AZZ INC (Form: 10-Q, Received: 09/28/2004 16:09:34)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended: August 31, 2004

¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 1-12777

AZZ incorporated

(Exact name of registrant as specified in its charter)


TEXAS		75-0948250
(State or other jurisdiction of incorporation of organization)		(I.R.S. Employer Identification No.)

Suite 200, 1300 South University Drive, Fort Worth, Texas		76107
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (817) 810-0095

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 x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Common Stock, $1.00 Par Value

Outstanding at September 16, 2004

5,444,504

Class

Number of Shares

AZZ incorporated

INDEX


			Page No.
PART I.		Financial Information

	Item 1.	Financial Statements	3
		Consolidated Condensed Balance Sheets at August 31, 2004 and February 28, 2004
		Consolidated Condensed Statements of Income for the Periods Ended August 31, 2004 and August 31, 2003	4
		Consolidated Condensed Statements of Cash Flow for the Periods Ended August 31, 2004 and August 31, 2003	5
		Notes to Consolidated Condensed Financial Statements	6-9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9-15
	Item 3.	Quantitative and Qualitative Disclosure of Market Risk	15
	Item 4.	Controls and Procedures	15

PART II.		Other Information

	Item 1.	Legal Proceedings	16
	Item 2.	Changes in Securities	16
	Item 3.	Defaults Upon Senior Securities	16
	Item 4.	Submissions of Matters to a Vote of Security Holders	16
	Item 5.	Other Information	16
	Item 6.	Exhibits and Reports on Form 8-K	16

SIGNATURES			17

EXHIBIT INDEX			18

PART I. FINANCIAL INFORMATION

Item I.

Financial Statements

AZZ incorprated

CONSOLIDATED CONDENSED BALANCE SHEET


	08/31/04			02/29/04
	(UNAUDITED)
ASSETS

CURRENT ASSETS
CASH AND CASH EQUIVALENTS	$	1,257,353		$	1,444,982
ACCOUNTS RECEIVABLE (NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS)		21,998,505			21,897,263
INVENTORIES
RAW MATERIAL		9,118,497			7,854,625
WORK-IN-PROCESS		5,386,871			5,732,162
FINISHED GOODS		2,630,275			4,092,129
COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS		1,911,262			236,368
DEFERRED INCOME TAXES		1,648,050			1,606,388
PREPAID EXPENSES AND OTHER		621,514			848,961

TOTAL CURRENT ASSETS		44,572,327			43,712,878

PROPERTY, PLANT AND EQUIPMENT, NET		34,932,276			34,201,272
GOODWILL, NET OF ACCUMULATED AMORTIZATION		40,962,104			40,962,104
OTHER ASSETS, NET OF ACCUMULATED AMORTIZATION		1,387,843			1,150,241

	$	121,854,550		$	120,026,495

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
LONG-TERM DEBT DUE WITHIN ONE YEAR	$	5,500,000		$	5,500,000
ACCOUNTS PAYABLE		11,588,893			9,985,612
BILLINGS IN EXCESS OF COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS		28,429			32,395
ACCRUED LIABILITIES AND INCOME TAXES		7,757,044			7,985,796

TOTAL CURRENT LIABILITIES		24,874,366			23,503,803

LONG-TERM DEBT DUE AFTER ONE YEAR		23,125,000			25,375,000
DEFERRED INCOME TAXES		1,939,580			1,850,133

SHAREHOLDERS’ EQUITY:
COMMON STOCK, $1 PAR VALUE
SHARES AUTHORIZED-25,000,000
SHARES ISSUED 6,304,580		6,304,580			6,304,580
CAPITAL IN EXCESS OF PAR VALUE		13,998,463			13,956,016
CUMULATIVE OTHER COMPRENSIVE INCOME (LOSS)		(154,709	)		(324,306	)
RETAINED EARNINGS		59,771,516			57,618,403
LESS COMMON STOCK HELD IN TREASURY, AT COST ( 860,581 SHARES AT AUGUST 31, 2004 AND 887,744 SHARES AT FEBRUARY 29, 2004)		(8,004,246	)		(8,257,134	)

TOTAL SHAREHOLDERS’ EQUITY		71,915,604			69,297,559

	$	121,854,550		$	120,026,495

See Accompanying Notes to Consolidated Condensed Financial Statements

AZZ incorporated

Consolidated Condensed Income Statement

(Unaudited)


	THREE MONTHS ENDED					SIX MONTHS ENDED
	08/31/04		08/31/03			08/31/04		08/31/03
NET SALES	$	36,510,459	$	34,010,636		$	76,203,956	$	70,358,326

COSTS AND EXPENSES
COST OF SALES		30,001,809		27,739,569			62,498,144		57,758,721
SELLING, GENERAL & ADMINISTRATIVE		4,629,767		4,173,832			9,379,525		8,590,426
INTEREST EXPENSE		428,057		579,926			870,174		1,253,085
OTHER (INCOME) EXPENSE, NET		10,614		(89,896	)		38,532		(275,201	)

		35,070,247		32,403,431			72,786,375		67,327,031

INCOME BEFORE INCOME TAXES		1,440,212		1,607,205			3,417,581		3,031,295
INCOME TAX EXPENSE		532,400		611,100			1,264,468		1,152,200

NET INCOME	$	907,812	$	996,105		$	2,153,113	$	1,879,095

INCOME PER SHARE
BASIC	$	0.17	$	0.19		$	0.40	$	0.35
DILUTED	$	0.16	$	0.19		$	0.39	$	0.35

See Accompanying Notes to Consolidated Condensed Financial Statements

PART I. FINANCIAL INFORMATION

Item I.

Financial Statements

AZZ incorprated

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW


	SIX MONTHS ENDING
	8/31/04			8/31/03
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME	$	2,153,113		$	1,879,095

ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
PROVISION FOR DOUBTFUL ACCOUNTS		64,045			151,300
AMORTIZATION AND DEPRECIATION		2,813,366			2,976,327
DEFERRED INCOME TAX BENEFIT		(56,162	)
NET GAIN(LOSS) ON SALE OF PROPERTY, PLANT & EQUIPMENT		16,248			(296,205	)
NON-CASH INTEREST EXPENSE		119,541			159,594
NON-CASH COMPENSATION EXPENSE		125,000			38,400

EFFECTS OF CHANGES IN ASSETS & LIABILITIES:

ACCOUNTS RECEIVABLE		(165,287	)		7,483,564
INVENTORIES		543,273			3,029,362
PREPAID EXPENSES AND OTHER		227,447			199,110
OTHER ASSETS		(424,862	)		(236,157	)
NET CHANGE IN BILLINGS RELATED TO COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS		(1,678,861	)		1,530,996
ACCOUNTS PAYABLE		1,603,281			(1,588,472	)
OTHER ACCRUED LIABILITIES AND INCOME TAXES		44,792			(3,181,038	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		5,384,934			12,145,876

CASH FLOWS USED FOR INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF PROPERTY, PLANT, AND EQUIPMENT		2,000			715,728
PURCHASE OF PROPERTY, PLANT AND EQUIPMENT		(3,494,898	)		(1,053,663	)

NET CASH USED IN INVESTING ACTIVITIES		(3,492,898	)		(337,935	)

CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM EXERCISE OF STOCK OPTIONS		170,335			662,890
PROCEEDS FROM REVOLVING LOAN		500,000			—
PROCEEDS FROM LONG-TERM DEBT		—			—
PAYMENTS ON LONG TERM DEBT		(2,750,000	)		(12,375,000	)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(2,079,665	)		(11,712,110	)

NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS		(187,629	)		95,831

CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD		1,444,982			1,983,829

CASH & CASH EQUIVALENTS AT END OF PERIOD	$	1,257,353		$	2,079,660

See Accompanying Notes to Consolidated Condensed Financial Statements

AZZ incorporated

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

These interim unaudited consolidated financial statements were prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the SEC rules and regulations referred to above. Accordingly, these financial statements should be read in conjunction with the audited financial statements and related notes for the fiscal year ended February 29, 2004 included in the Form 10-K covering such period.

In the opinion of Management of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of August 31, 2004, and the results of its operations for the three-month and six-month periods ended August 31, 2004 and 2003, and cash flows for the six-month periods ended August 31, 2004 and 2003.

3.	Earnings per share is based on the weighted average number of shares outstanding during each period, adjusted for the dilutive effect of stock options.

