We are a lessee under various leases for facilities and equipment. As of August 31, 2026, we were the lessee for 164 operating leases and 173 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 August 31, 2026, do not reflect all of our short-term lease commitments.

In connection with the acquisition of Seattle Galvanizing on July 30, 2026, the Company entered into lease agreements for certain land and building assets used in the acquired operations. The agreements include purchase obligations that require the Company to acquire the underlying properties upon expiration of the lease term. Accordingly, the Company concluded that the arrangements contain residual value guarantees and meet the criteria for finance lease classification. As of August 31, 2026, the Company recorded finance lease right-of-use assets and corresponding lease liabilities of approximately $29.3 million related to these arrangements.

The following table outlines the classification of right-of-use ("ROU") assets and lease liabilities in the consolidated balance sheets as of August 31, 2026 and February 28, 2026 (in thousands):


		As of
		August 31, 2026		February 28, 2026
Assets	Balance Sheet Classification
Operating right-of-use assets	Right-of-use assets	$	45,378	$	46,261
Finance right-of-use assets	Right-of-use assets	$	44,939	$	13,303
Liabilities
Operating lease liabilities―short-term	Lease liability—short-term	$	5,938	$	5,413
Operating lease liabilities―long-term	Lease liability—long-term	$	40,327	$	41,489
Finance lease liabilities―short-term	Lease liability—short-term	$	4,119	$	3,266
Finance lease liabilities―long-term	Lease liability—long-term	$	41,531	$	10,480


	Three Months Ended August 31,				Six Months Ended August 31,
	2026		2025		2026		2025
Operating cash flows from operating leases included in lease liabilities	$	2,043	$	1,852	$	4,049	$	3,733
Lease liabilities obtained from new ROU assets—operating leases	$	714	$	1,954	2,090		1,970
Decrease in ROU assets related to lease terminations	$	(133)	$	(146)	(133)		(613)
Operating cash flows from finance leases included in lease liabilities	$	410	$	199	649		340
Financing cash flows from finance leases included in lease liabilities	$	947	$	604	1,819		1038
Lease liabilities obtained from new ROU assets—finance leases	$	31,434	$	2,497	33,826		6,624


	As of
	August 31, 2026		February 28, 2026
Weighted-average remaining lease term—operating leases	14.39 years		14.71 years
Weighted-average discount rate—operating leases	6.11	%	6.10	%
Weighted-average remaining lease term—finance leases	3.24 years		4.01 years
Weighted-average discount rate—finance leases	6.47	%	6.59	%

The following table outlines our lease expense in the consolidated statements of operations for the three and six months ended August 31, 2026 and 2025 (in thousands):


	Three Months Ended August 31,				Six Months Ended August 31,
	2026		2025		2026		2025
Operating lease expense:
Cost of sales	$	1,935	$	1,495	$	3,821	$	3,325
Selling, general and administrative	468		575		968		1,085
Total operating lease expense	2,403		2,070		4,789		4,410
Finance lease expense:
Cost of sales	1,139		684		2,091		1,171
Interest expense	410		199		649		340
Total finance lease expense	1,549		883		2,740		1,511
Variable lease expense:
Cost of sales	300		215		558		464

Total variable lease expense	300		215		558		464
Short-term lease expense:
Cost of sales	1,889		1,869		3,795		3,671
Selling, general and administrative	35		—		70		4
Total short-term lease expense	1,924		1,869		3,865		3,675
Total lease expense	$	6,176	$	5,037	$	11,952	$	10,060


Fiscal year:	Operating Leases		Finance Leases		Total
2027	$	4,503	$	3,325	$	7,828
2028	7,763		6,596		14,359
2029	6,942		6,409		13,351
2030	4,841		34,735		39,576
2031	3,916		1,792		5,708
2032	3,139		226		3,365
Thereafter	41,623		38		41,661
Total lease payments	72,727		53,121		125,848
Less imputed interest	(26,462)		(7,471)		(33,933)
Total	$	46,265	$	45,650	$	91,915

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." Sublease income for the three and six months ended August 31, 2026 and 2025 was as follows (in thousands):