's sales of $656.2$665.1 million. The increase in sales was primarily due to a$110.4 million resulting from higher volume of steel processedprocessed, whichmainly contributeddue $17.8to million,increases in the construction, electrical, industrial, and transportation end markets, and an increase in other sales of $1.8 million. The increase was partially offset by a decrease in average selling price,price whichof decreased$18.6 salesmillion bydue $4.6to million.product In addition, other sales decreased by $4.3 million.mix.

Sales for the AZZ Precoat Metals segment increaseddecreased $31.2$21.3 million, or 3.5%,2.3%, to $912.6$891.4 million, from the prior year's sales of $881.4$912.6 million. The increasedecrease in sales was primarily due to a lower volume of coil coated during fiscal 2026, mainly due to decreases in construction and transportation end markets. The decrease was partially offset by an increase in volumeaverage ofselling metalprice coateddue duringto fiscalvendor 2025price comparedincreases that were passed through to the prior year, partially offset by a slight decrease in selling price, due to product mix.customer.

Operating income for the AZZ Metal Coatings segment increased $13.7$25.2 million, or 8.3%,14.1%, for fiscal 2025,2026, to $178.5$203.6 million, as compared to $164.7$178.5 million for the prior year. The increase is primarily due to net increase in sales as described above, loweroffset by higher cost of sales and lower selling, general and administrative expenses. Cost of sales decreasedincreased $0.9$66.8 million, primarily due to ahigher decreasesales volumes and an increase in zinczinc, costs, offset by higher laborlabor, and overhead costs. The decreaseincrease in selling, general and administrative expense was primarily due to ahigher legal accrual andemployee related expenses of $5.5 million recognized in the prior year.costs.

Operating income for the AZZ Precoat Metals segment increaseddecreased $8.3$9.7 million, or 5.9%,6.6%, for fiscal 2025,2026, to $147.8$138.1 million, as compared to $139.6$147.8 million for the prior year. The increasedecrease is primarily due to the increasedecrease in sales as described above, partially offset by ana increasedecrease in cost of sales, primarily driven by higherlower cost of labor and materials (mainly due to higherlower volume). Selling, general and administrative expense increaseddecreased due to higherlower employee related costs,costs travel,and other indirect costs.

Operating loss for the AZZ Infrastructure solutions segment increasedwas $0.5$0.1 million, or 7.9%, for fiscal 2025, to $(6.7) million, asmillion compared to $(6.2)an operating loss of $6.7 million for the prior year.year, an improvement of $6.6 million for fiscal 2026. The increaseoperating isloss was lower due to the prior year recognition of $1.2 million in litigation fees and the write-off of $5.2 million for a disputed receivable that was retained following the sale of the AIS business, following an unfavorable resolution of the litigation matter.business. For additional detail, see "Item 8. Financial Statements and Supplementary Data—Note 22."

Interest expense for fiscal 20252026 decreased $25.8$25.6 million, to $81.3$55.7 million, as compared to $107.1$81.3 million in fiscal 2024.2025. The decrease is primarily attributable to a decrease of $110.3$235.9 million in our weighted average debt outstanding and a decrease in the weighted average interest rate of 121160 basis points. The decrease is alsooffset dueby to higherlower capitalized interest of $4.4$6.1 million in the current year period associated with the new coil coating facility under construction in Washington, Missouri.Missouri, which became operational during the first quarter of fiscal 2026. See "Liquidity and Capital Resources—Greenfield Aluminum Coil Coating Facility" below for more information.

Equity in earnings of unconsolidated subsidiaries for the current period increased $0.8$193.6 million, to $16.2$209.7 million, compared to $15.4$16.2 million in the prior year period. The increase is due to highera earningsnet gain from the sale of the Electrical Products Group and WSI, partially offset by an impairment loss recognized on the AVAIL JV in the second quarter of fiscal 2026, a prior period adjustment for accounting errors within the Brazil operations of the AVAIL JV, primarilyand inlower theirearnings electricalfollowing business.the sale of the Electrical Products Group and WSI. See "Item 8. Financial StatementsLiquidity and SupplementaryCapital DataResources—NoteAVAIL 19JV" below for more information about the AVAIL JV.

Other income, net was $1.6 million for fiscal 2026, compared to other expense, net wasof $0.6 million for fiscal 2025, compared to other income, net of $0.2 million for fiscal 2024.2025. The increase in expenseincome is primarily due to foreign currency lossesgains primarily attributed to our operations in Canada, partiallyand offset byincreased interest income.income in the current year.