The following table sets forth the computation of basic and diluted earnings per share:


	Three months ended August 31,				Six months ended August 31,
	2004		2003		2004		2003
	(Unaudited)
	(In thousands except share and per share data)
Numerator:
Net income for basic and diluted earnings per common share	$	908	$	996	$	2,153	$	1,879

Denominator:
Denominator for basic earnings per common share –weighted average shares		5,438,853		5,320,680		5,431,185		5,304,938
Effect of dilutive securities:
Employee and Director stock options		73,967		44,932		77,880		31,225

Denominator for diluted earnings per common share		5,512,820		5,365,612		5,509,065		5,336,163

Basic earnings per common share	$	.17	$	.19	$	.40	$	.35

Diluted earnings per common share	$	.16	$	.19	$	.39	$	.35

Total comprehensive income for the quarter ended August 31, 2004 was $963,272 consisting of net income of $907,812 and net changes in accumulated other comprehensive income of $55,460. For the six-month period ended August 31, 2004, total comprehensive income was $2,322,710 consisting of net income of $2,153,113 and net changes in accumulated other comprehensive income of $169,597. Changes in other comprehensive income result from changes in the Company’s cash flow hedges.

Total comprehensive income for the quarter ended August 31, 2003 was $1,170,089 consisting of net income of $996,105 and net changes in accumulated other comprehensive income of $173,984. For the six-month period ended August 31, 2003, total comprehensive income was $2,073,688, consisting of net income of $1,879,095 and net changes in accumulated other comprehensive income of $194,593.

The Company grants stock options for a fixed number of shares to employees and directors with an exercise price equal to the fair value of the shares at the date of grant. The Company accounts for stock option grants using the intrinsic value method in accordance with the Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related interpretations. The following schedule reflects the impact on net income if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock Based Compensation , to stock based employee and director compensation for the three and six-month periods ended August 31, 2004 and 2003:


	Three Months Ended August 31,						Six Months Ended August 31,
	2004			2003			2004			2003
	(Unaudited)
	(In thousands except per share amounts)
Reported net income	$	908		$	996		$	2,153		$	1,879
Additional compensation expense per SFAS No.123		(77	)		(84	)		(154	)		(549	)

Pro forma net income for SFAS No.123	$	831		$	912		$	1,999		$	1,330

Reported earnings per common share:
Basic	$	.17		$	.19		$	.40		$	.35
Diluted	$	.16		$	.19		$	.39		$	.35

Additional compensation expense per SFAS No.123:
Basic	$	(.02	)	$	(.02	)	$	(.03	)	$	(.10	)
Diluted	$	(.01	)	$	(.02	)	$	(.03	)	$	(.10	)


Pro forma earnings per share:
Basic	$	.15		$	0.17		$	.37		$	0.25
Diluted	$	.15		$	0.17		$	.36		$	0.25

On April 7, 2004, the Company implemented Stock Appreciation Rights Plans for its key employees and directors. The purpose of the Plans are to enable the Company to attract and retain qualified key employees and directors by offering to them the opportunity to share in increases in the value of the Company to which they contribute. On April 7, 2004, the Company granted 83,120 rights under the 2004 Stock Appreciation Rights Plan. All rights which have not previously accelerated due to events such as death or disability will vest on the Company’s earnings release date for the fiscal year ended February 28, 2007. The value of each vested right will be paid in cash and such value, for rights vesting on the Company’s earnings release date for the fiscal year ended February 28, 2007, shall be equal to the excess, if any, (i) of the average of the closing prices of a share of Common Stock on the New York Stock Exchange for those days on which it trades during the ninety calendar days immediately following the public release of financial results for the period ended February 28, 2007, over (ii) the average of the closing prices of a share of Common Stock on the New York Stock Exchange for those days on which it trades during the ninety calendar days immediately following April 15, 2004, which was $15.45 per share. The excess in the average stock price will then be multiplied by the number of Stock Appreciation Rights granted to each participant to determine the cash payment. The value of rights vesting before the normal vesting date will be measured by reference to the price of the Common Stock during a period at or near the accelerated vesting date. Based on the closing common stock price as of August 31, 2004, the Company has not incurred or recognized any compensation expense related to the Stock Appreciation Rights Plans.

7.	The Company has two operating segments as defined on page 38 of its Form 10-K report for the year ended February 29, 2004. Information regarding operations and assets by segment is as follows:


	Three Months Ended August 31,					Six Months Ended August 31,
	2004		2003			2004		2003
	(Unaudited)
	($ In thousands)
Net Sales:
Electrical and Industrial Products	$	23,435	$	22,065		$	51,045	$	46,281
Galvanizing Services		13,076		11,946			25,159		24,077

	$	36,511	$	34,011		$	76,204	$	70,358

Operating Income (a):
Electrical and Industrial Products	$	1,319	$	1,461		$	3,231	$	3,003
Galvanizing Services		2,386		1,992			4,725		3,995

	$	3,705	$	3,453		$	7,956	$	6,998

General Corporate Expense	$	1,810	$	1,442		$	3,612	$	2,951
Interest Expense		429		580			870		1,253
Other (Income) Expense, Net (b)		26		(176	)		56		(237	)

	$	2,265	$	1,846		$	4,538	$	3,967

Income Before Income Taxes	$	1,440	$	1,607		$	3,418	$	3,031

Total Assets:
Electrical and Industrial Products	$	73,203	$	73,085		$	73,203	$	73,085
Galvanizing Services		43,869		42,686			43,869		42,686
Corporate		4,783		3,448			4,783		3,448

	$	121,855	$	119,219		$	121,855	$	119,219

(a)	Operating income consists of net sales less cost of sales, specifically identifiable general and administrative expenses and selling expenses.

(b)	Other (income) expense, net includes gains and losses on sale of property, plant and equipment and other (income) expense not specifically identifiable to a segment.

8.	Warranty reserves

A reserve has been established in accrued liabilities on the balance sheet to provide for the estimated future cost of warranties on a portion of the Company’s delivered products. Management periodically reviews the reserves and adjustments are made accordingly. Warranties cover such factors as non-conformance to specifications and defects in material and workmanship. The following shows changes in the warranty reserves since the end of fiscal 2003:


	Warranty Reserve
	(Unaudited)
	($ in thousands)
Balance at February 28, 2003	$	1,211
Warranty costs incurred		(1,020	)
Additions charged to income		688

Balance at February 29, 2004	$	879
Warranty costs incurred		(398	)
Additions charged to income		436

Balance at August 31, 2004	$	917

9.	Change in Credit Agreements

On November 1, 2001, the Company entered a syndicated credit facility, which replaced the previous term notes and revolving line of credit. This agreement included a $40 million term facility and a $45 million revolving credit facility. Since November 1, 2001, the Company amended its credit facility to reduce the number of banks participating from five to three banks, reduced the Company’s Revolving Credit Commitment from $45 million to $20 million, extended the maturity of the revolving line of credit to June 30, 2008, extended the maturity and amortization of the term facility to March 31, 2008, and revised the provisions of various financial covenants. These financial covenants consist of 1) Minimum Consolidated Net Worth 2) Maximum Leverage Ratio and 3) Minimum Fixed Charge Coverage Ratio. As of August 31, 2004, the Company was in compliance with all debt covenants. The availability under the revolving credit facility is contingent on asset-based collateral of inventories and accounts receivables. At August 31, 2004, the Company had $20.6 million outstanding under the term note and $8 million outstanding under the revolving credit facility. The remaining balance outstanding on the term-loan is payable in quarterly installments of $1.375 million through March 2008. At August 31, 2004, the Company had approximately $9.5 million available under the revolving line of credit.

Interest on borrowings under the term note and revolving line of credit bear interest at a rate per annum equal to the lesser of the base rate plus the applicable margin for the base rate borrowings for the applicable facility, or the adjusted Eurodollar rate plus the applicable margin for Eurodollar rate borrowings for the applicable facility. The applicable margin range is based on the leverage ratio, which was 2% at August 31, 2004, and correlated to an interest rate of 5.53% on the term note and 3.59% on the revolving line of credit at August 31, 2004. Additionally, the Company is obligated to pay a commitment fee based on the leverage ratio at a rate ranging from .25% to .5% on the unused revolving credit facility.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

This Report may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are generally identified by the use of words such as “anticipate,” “expect,” “estimate,” “intend,” “should,” “may,” “believe,” and terms with similar meanings. Although the Company believes that the current views and expectations reflected in these forward-looking statements are reasonable, those views and expectations, and the related statements, are inherently subject to risks, uncertainties, and other factors, many of which are not under the Company’s control. Those risks, uncertainties, and other factors could cause the actual results to differ materially from these in the forward-looking statements. Those risks, uncertainties, and factors include, but are not limited to: the level of customer demand for and response to products and services offered by the Company, including demand by the power generation markets, electrical transmission and distribution markets, the general industrial market, and the hot dip galvanizing markets; prices and raw material cost, including cost of zinc and natural gas which are used in the hot dip galvanizing process; changes in economic conditions of the various markets the Company serves, foreign and domestic, customer requested delays of shipments, acquisition opportunities, adequacy of financing, and availability of experienced management employees to implement the Company’s growth strategy. The Company expressly disclaims any obligations to release publicly any updates or revisions to these forward-looking statements to reflect any change in its views or expectations. The Company can give no assurances that such forward-looking statements will prove to be correct.

RESULTS OF OPERATIONS

For the three-month and six-month periods ended August 31, 2004, consolidated net revenues increased 7% and 8%, respectively, as compared to the same periods in fiscal 2004, to $37 million for the three-month period and $76 million for the six-month period. The Electrical and Industrial Products Segment contributed 67% of the Company’s revenues, while the Galvanizing Services Segment accounted for the remaining 33% for the six-month period ended August 31, 2004. For the quarter ended August 31, 2004, the Electrical and Industrial Segment contributed 64% of the Company’s revenues and the Galvanizing Services Segment accounted for the remaining 36% of the combined revenues.

Revenues for the Electrical and Industrial Products Segment increased $1.4 million or 6% for the three-month period ended August 31, 2004, and increased $4.8 million or 10% for the six-month period ended August 31, 2004, as compared to the same periods in fiscal 2004. The increase in revenues was due to the increased sales to the power distribution market as well as some improvement in the transmission market associated with orders booked in late fiscal 2004. These increases were partially offset by further declines in our power generation business. The softness in the industrial markets has continued to hamper the Company’s ability to offset the downturn in power generation projects.

The Electrical and Industrial Products Segment’s backlog was $53.8 million as of August 31, 2004, as compared to $48.5 million at August 31, 2003. Backlog improved 4% from the $51.9 million reported as of May 31, 2004. Orders included in the backlog are represented by contracts and purchase orders that the Company believes to be firm. The Company’s book to ship ratio, defined as the total bookings for the Company divided by the total shipments for the Company, for the period ended August 31, 2004, was 105% as compared to 97% for the quarter ended May 31, 2004, and 102% for the quarter ended February 28, 2004. While our book to ship ratio is over a one to one ratio, the order input continues to be inconsistent indicating that the markets served by these products, in particular the industrial sector of the economy, remains slow to recover.

Revenues in the Galvanizing Services Segment increased $1.1 million or 9% for the three-month period ended August 31, 2004, and increased $1.1 million or 4% for the six-month period ended August 31, 2004, as compared to the same periods in fiscal 2004. Pounds produced for the six months ending August 31, 2004, were flat as compared to the same period in fiscal 2004, while the selling price increased 3.4% for the comparable period. Revenues for this segment have historically closely followed the condition of the general economy. Any sustained recovery of the general economy should produce improved results for this segment.

Consolidated operating income (net sales less operating expenses) increased 7% for the three-month period ended August 31, 2004, to $3.7 million as compared to $3.5 million for the same period in fiscal 2004. The Electrical and Industrial Products Segment generated 36% of the operating income for the second quarter of fiscal 2005, while the Galvanizing Services Segment contributed the remaining 64%. For the six-month period ended August 31, 2004, consolidated operating income increased 14% to $8 million as compared to $7 million for the same period in fiscal 2004. For the six-month period ended August 31, 2004, the Electrical and Industrial Products Segment produced 41% of operating income, while the Galvanizing Services Segment contributed the remaining 59%.

Operating income in the Electrical and Industrial Products Segment declined 10% and increased 8% for the three and six-month periods ended August 31, 2004, respectively, to $1.3 million and $3.2 million as compared to $1.5 million and $3 million for the same periods in fiscal 2004. Continued pricing pressures on the markets in which these products are sold to as well as our inability to pass along many of the material cost increases we have incurred have adversely affected operating profits and margins. The Company continues to implement cost containments and review all strategic alternatives to lower the overall cost structure while maintaining product quality and customer service. The increase in operating profit for the six month period ended August 31, 2004 was generated through leverage that was obtained from modest improvements in volumes during the first quarter of this fiscal year.

In the Galvanizing Services Segment, operating income increased 20% and 18% for the three and six-month periods ended August 31, 2004, to $2.4 million and $4.7 million as compared to $2 million and $4 million for the same periods in fiscal 2004. The improved operating results were achieved through higher revenues as well as lower cost as a result of continued cost reductions throughout the year. While selling prices stabilized during the second quarter of the current fiscal year, the six-month average selling price increased as compared to the same period last year.

Consolidated general and administrative, and selling expenses (selling, general and administrative expense, and other (income) expense) for the three and six-month periods ended August 31, 2004, increased $.6 million or 14% and $1.1 million or 13%, respectively, as compared to the same periods in fiscal 2004. Consolidated general and administrative, and selling expense was higher due to increased professional service fees associated with the implementation of our Oracle ERP system and compliance cost associated with the Sarbanes-Oxley Act of 2002. As a percent of sales, consolidated general and administrative, and selling expenses were 12.7% and 12.4% for the three and six-month periods ended August 31, 2004, as compared to 12% and 11.8% for the same periods in fiscal 2004. In addition, other income for the three and six-month periods ended August 31, 2003, included the amounts of $95,000 and $298,000, respectively, for the gain on the sale of vacant land located at two of the Company’s facilities.

As a result of lower levels of outstanding debt due to reduced working capital requirements, net interest expense for the three and six-month periods ended August 31, 2004, declined 26% and 31% compared to the same periods in fiscal 2004. As of August 31, 2004, the Company had outstanding bank debt of $28.6 million, a decrease of 7% or $2.3 million, as compared to $30.9 million at the end of fiscal 2004. With the reduction in debt, the long-term debt to equity ratio improved to .32 to 1 at August 31, 2004, as compared to .40 to 1 at August 31, 2003. Variable interest rates increased to 3.59% for the period ended August 31, 2004, as compared to 3.11% in the comparable prior year period.

The provision for income taxes reflects an effective tax rate of 37% for the three and six-month periods ended August 31, 2004, and 38% for the three and six-month periods ended August 31, 2003.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically met its liquidity and capital needs through a combination of cash flows from operating activities and bank borrowings. The Company’s cash requirements are generally for operating activities, acquisitions, capital improvements, and debt repayment. The Company believes that working capital, borrowing capabilities, and funds generated from operations should be sufficient to finance anticipated operational activities, capital improvements, scheduled debt payments and possible future acquisitions.

Net cash provided by operations was $5.4 million for the six-month period ended August 31, 2004, as compared to $12.1 million for the same period in the prior fiscal year. Net cash provided by operations was generated from $2.2 million in net income, $2.9 million in depreciation and amortization of intangibles and debt issue costs, and $.3 million of net changes in operating assets and liabilities and other adjustments to reconcile net income to net cash. Positive cash flow was recognized due to decreased inventory and prepaid balances in the amount of $.5 million and $.2 million, respectively. Additional positive cash flows were recognized from increased accounts payable and accrued liabilities balances in the combined amount of $1.6 million. These positive cash flow items were offset by increases in accounts receivable, revenue in excess of billings, and other asset balances in the amount of $.2 million, $1.7 million, and $.4 million, respectively.

For the six-month period ended August 31, 2004, capital improvements were made in the amount of $3.5 million and long-term debt was repaid in the amount of $2.3 million. Approximately $1.2 million of the capital money invested during the quarter relates to the Company’s new Oracle ERP system it is implementing. Capital improvements in the amount of $1.7 million were expended in the Company’s Galvanizing Service Segment. The Company received proceeds from the exercise of stock options in the amount of $.2 million.

On November 1, 2001, the Company entered a syndicated credit facility, which replaced the previous term notes and revolving line of credit. This agreement included a $40 million term facility and a $45 million revolving credit facility. Since November 1, 2001, the Company amended its credit facility to reduce the number of banks participating from five to three banks, reduced the Company’s Revolving Credit Commitment from $45 million to $20 million, extended the maturity of the revolving line of credit to June 30, 2008, extended the maturity and amortization of the term facility to March 31, 2008, and revised the provisions of various financial covenants. These financial covenants consist of 1) Minimum Consolidated Net Worth 2) Maximum Leverage Ratio and 3) Minimum Fixed Charge Coverage Ratio. As of August 31, 2004, the Company was in compliance with all debt covenants. The availability under the revolving credit facility is contingent on asset-based collateral of inventories and accounts receivables. At August 31, 2004, the Company had $20.6 million outstanding under the term note and $8 million outstanding under the revolving credit facility. The remaining balance outstanding on the term-loan is payable in quarterly installments of $1.375 million through March 2008. At August 31, 2004, the Company had approximately $10.8 million available under the revolving line of credit.