The provisioneffective fortax income taxes from continuing operationsrate was flat at 24.5% for fiscal 20252026 compared to 21.9% for fiscal 2024.2025. TheIn increasethe incurrent year, the effective tax rate iswas primarilynegatively attributableimpacted toby favorablean adjustmentsincrease forin fiscal 2024 related to uncertainstate tax positions,expense from our investment in the AVAIL JV, partially offset by higher R&D tax deductionscredits forrelated stockto compensationthe construction of the new aluminum coil coating facility in fiscalWashington, 2025.Missouri. TheIn increasethe isprior alsoyear, attributablethe toeffective tax rate was negatively impacted by non-deductible items such as compensation limited by IRC Sec. 162(m) and, meals &and entertainment subject to the 50% limitation under IRC Sec. 274(n). The increase also relates toand higher state tax expense, net of federal benefit, and lower R&D tax credits following the divestiture of the AIS business.benefit.

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 generally include cashworking dividendcapital payments,needs, capital improvements, debtquarterly repaymentcash dividends, acquisitions and acquisitions.other general corporate purposes. Based on our current financial condition and current operations, 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 nextforeseeable twelve months and beyond.future.

As of February 28, 2025,2026, our total liquidity of $356.1$358.8 million, consisted of $358.1 million consisted of available capacity onunder our Revolving Credit Facility ofand $354.6Receivables millionSecuritization plusFacility, and cash and cash equivalents of $1.5$0.7 million.

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," "could," "should," "expects," "plans," "will," "might," "would," "projects," "currently," "intends," "outlook," "forecasts," "targets," "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. Forward-looking statements speak only as of the date they are made and are subject to risks that could cause them to differ materially from actual results. Certain factors could affect the outcome of the matters described herein. This Quarterly Report may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand for our manufactured solutions, including demand by the construction; markets,infrastructure; thetransportation; industrialHVAC markets,& appliance; container; and the metal coatings end markets. We could also experience additional increases, including increases due to inflation, in labor costs, components and raw materials including zinc and natural gas, which are used in our hot-dip galvanizing process,process and paint used in our coil coating process; customersupply requestedchain vendor delays of our manufactured solutions; delays in additional acquisition opportunities; an increase in our debt leverage and/or interest rates on our debt, of which a significant portion is tied to variable interest rates; availability of experienced management and employees to implement AZZ’sAZZ's growth strategy; a downturn in market conditions in any industry relating to the manufactured solutions that we provide; economic volatility, including a prolonged economic downturn or macroeconomic conditions such as inflation or changes in the political stability in the United States andor other foreign markets in which we operateCanada; tariffs, acts of war or terrorism inside the United States or abroad; and other changes in economic and financial conditions. AZZ has provided additional information regarding risks associated with the business, including in Part I, Item 1A. Risk Factors, in AZZ's Annual Report on Form 10-K for the fiscal year ended February 28, 2025,2026, 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.

Our results for the ninethree months ended NovemberMay 30,31, 2025 (the "current nine-month period")2026 were favorably impacted primarily by the recognition of equity in earnings for the AVAIL JV, which included the gain from AVAIL's sale of the Electrical Products Group business to nVent Electric plc., and by the growth in demand for our manufactured solutions in the utilities,construction, constructionindustrial and consumercontainer industries.end markets.

The equitydemand infor earningsour frommanufacturing the AVAIL JVsolutions was the primary contributor to net income of $301.3$52.0 million for the current nine-monththree-month period. Our operating results for the current nine-monththree-month period, including operating results by segment, are described in the summary on the following page, and detailed descriptions can be found below under "Results of Operations."

Our operations generated $452.9$37.1 million of cash for the current nine-monththree-month period. The components of our liquidity and descriptions of our cash flows, capital investments, and other utilities, construction and matters impacting our liquidity and capital resources can be found below under "Liquidity and Capital Resources."

While it is difficult to predict future North American economic activity and its impact on the demand for our galvanizing and coil coating solutions, as well the impact that political or regulatory developments may have on us, we have noted several factors below that have impacted or may impact our results of operations during the fourthsecond quarter of fiscal 2026.2027.

•Sales prices in our AZZ Metal Coatings and AZZ Precoat Metals segment are expected to remainmodestly consistentincrease withfrom current levels.levels, supported by continued increases in input costs. Fluctuations in product mix, along with competitive market pressures, may impact selling price.