The Company utilizes interest rate swap agreements to protect against volatile interest rates and manage interest expense. At August 31, 2004, the Company had a $2.1 million interest rate swap agreement entered into in February 1999 at a fixed rate of 6.8%. On November 1, 2001, the Company entered into an interest rate swap agreement covering an additional $40 million of term debt at a fixed rate of 5.53%. At August 31, 2004, the notional amount of this swap was $12.5 million. In conjunction with the Company’s financing agreement the Company discontinued hedge accounting for the February 1999 interest rate swap effective November 1, 2001. The Company continues to amortize the amount that was in other comprehensive income as of November 1, 2001. Subsequent changes in fair value have been recognized in earnings. At August 31, 2004, the fair value of the February 1999 swap was a liability of $58,000. The fair value of the November 2001 interest rate swap, which was designated as a hedge of the Company’s variable rate interest, was a liability of $145,000 as of August 31, 2004. The accumulated balance in other comprehensive income is $155,000, net of tax of $95,000, as of August 31, 2004. This amount will be charged to interest expense over the respective terms of the two swaps.

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 of the Company 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

The Company leases various facilities under non-cancelable operating leases with an initial term in excess of one year. As of August 31, 2004, the future minimum payments required under these operating leases are summarized as follows:


	Operating Leases
	(Unaudited)
	(In thousands)
2005	$	601
2006		976
2007		842
2008		306
2009		282
Thereafter		752

Total	$	3,759

Long-term debt and letters of credit

As of August 31, 2004 the Company had outstanding debt in the amount of $28.6 million, which consisted of a $20.6 million term note and $8 million outstanding under the revolving credit facility. The Company utilizes interest rate protection agreements to modify its characteristics from variable rate to a fixed rate. For further information regarding the Company’s long-term debt obligations and interest rate protection agreement see Liquidity and Capital Resources above and footnote 10 of the Notes to the Consolidated Financial Statements found on page 37 of the Company’s 2004 Annual Report.

Maturities of long-term debt are as follows:


	(Unaudited)
	(In thousands)
2005	$	2,750
2006		5,500
2007		5,500
2008		5,500
2009		9,375

Total	$	28,625

At August 31, 2004, the Company had outstanding letters of credit in the amount of $1.2 million. These letters of credit are issued to a portion of the Company’s customers to cover any potential warranty costs that the customer might incur. As of August 31, 2004, a warranty reserve in the amount of $917,000 has been established to offset any future warranty claims.

Commodity pricing

The Company manages its exposures to commodity prices, primarily zinc used in its Galvanizing Services Segment, by utilizing contracts with its zinc suppliers that include protective caps to guard against rising commodity prices. The Company utilizes these contracts for approximately 90% of its zinc requirements. The contracts are normally negotiated in December of each year and normally are for a twelve-month period of time. Management believes these contractual agreements ensure adequate supplies and partial offset against exposure to commodity price swings. In the Electrical and Industrial Products Segment, the Company has exposure to commodity pricing for copper, aluminum, and steel. Increases in price for these items are normally managed through escalation clauses to the customer’s contracts, although during difficult market conditions these escalation clauses may be difficult to obtain. The Company does not believe there has been a material change in its commodity commitments or risk since February 29, 2004.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the consolidated financial statements requires the Company to make estimates that affect the reported value of assets, liabilities, revenues and expenses. The Company’s estimates are based on historical experience and various other factors that are believed to be reasonable under the circumstances, and form the basis for the Company’s conclusions. The Company continually evaluates the information used to make these estimates as the business and the economic conditions change. Accounting policies and estimates considered most critical are allowances for doubtful accounts, accruals for contingent liabilities, revenue recognition and goodwill impairment. More information regarding significant accounting policies can be found in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report on form 10-K.

Allowance for Doubtful Accounts- The carrying value of the accounts receivables is continually evaluated based on the likelihood of collection. An allowance is maintained for estimated losses resulting from our customer’s inability to make required payments. The allowance is determined by historical experience of uncollected accounts, the level of past due accounts, overall level of outstanding accounts receivables, information about specific customers with respect of their inability to make payments and future expectations of conditions that might impact the collectibility of accounts receivables. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Accruals for Contingent Liabilities- The amounts the Company records for estimated claims such as self insurance programs, warranty and other contingent liabilities requires the Company to make judgments regarding the amount of expenses that will ultimately be incurred. The Company uses past history and experience, as well as other specific circumstances surrounding these claims in evaluating the amount of liability that should be recorded. Actual results may be different than the Company’s estimates.

Revenue Recognition – Revenue is recognized for the Galvanizing Services Segment upon completion of the galvanizing services or shipment of product. Revenue is recognized for the Electrical and Industrial Products Segment upon transfer of title and risk to customers, or based upon the percentage of completion method of accounting as contract services are performed. The extent of progress for revenue recognized using the percentage of completion method is measured by the ratio of contract costs incurred to date to estimated total contract costs at completion. Contract costs include direct labor and material, and certain indirect costs. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses, if any, on uncompleted contracts are made in the period in which such losses are able to be determined. The assumptions made in determining the estimated cost could differ from actual performance resulting in a different outcome for profits or losses than anticipated.

Impairment of Long-Lived Assets, Identifiable Intangible Assets and Goodwill– The Company records impairment losses on long-lived assets, including identifiable intangible assets, when events and circumstances indicate that the assets might be impaired and the undiscounted projected cash flows associated with those assets are less than the carrying amounts of those assets. In those situations, impairment losses on a long-lived assets are measured based on the excess of the carrying amount of the asset’s fair value, generally determined based upon discounted estimates of future cash flows. A significant change in events, circumstances or projected cash flows could result in an impairment of long-lived assets, including identifiable intangible assets.

An annual impairment test of goodwill will be performed in December of each year. The test is calculated using the anticipated future cash flows from the Company’s operating segments. Based on the present value of the future cash flow, the Company will determine whether impairment may exist. A significant change in projected cash flows or cost of capital for future years could result in an impairment of goodwill in future years

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk relating to the Company’s operations results primarily from changes in interest rates and commodity prices. The Company has only limited involvement with derivative financial instruments and is not a party to any leveraged derivatives. The Company does not believe its market risks have changed significantly since February 29, 2004.

The Company manages its exposures to changes in interest rates through the use of variable rate debt and interest rate swaps.

The Company manages its exposures to commodity prices, primarily zinc used in its Galvanizing Services Segment, by utilizing contracts with its zinc suppliers that include protective caps to guard against rising commodity prices. Management believes these contractual agreements ensure adequate supplies and partial offset against exposure to commodity price swings. In the Electrical and Industrial Product Segment, the Company has exposure to commodity pricing for copper, aluminum, and steel. Increases in the price for these items are normally managed through escalation clauses to the customer’s contracts, although during difficult market conditions these escalation clauses may be difficult to obtain.

Item 4. Controls and Procedures

As of the last day of the period covered by this report, an evaluation was performed by management under the supervision and with the participation of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of the effectiveness of the Company’s disclosure controls and procedures. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives. Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective in timely alerting them to material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and in assuring the Company that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. There were no material changes in the Company’s internal controls over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

While the Company believes that its existing disclosure controls and procedures have been effective to accomplish their objectives, the Company intends to continue to examine, refine and document its disclosures controls and procedures and to monitor ongoing developments in this area.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved from time to time in various suits and claims arising in the normal course of business. In management’s opinion, the ultimate resolution of these matters will not have a material effect on the Company’s financial position or results of operations.

Item 2. Changes in Securities – The Company has no investment Securities.

Item 3. Defaults Upon Senior Securities – Not applicable.

Item 4. Submissions of Matters to a Vote of Security Holders

Shareholders at the Annual Meeting on July 13, 2004 reelected four incumbent directors, R.J. Schumacher, Dr. H. Kirk Downey, Daniel R. Feehan and Robert H. Johnson. Of the 4,831,716 shares represented at the meeting, 4,740,934 shares (98%) were voted for Mr. Schumacher, 4,741,121 shares (98%) were voted for Mr. Downey, 4,751,648 shares (98%) were voted for Mr. Feehan and 4,740,485 shares (98%) were voted for Mr. Johnson. Other directors continuing in office are Martin Bowen, Sam Rosen, Kevern Joyce, David H. Dingus, Dana L. Perry and Daniel E. Berce.

One proposal by the Board of Directors was submitted to the stockholders at the Annual Meeting, with the following vote tabulation.


Approval of Ratification of the Appointment of Ernst & Young LLP as Auditors.			Approved/Failed to Approve
Shares for: 4,734,748	98	%
Shares Against: 88,205	1.8	%	APPROVED
Shares Abstained: 8,763	.2	%

Item 5. Other Information – Not applicable.

Item 6. Exhibits and Reports on Form 8-K

(a)	Exhibits Required by Item 601 of Regulation S-K.

A list of the exhibits required by Item 601 of Regulation S-K and filed as part of this report is set forth in the Index to Exhibits on page 17, which immediately proceeds such exhibits.