QUARTER ENDED NOVEMBERMAY 30,31, 20252026 COMPARED TO THE QUARTER ENDED NOVEMBERMAY 30,31, 20242025

Sales for the AZZ Metal Coatings segment increased $26.4$23.1 million, or 15.7%,12.3%, for the current quarter,quarter compared to the prior year quarter. The increase was primarily due to $30.0$22.2 million resulting from a higher volume of steel processedprocessed, mainly due to increases in the construction and industrial end markets, and an increase of $1.5 million in other sales of $2.1 million,sales, partially offset by a decrease in the average selling price of $5.7$0.6 millionmillion, due to product mix.

Sales for the AZZ Precoat Metals segment decreasedincreased $4.3$3.5 million, or 1.8%1.5% for the current quarter,quarter compared to the prior year quarter. The decreaseincrease iswas due to a lower volume of coil coated, partially offset by an increase in the average price dueof tocoils vendorcoated, priceas increaseswell thatas wererevenue passed throughrelated to the customer.ramp-up of the Washington, Missouri facility, partially offset by lower volume, mainly due to decreases in construction, infrastructure, HVAC and appliance end markets.

Operating income for the AZZ Metal Coatings segment increased $5.7$5.8 million, or 12.3%,11.5%, for the current quarter, compared to the prior year quarter. The increase was due to increased sales as described above, partially offset by an increase in cost of sales. The increase in cost of sales of $20.3$17.1 million was primarily due to a $6.6 million increase in variable costs, a $5.5$6.2 million increase in zinc cost, and a $3.9$3.6 million increase in labor costs and an increase in other overhead costs of $4.3$7.3 million. Selling, general and administrative expense increased $0.3$0.2 million.

Operating income for the AZZ Precoat Metals segment decreasedincreased $1.2$2.2 million, or 3.2%5.5% for the current quarter, compared to the prior year quarter. The decreaseincrease was primarily due to decreasedincreased sales as described above. In addition, cost of sales decreased by $2.4 million, primarily due to a decrease in material costs related to the decreased volume of coil coated,above, partially offset by an increase in cost of sales for the new plant in Washington, Missouri, which became operational during the first quarter of fiscal$1.4 2026.million, primarily due to higher materials cost.

Corporate selling, general and administrative expenses decreasedincreased $6.4$0.6 million, or 25.8%,2.9%, for the current quarter, compared to the prior year quarter. The decreaseincrease was primarily due to decreasesincreased inprofessional salariesfees and wages,personnel employeecosts, benefitspartially andoffset by a decrease in stock-based compensation, primarily due to retirementthe adoption of the Executive Retiree LTI Program and otherthe severanceacceleration costsof recognizedexpense for the related stock awards in the prior year.

Interest expense for the current quarter decreased $7.0$7.3 million, to $12.2$11.3 million, compared to $19.2$18.6 million for the prior year quarter. The decrease in interest expense was primarily attributable to a decrease of $364.2 million in the weighted average debt outstanding of $339.8 million and a decrease in the weighted average interest rate of 1.76%1.54% in the current quarter, compared to the prior year quarter. The decrease in interest expense is partially offset by lower capitalized interestinterest, primarily associated with the construction of the new plant in Washington, Missouri, for the current quarter, compared to the prior year quarter.

Equity in Earnings of Unconsolidated EntitiesSubsidiary

Equity in earnings of unconsolidated subsidiariessubsidiary for the current quarter decreased $8.6$173.0 million to a loss of $1.4$0.5 million, compared to income of $7.2$173.5 million in the prior year quarter. The decrease was due to AVAIL'srecognition lowerin incomethe prior year quarter of a gain for thea quarterdistribution followingin the saleexcess of theour Electricalinvestment Productsbalance Groupof business.$165.8 million. See "Item I. Financial Statements—Note 8" for more information about the AVAIL JV.

The provision for income taxes reflects an effective tax rate of 26.1%21.2% for the currentthree quarter,months ended May 31, 2026, compared to 26.5%24.3% for the priorthree yearmonths quarter.ended May 31, 2025. The decrease in the effective tax rate is driven by higher tax deductions for stock compensation, partially offset by an increasecompensation in non-deductiblethe researchcurrent expenses.year, coupled with higher tax expense in the prior year related to equity in earnings from the AVAIL JV.

As of NovemberMay 30,31, 2025,2026, our total liquidity of $337.1$360.5 million consisted of available capacity onunder our Revolving Credit Facility of $336.4$359.4 million and cash and cash equivalents of $0.6$1.1 million.