(b)	Reports on Form 8-K . AZZ incorporated filed one Form 8-K Report during the three-months ended August 31, 2004. On June 25, 2004, the Company filed an 8-K Report attaching Other Statistical Information for the twelve-month period ended February 29, 2004 and Guidance for Fiscal year 2005.

(c)	All schedules and compliance information called for by the instructions for Form 10-Q have been omitted since the required information is not present or not present in amounts sufficient to require submission.

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 incorporated
		(Registrant)

Date: 9/28/04		/s/ Dana Perry
		Dana Perry, Senior Vice President for Finance
		Principal Financial Officer

EXHIBIT

INDEX


EXHIBIT NUMBER		DESCRIPTION OF EXHIBIT
3.1		3(1) - Articles of Incorporation, and all amendments thereto (incorporated by reference to the Annual Report on Form 10-K filed by Registrant for the fiscal year ended February 28, 1981).

3.2		Articles of Amendment to the Article of Incorporation of the Registrant dated June 30, 1988 (incorporated by reference to the Annual Report on Form 10-K filed by Registrant for the fiscal year ended February 29, 2000).

3.3		Articles of Amendment to the Articles of Incorporation of the Registrant dated October 25, 1999 (incorporated by reference to the Annual Report on Form 10-K filed by Registrant for the fiscal year ended February 29, 2000).

3.4		Articles of Amendment to the Articles of Incorporation dated July 17, 2000 (incorporated by reference to the Quarterly Report Form 10-Q filed by Registrant for the quarter ended August 31, 2000).

3.5		Bylaws of AZZ incorporated as restated through September 24, 2003 (incorporated by reference to the Exhibit 3(5) to the Quarterly Report Form 10-Q filed by the Registrant for the quarter ended August 31, 2003).

10.32		Second Amendment to Amended and Restated Revolving and Term Loan Agreement dated March 7, 2003 (incorporated by reference to Exhibit 10(32) to Form 8-K filed by the Registrant on March 7, 2003).

10.50		Third Amendment to Amended and Restated Revolving and Term Loan Credit Agreement dated October 15, 2003 (incorporated by reference to Exhibit 10(50) to Form 10-Q filed by the Registrant on October 15, 2003).

10.51		Waiver of Amended and Restated Revolving and Term Loan Credit Agreement dated September 29, 2003 (incorporated by reference to Exhibit 10(50) to Form 8-K filed by the Registrant on September 30, 2003).

*10.52		Fourth Amendment to Amended and Restated Revolving and Term Loan Agreement dated July 2, 2004.

*10.53		AZZ incorporated Fiscal 2005 Stock Appreciation Rights Plan for Directors.

*10.54		AZZ incorporated Fiscal 2005 Stock Appreciation Rights Plan for Key Employees.

*31.1		Chief Executive Officer Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated September 21, 2004.

*31.2		Chief Financial Officer Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 September 21, 2004.

*32.1		Chief Executive Officer Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbane-Oxley Act of 2002 dated September 21, 2004.

*32.2		Chief Financial Officer Certificate pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbane-Oxley Act of 2002 dated September 21, 2004.

*	Filed with this report

EXHIBIT 10.52

FOURTH AMENDMENT

AMENDED AND RESTATED REVOLVING AND TERM LOAN CREDIT AGREEMENT

This Fourth Amendment to Amended and Restated Revolving and Term Loan Credit Agreement (this “ Amendment ”) is executed effective as of July 2, 2004 (the “ Effective Date ”), by and among AZZ incorporated, a Texas corporation (“ Borrower ”), Bank of America, N.A., as Administrative Agent and Collateral Agent for Lenders (in such capacity, “ Administrative Agen t ”) and Lenders party hereto.

A. Borrower, Administrative Agent and Lenders are party to that certain Amended and Restated Revolving and Term Loan Credit Agreement dated as of November 1, 2001, as amended by the First Amendment to Amended and Restated Revolving and Term Loan Credit Agreement dated as of April 4, 2002, the Second Amendment to Amended and Restated Revolving and Term Loan Credit Agreement dated as of March 7, 2003 and the Third Amendment to Amended and Restated Revolving and Term Loan Credit Agreement dated as of October 15, 2003 (as so amended and as the same may be further amended, modified, supplemented, restated or amended and restated from time to time, the “ Credit Agreement ”).

B. Borrower has requested that Administrative Agent and Lenders amend certain terms and provisions of the Credit Agreement.

C. Borrower, Administrative Agent and Lenders have agreed, upon the following terms and conditions, to amend the Credit Agreement subject to and upon the terms and conditions provided herein.

NOW, THEREFORE , in consideration of the mutual promises herein contained, and for other valuable consideration, the parties hereto agree as follows:

Section 1 . Defined Terms; References . Unless otherwise specifically defined herein, each term used herein that is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement.

Section 2 . Amendments to Credit Agreement . Effective as of the Effective Date, but subject to satisfaction of the conditions precedent set forth in Section 3 hereof, the Credit Agreement is hereby amended as set forth below.

(a) The definition of “Applicable Margin” in Section 1.1 of the Credit Agreement is amended to read as follows:

“ ‘ Applicable Margin ’ means, from the Fourth Amendment Closing Date until the [earlier of the] third Business Day after delivery of the Compliance Certificate for the fiscal quarter ending August 31, 2004 and the Permitted Acquisition Certificate in connection with the first Permitted Acquisition occurring after the Fourth Amendment Closing Date, the Applicable Margin set forth in Level 3, and thereafter, on any date of determination, the percentage per annum set forth in the table below for the Type of Borrowing or Commitment Fees (as the case may be) that corresponds to the Leverage Ratio at such date of determination, as calculated based on the quarterly Compliance Certificate of Borrower most recently delivered pursuant to Section 9.3 hereof or the Permitted Acquisition Certificate most recently delivered in connection with a Permitted Acquisition, as the case may be:

AZZ Fourth Amendment


Level	Leverage Ratio	Applicable Margin (per annum)
Level	Leverage Ratio	Eurodollar Rate Borrowing and Commission Fee		Base Rate Borrowing		Commitment Fees
1	Less than or equal to 1.00:1.0	1.000	%	0.00	%	0.250	%
2	Greater than 1.00:1.0, but less than or equal to 1.50:1.0	1.250	%	0.00	%	0.250	%
3	Greater than 1.50:1.0, but less than or equal to 2.00:1.0	1.500	%	0.250	%	0.375	%
4	Greater than 2.00:1.0	2.000	%	0.500	%	0.500	%

Upon delivery of the Compliance Certificate pursuant to Section 9.3 , commencing with the Compliance Certificate delivered for the fiscal quarter ending August 31, 2004, or the Permitted Acquisition Compliance Certificate in connection with a Permitted Acquisition, the Applicable Margin shall automatically be adjusted to the rate corresponding to the Leverage Ratio set forth in the table above, such automatic adjustment to take effect prospectively the third Business Day after receipt by Administrative Agent of the Compliance Certificate or the Permitted Acquisition Compliance Certificate, as the case may be. If Borrower fails to deliver such Compliance Certificate or Permitted Acquisition Compliance Certificate, as the case may be, with respect to any fiscal quarter or any Permitted Acquisition, as the case may be, which sets forth such ratio within the period of time required by Section 9.3 or by the definition of Permitted Acquisition, as the case may be, the Applicable Margin shall automatically be adjusted to that set forth in Level 4. The automatic adjustments provided for in the preceding sentence shall take effect on the last day that the Compliance Certificate or the Permitted Acquisition Compliance Certificate, as the case may be, was required to be delivered and shall remain in effect until subsequently adjusted in accordance herewith upon the delivery of such Compliance Certificate or such Permitted Acquisition Compliance Certificate, as the case may be.”

(b) A new definition of “ Fourth Amendment Closing Date ” is added to Section 1.1 of the Credit Agreement and shall read as follows:

“ ‘ Fourth Amendment Closing Date ’ means July 2, 2004.”

(c) The definition of “ Increase Effective Date ” in Section 1.1 of the Credit Agreement is amended by deleting therefrom the reference to “ Section 2.7(b) ,” and substituting therefor a reference to “ Section 2.8(d) .”

(d) The definition of “ Lenders ” in Section 1.1 of the Credit Agreement is amended by deleting therefrom the reference to “ Section 2.7(a) ”, and substituting therefor a reference to “ Section 2.8(c) .”

(e) The definition of “ Revolver Termination Date ” in Section 1.1 of the Credit Agreement is amended in its entirety to read as follows:

“ ‘ Revolver Termination Date ’ means the earlier of (a) June 30, 2008 (subject to extension as provided in Section 2.7 ), and (b) the effective date of any termination, cancellation, or acceleration of all commitments to lend under the Revolver Facility.”

AZZ Fourth Amendment

(f) The definition of “ Term Termination Date ” in Section 1.1 of the Credit Agreement is amended in its entirety to read as follows:

“ ‘ Term Termination Date ’ means the earlier of (a) March 31, 2008, and (b) the effective date of any other termination, cancellation, or acceleration of the Term Facility.

(g) Section 2.7 of the Credit Agreement is amended by amending clause (a) , clause (b) and clause (c) thereof by deleting therefrom “Closing Date” and substituting therefor “Fourth Amendment Closing Date.”

(h) Section 2 of the Credit Agreement is amended by adding a new Section 2.8 thereto reading as follows:

“ 2.8 Increase in Revolver Commitment .

(a) Request for Increase . Provided there exists no Default, upon notice to Administrative Agent (which shall promptly notify Lenders), Borrower may request from time to time an increase in the Revolver Commitment by an amount (for all such requests) not exceeding $10,000,000; provided that any such request for an increase shall be in a minimum amount of $2,500,000. At the time of sending such notice, Borrower (in consultation with Administrative Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to Lenders).

(b) Lender Elections to Increase . Each Lender shall notify Administrative Agent within such time period whether or not it agrees to increase its Committed Sum with respect to the Revolver Facility and, if so, whether by an amount equal to, greater than, or less than its Commitment Percentage of such requested increase. Any Lender not responding within such time period shall be deemed to have declined to increase its Committed Sum with respect to the Revolver Facility.

(c) Notification by Administrative Agent; Additional Lenders . Administrative Agent shall notify Borrower and each Lender of Lenders’ responses to each request made hereunder. To achieve the full amount of a requested increase and subject to the approval of Administrative Agent (which approval shall not be unreasonably withheld), Borrower may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance satisfactory to Administrative Agent and its counsel.

(d) Effective Date and Allocations . If the Revolver Commitment is increased in accordance with this Section 2.8 , Administrative Agent and Borrower shall determine the effective date (the “ Increase Effective Date ”) and the final allocation of such increase. Administrative Agent shall promptly notify Borrower and Lenders of the final allocation of such increase and the Increase Effective Date, and Schedule 2.01 shall be deemed to be amended to reflect such final allocation of such increase.

(e) Conditions to Effectiveness of Increase . As a condition precedent to such increase, Borrower shall deliver to Administrative Agent one or more Revolver Notes payable to Lenders in the amounts of their respective Committed Sums under the Revolver Facility after giving effect to such increase and such other documents, instruments, certificates and legal opinions as Administrative Agent may reasonably request, including a certificate of each Loan

AZZ Fourth Amendment

Party dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer of such Loan Party (i) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such increase, and (ii) in the case of Borrower, certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Section 8 and the other Loan Documents are true and correct on and as of the Increase Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they were true and correct as of such earlier date, and (B) no Default or Potential Default exists. Borrower shall prepay any Revolver Principal Debt outstanding on the Increase Effective Date (and pay any additional amounts required pursuant to Section 4.5 ) to the extent necessary to keep the outstanding Revolver Principal Debt ratable with any revised Commitment Percentages arising from any nonratable increase in the Revolver Commitments under this Section 2.8 .

(g) Conflicting Provisions . This Section shall supersede any provisions in Sections 3.13 or 13.11 to the contrary.”

(i) Section 3.2(c) of the Credit Agreement is amended in its entirety to read as follows:

“(c) Term Principal Debt . The Term Principal Debt is due and payable in quarterly installments in the principal amounts indicated in the table below, commencing on the last Business Day of March, 2002, and continuing thereafter on the last Business Day of each March (but excluding March 2003), June, September, and December, with a payment equal to the remaining Term Principal Debt due on the Term Termination Date, in accordance with the following amortization schedule:


Payment Dates		Principal Installments
March 29, 2002		$1,000,000
June 28, 2002,September 30, 2002 and December 31, 2002		$3,000,000/each
Last Business Day of Each March, June, September, and December, commencing June 30, 2003, through and including December 31, 2007		$1,375,000/each
Term Termination Date		Remaining Term Principal Debt

(j) Section 9.22 of the Credit Agreement is amended by amending clause (y) thereof by deleting therefrom “Closing Date” and substituting therefor “Fourth Amendment Closing Date.”

(k) Section 9.29(a) of the Credit Agreement is amended in its entirety to read as follows:

“(a) Minimum Consolidated Net Worth . Consolidated Net Worth, as of any date, to be less than $55,000,000, such amount to be increased on the last day of each successive fiscal quarter of Borrower, beginning May 31, 2004, by an amount equal to the sum of (i) seventy-five percent (75%) of the Consolidated Net Income of the Companies for each such fiscal quarter (without deduction for any losses during any fiscal quarter), plus (ii) an amount equal to 100% of the proceeds of any Equity Issuance after February 29, 2004.”

AZZ Fourth Amendment

(l) Section 9.29(b) of the Credit Agreement is amended in its entirety to read as follows:

“(b) Maximum Leverage Ratio . On and after the Fourth Amendment Closing Date, through and including February 28, 2005, the Leverage Ratio to be greater than 2.50:1.0 with respect to the immediately preceding Rolling Period; and thereafter, to be greater than 2.25:1.0.

(m) Section 9.29(c) of the Credit Agreement is amended in its entirety to read as follows:

“(c) Minimum Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio to be less than: (i) from August 31, 2003 through and including February 27, 2006, 1.10:1; (ii) from February 28, 2006 through and including August 31, 2006, 1.15:1; and (iii) from September 1, 2006 and thereafter, 1.25:1, in each case determined with respect to the immediately preceding Rolling Period.”

Section 3 . Conditions to Effectiveness . This Amendment shall become effective as of the Effective Date when and if Administrative Agent has received the following:

(a) for the respective pro rata accounts of Lenders, an amendment and extension fee in an amount equal to 17.5 basis points of Lenders’ respective aggregate Committed Sums (after giving effect to this Amendment);

(b) for the account of Administrative Agent, the arrangement fee set forth in the separate fee letter dated the Fourth Amendment Effective Date, between Borrower and Administrative Agent;

(d) copies of the resolutions of Borrower’s Board of Directors approving and authorizing the execution, delivery and performance by Borrower of this Amendment, certified by a Responsible Officer;

(e) a certificate of a Responsible Officer, certifying the names and true signatures of the officers of Borrower authorized to execute and deliver this Amendment;

(f) (i) for each Guarantor that is not a partnership, copies of the resolutions of the Board of Managers or Board of Directors of such Guarantor, approving and authorizing the execution, delivery and performance by such Guarantor of this Amendment, certified by a Responsible Officer of such Guarantor; and (ii) for each Guarantor that is a partnership, evidence of approval and authorization of the execution, delivery and performance by such Guarantor of this Amendment, accompanied by a certificate from the general partner or other appropriate managing partner;

(g) a certificate of a Responsible Officer (or general partner or other appropriate managing partner, as applicable) of each Guarantor, certifying the names and true signatures of the officers of such Guarantor authorized to execute and deliver this Amendment; and

(h) such other assurances, certificates, documents, consents and opinions as Administrative Agent may reasonably require.

Section 4 . Representations and Warranties of Borrower . Borrower represents and warrants to Lenders and Administrative Agent as set forth below.

AZZ Fourth Amendment

(a) The execution, delivery and performance by Borrower of this Amendment and the Credit Agreement, as amended hereby, have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval not heretofore obtained of any director, stockholder, security holder or creditor of Borrower, (ii) violate or conflict with any provision of Borrower’s Articles of Incorporation, (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or leased or hereafter acquired by Borrower, (iv) violate any Laws applicable to Borrower or (v) result in a breach of or constitute a default under, or cause or permit the acceleration of any obligation owed under, any indenture or loan or credit agreement or any other material agreement to which Borrower is a party or by which Borrower or any of its Property is bound or affected.

(b) No authorization, consent, approval, order license or permit from, or filing, registration or qualification with, any Governmental Authority is or will be required to authorize or permit under applicable Law the execution, delivery and performance by Borrower of this Amendment and the Credit Agreement, as amended hereby.

(c) Each of this Amendment and the Credit Agreement, as amended hereby, has been duly executed and delivered by Borrower and constitutes the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as enforcement may be limited by Debtor Relief Laws or equitable principles relating to the granting of specific performance and other equitable remedies as a matter of judicial discretion.

(d) The representations and warranties of Borrower contained in Section 8 of the Credit Agreement are true and correct in all material respects as though made on and as of the Effective Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they were true and correct as of such earlier date).

(e) No Default or Potential Default exists or would result from the effectiveness of this Amendment.

(f) Borrower agrees to perform such acts and duly authorize, execute, acknowledge, deliver, file, and record such additional documents and certificates as Administrative Agent may reasonably request in order to create, perfect, preserve, and protect those guaranties, assurances, and Liens.

Section 5 . Reference to and Effect on Loan Documents.

(a) On and after the Effective Date, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or any other expression of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement,” “thereunder,” “thereof,” “therein” or any other expression of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended by this Amendment.

(b) Except as specifically amended hereby, all provisions of the Credit Agreement and all Collateral Documents shall remain in full force and effect and are hereby ratified and confirmed.

(c) Except as otherwise expressly provided herein, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any Lender or Administrative Agent under any of the Loan Documents or constitute a waiver of any provision of any of the Loan Documents.

AZZ Fourth Amendment

(d) Borrower (A) ratifies and confirms all provisions of the Loan Documents applicable to Borrower, and (B) ratifies and confirms that all guaranties, assurances, and Liens granted, conveyed, or assigned to Administrative Agent under the Loan Documents by Borrower are not released, reduced, or otherwise adversely affected by this Amendment and continue to guarantee, assure, and secure full payment and performance of the present and future Obligation.

Section 6 . Costs and Expenses . Borrower agrees to pay on demand all reasonable costs and expenses of Administrative Agent in connection with the preparation, execution and delivery of this Amendment and the other instruments and documents to be delivered hereunder, including the reasonable fees and out-of-pocket expenses of counsel for Administrative Agent with respect thereto and with respect to advising Administrative Agent as to its rights and responsibilities hereunder and thereunder.

Section 7 . Execution in Counterparts . This Amendment may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. This agreement, when countersigned by the parties hereto, shall be a “Loan Document” as defined and referred to in the Credit Agreement and the other Loan Documents.

Section 8 . Governing Law . THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

[R EMAINDER OF PAGE INTENTIONALLY LEFT BLANK .]

AZZ Fourth Amendment

Section 9 . ENTIRETY . THIS AMENDMENT, THE CREDIT AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.


AZZ incorporated

By:		/s/ Dana Perry
		Dana Perry, Vice President

AZZ Fourth Amendment


ADMINISTRATIVE AGENT :

BANK OF AMERICA, N.A ., as Administrative Agent

By:		/s/ Suzanne M. Paul
Name:		Suzanne M. Paul
Title:		Vice President

AZZ Fourth Amendment


LENDERS :

BANK OF AMERICA, N.A.

By:		/s/ Steven A. MacKenzie
		Steven A. Mackenzie
		Senior Vice President

AZZ Fourth Amendment


COMERICA BANK

By:		/s/ Corey R. Bailey
		Corey R. Bailey, Vice President

AZZ Fourth Amendment


WASHINGTON MUTUAL BANK, FA

By:		/s/ Randy Woods
		Randy Woods, Vice President

AZZ Fourth Amendment

To induce Administrative Agent and Lenders to enter into this Amendment, the undersigned consent and agree (a) to its execution and delivery and terms and conditions thereof, (b) that this document in no way releases, diminishes, impairs, reduces, or otherwise adversely affects any Liens, charges, guaranties, assurances, or other obligations or undertakings of any of the undersigned under any Loan Documents, and (c) waive notice of acceptance of this Amendment, which Amendment binds each of the undersigned and their respective successors and permitted assigns and inures to the benefit of Administrative Agent, Lenders, and their respective successors and permitted assigns.


GUARANTORS:

AZTEC INDUSTRIES, INC.

THE CALVERT COMPANY, INC.

GULF COAST GALVANIZING, INC.

ARKGALV, INC.

ARBOR-CROWLEY, INC.

ATKINSON INDUSTRIES, INC.

AZTEC INDUSTRIES, INC. - MOSS POINT

AUTOMATIC PROCESSING INCORPORATED

ARIZONA GALVANIZING, INC.

HOBSON GALVANIZING, INC.

CGIT WESTBORO, INC.

WESTSIDE GALVANIZING SERVICES, INC.

CARTER AND CRAWLEY, INC.

CENTRAL ELECTRIC COMPANY

CENTRAL ELECTRIC MANUFACTURING COMPANY

ELECTRICAL POWER SYSTEMS, INC.

CLARK CONTROL SYSTEMS, INC.

AZTEC MANUFACTURING PARTNERSHIP, LTD.

By:	AZZ GROUP, LP , its General Partner
	By:	AZZ GP, LLC , its General Partner

AZTEC MANUFACTURING – WASKOM PARTNERSHIP, LTD.

By:	AZZ GROUP, LP , its General Partner
	By:	AZZ GP, LLC , its General Partner

AZZ Fourth Amendment


RIG-A-LITE PARTNERSHIP, LTD.
By:	AZZ GROUP, LP , its General Partner
	By:	AZZ GP, LLC, its General Partner

INTERNATIONAL GALVANIZERS PARTNERSHIP, LTD.
By:	AZZ GROUP, LP , its General Partner
	By:	AZZ GP, LLC , its General Partner

DRILLING RIG ELECTRICAL SYSTEMS CO. PARTNERSHIP, LTD.
By:	AZZ GROUP, LP , its General Partner
	By:	AZZ GP, LLC , its General Partner

AZZ GROUP, LP
By:	AZZ GP, LLC , its General Partner

AZZ GP, LLC

AZZ LP, LLC

By:	/s/ Dana L. Perry
	Dana L. Perry, Secretary of each of the
	foregoing entities

AZZ HOLDINGS, INC.

By:	/s/ Mike McLain
	Mike McLain, President

AZZ Fourth Amendment

EXHIBIT 10.53

AZZ incorporated

FISCAL YEAR 2005 STOCK APPRECIATION RIGHTS

PLAN FOR DIRECTORS

DATED April 6, 2004

AZZ incorporated

FISCAL YEAR 2005 STOCK APPRECIATION RIGHTS

PLAN FOR DIRECTORS

TABLE OF CONTENTS




ARTICLE 1 Purpose of Plan

ARTICLE 2 Administration of Plan

ARTICLE 3 Eligibility and Grant

ARTICLE 4 Terms of Rights

ARTICLE 5 Limitations on Number of Rights and Date of Grant

ARTICLE 6 Appreciation Amount

ARTICLE 7 Payment of Appreciation Amount

ARTICLE 8 Nature of Rights

ARTICLE 9 Termination of Rights

ARTICLE 10 Adjustment to Rights

ARTICLE 11 Termination and Amendment

ARTICLE 12 Rights Agreement

ARTICLE 13 Miscellaneous Provisions

ARTICLE 14 Definitions

AZZ incorporated, a Texas corporation (the “Company”), hereby establishes and sets forth the terms of the AZZ incorporated, FISCAL YEAR 2005 STOCK APPRECIATION RIGHTS PLAN FOR DIRECTORS (the “Plan”) to be effective March 1, 2004.

ARTICLE I. PURPOSE OF PLAN

The purpose of this Plan is to enable the Company to attract and retain directors of the highest caliber by offering to them an opportunity to share in increases in the value of the Company to which they contribute. This Plan will seek to accomplish this purpose by granting such directors stock appreciation rights (collectively, the “Rights” and individually, a “Right”), which will be associated with shares of common stock of the Company, one dollar ($1.00) par value (the “Common Stock”), and which will be subject to all of the terms and conditions contained in this Plan.

ARTICLE 2. ADMINISTRATION OF PLAN

2.1 This Plan shall be administered by the Nominating and Corporate Governance Committee of the Board of Directors of the Company (the “Administrative Committee”).

2.2 A majority of the members of the Administrative Committee shall constitute a quorum. All actions of the Administrative Committee shall require the affirmative vote of members who constitute a majority of such quorum.

2.3 The Administrative Committee shall have the following rights and powers:

(a) The Administrative Committee shall have the authority (i) to administer this Plan in accordance with its express terms; (ii) to determine all questions arising in connection with the administration, interpretation, and application of this Plan, including all questions relating to the fair market value of the Common Stock; (iii) to correct any defect, supply any information and reconcile any inconsistency in the Plan in such manner and to such extent as shall be deemed necessary or advisable to carry out the purpose of this Plan; (iv) to prescribe, amend and rescind rules and regulations relating to the administration of this Plan; and (v) to make all other determinations and to take all actions necessary or advisable for administration of this Plan provided, however, no action taken under the authority of this Section 2.3(a) shall be contrary to any specific provisions in the Plan.

(b) All determinations made by the Administrative Committee on matters referred to in this Section 2.3 shall be final, conclusive and binding upon all persons and shall, except as expressly provided to the contrary in this Plan, be at the sole discretion of the Administrative Committee. The Administrative Committee shall have all powers necessary or appropriate to accomplish its duties under this Plan or to administer this Plan.

ARTICLE 3. ELIGIBILITY AND GRANT

3.1 An individual shall be eligible to participate in this Plan provided that such individual is a director of the Company (a “Director”) .

3.2 A Director of the Company may be granted a Right only by a written Stock Appreciation Rights Agreement signed by the Company and the Director granting to a Director a number of SARs in accordance with action taken by the Board of Directors, in form and substance approved by the Administrative Committee, in accordance with Article 12 hereof. Each Director of the Company who so enters into a written Stock Appreciation Rights Agreement with the Company shall sometimes be referred to in this Plan as a “Holder.”

ARTICLE 4. TERMS OF RIGHTS

Each Right granted to a Holder in accordance with Section 3 shall have the following terms:

4.1 The Right shall be granted effective as of the effective date of the Stock Appreciation Rights Agreement evidencing the grant of the Right;

4.2 The Right shall be associated with one share of Common Stock;

4.3 Unless it earlier terminates as provided in Section 9, the Right shall vest (if the Holder is still a Director at such time) upon the public release of financial results by the Company for its fiscal year ending on February 28, 2007 (the “Normal Vesting Date”) or (if the Holder is still a Director at such time) upon the occurrence of an Accelerating Event under Section 10.2, which shall accelerate vesting (the “Accelerated Vesting Date”) as provided in Section 10.2;

4.4 Each Right shall have a base value (the “Base Value”) equal to the average of the closing prices of one share of the Common Stock as listed on the New York Stock Exchange for those days on which it trades during the ninety calendar days period immediately following the public release of financial results for the Company’s fiscal year ended February 29, 2004; and

4.5 Each Right shall be subject to such other terms and conditions as the Administrative Committee deems advisable and as are consistent with the terms and conditions of this Plan. Except as expressly provided herein, nothing contained in this Plan shall require that the terms and conditions of Rights granted hereunder be uniform.

ARTICLE 5. LIMITATIONS ON NUMBER OF RIGHTS AND DATE OF GRANT

5.1 The aggregate number of Rights that may be granted under this Plan shall be Twenty Seven Thousand Seven Hundred Twenty (27,720). This number shall be subject to any adjustment required or permitted pursuant to the provisions of Section 10.

5.2 No Rights may be granted under this Plan after April 7, 2004.

ARTICLE 6. APPRECIATION AMOUNT

6.1 Effective as of the Normal Vesting Date or Accelerated Vesting Date of a Right, the Holder of the Right shall have the full, unconditional and nonforfeitable ownership of the Right and shall be entitled to receive the amount by which the fair market value (the “FMV”) of one share of Common Stock as determined by the methods provided below exceeds the Base Value of the Right (the “Appreciation Amount”). Prior to the occurrence of a Normal Vesting Date or Accelerated Vesting Date, a Right may be terminated or otherwise adjusted as allowed herein.

6.2 The FMV for the purpose of calculating the Appreciation Amount for a Right that reaches maturity on the Normal Vesting Date, shall be the average of the closing prices of one share of the Common Stock on the New York Stock Exchange for those days on which it traded during the ninety calendar days period immediately following the public release of financial results for the Company’s fiscal year ended February 28, 2007 (the “Normal Determination Period”). The FMV for the purpose of calculating the Appreciation Amount for a Right that reaches maturity on an Accelerated Vesting Date shall be determined as set forth in Section 10.2 below (an “Accelerated Determination Period”).

ARTICLE 7. PAYMENT OF APPRECIATION AMOUNT

7.1 Within thirty (30) days following the expiration of the Normal Determination Period or, if applicable, an Accelerated Determination Period of a Right, the Company shall pay the Appreciation Amount for each SAR which has vested (the Appreciation Amount times the number of Rights), without interest, to the Holder.

7.2 In the event of the death of a Holder of a Right, that has not been terminated, the right to receive any Appreciation Amounts due to the Holder pursuant to this Plan may pass to the person or persons entitled thereto pursuant to the will of the Holder or applicable laws of descent and distribution.

7.3 The Company shall be entitled to deduct from any payment required by this Plan (including any Appreciation Amounts payable under Section 10.2) any amounts that the Company is required by applicable federal, state or local law to withhold therefrom on account of income or similar taxes.

ARTICLE 8. NATURE OF RIGHTS

8.1 The Rights are intended solely as a means to measure the Appreciation Amounts that may become payable under this Plan. The Rights shall not constitute equity or other securities of the Company, and Holders of Rights shall not be shareholders of the Company and shall not have any right of access to financial or other information regarding the Company. The Company shall not be required to set aside any amounts for purposes of this Plan, in trust or otherwise, in advance of the respective dates prescribed for the payment of Appreciation Amounts. All Holders shall, except as otherwise provided by law, be general creditors of the Company with respect to the Rights and the right to payment of any Appreciation Amounts under this Plan.

8.2 Except as expressly allowed in Section 7.2 above or pursuant to a qualified domestic relations order (within the meaning of Section 414(p) of the Code), no Holder shall have any right to sell, assign, pledge or otherwise transfer the Rights or any other rights that the Holder may have under this Plan, and any attempt to do so shall be void.

ARTICLE 9. TERMINATION OF RIGHTS

All of the Rights of a Holder shall terminate if the Holder sells, assigns, pledges or otherwise transfers, or attempts to sell, assign, pledge or otherwise transfer, any Rights or any other rights that the Holder may have under this Plan; provided, however, that the foregoing shall not apply to a transfer occurring upon the death of the Holder pursuant to the will of the Holder or applicable laws of descent and distribution or to a transfer or assignment pursuant to a qualified domestic relations order (within the meaning of Section 414(p) of the Code). Additionally, all the rights of a Holder shall terminate if the Holder ceases to be a Director unless such termination is due to death, Permanent Disability or Retirement. Termination of the Rights of a Holder under this Section shall terminate any rights to unpaid Appreciation Amounts.

ARTICLE 10. ADJUSTMENTS TO RIGHTS

10.1 In the event that there is a material alteration in the capital structure of the Company on account of a reorganization, merger, recapitalization, stock split, reverse stock split, stock dividend or otherwise in which the Company is the Surviving Entity, then the Administrative Committee shall make such adjustments, if any, to the then outstanding Rights, including the Base Price, as the Administrative Committee determines to be appropriate and equitable under the circumstances. For purposes of this Section 10.1, neither (a) the issuance of additional shares of Common Stock or other securities of the Company in exchange for consideration (including services) of any kind nor (b) the conversion into Common Stock of any securities of the Company now or hereafter outstanding, shall be deemed material alterations in the capital structure of the Company. Notwithstanding the foregoing, however, in the event the Administrative Committee shall determine that the nature of a material alteration in the capital structure of the Company is such that it is not feasible or advisable to make adjustments to the Rights, the Administrative Committee may declare a Restructuring Event to have occurred, in which case an Accelerated Vesting Date will be established as provided in Section 10.2(i).

10.2 In the event of (i) a Restructuring Event, (ii) the dissolution or liquidation of the Company, a merger or other reorganization of the Company with one or more entities as a result of which the Company will not be the Surviving Entity, or a sale of all or substantially all of the assets of the Company, (iii) a Change in Control, (iv) a voluntary or involuntary petition is filed for or against the estate of the Holder under the bankruptcy laws of the United States or under the insolvency laws of any state, and in the case of an involuntary petition, the petition is not dismissed within sixty (60) days following the date of filing thereof, or (v) the termination as a Director of a Holder due to death, Permanent Disability (as defined below) or Retirement (as defined below), (each an “Accelerating Event”), an Accelerated Vesting Date shall be established and a period (an “Accelerated Determination Period”) for the determination of the FMV shall be established as follows:


Accelerating Event	Accelerated Vesting Date	Accelerated Determination Period and FMV
(i) A Restructuring Event.	Date of such formal action as may be required to cause the material alteration in the Company’ s capital structure.	Closing Price of one share of Common Stock on the New York Stock Exchange on the last day before the Vesting Date on which shares of Common Stock traded shall be the FMV.

(ii) Dissolution, liquidation, merger or other reorganization in which the Company is not the Surviving Entity.	Date of Filing of Articles of Dissolution or Articles of Merger or other documents formalizing a reorganization.	Closing Price of one share of Common Stock on the New York Stock Exchange on the last day before the Vesting Date on which shares of Common Stock traded shall be the FMV.

(iii) Change in Control.	Public announcement of an event constituting a Change in Control.	The average of the closing prices of one share of the Common Stock on the New York Stock Exchange for those days on which it trades during the fifteen (15) calendar days immediately following the Accelerated Vesting Date shall be the FMV.

(iv) Bankruptcy	The date a voluntary petition is filed or sixty days following the date of filing of an involuntary petition, if not dismissed by that date.	The average of the closing prices of one share of the Common Stock on the New York Stock Exchange for those days on which it trades during the fifteen (15) calendar days immediately following the Accelerated Vesting Date shall be the FMV.

(v) Termination as a Director due to death, Permanent Disability, Retirement or Removal	The last day of the Holder’s service as a Director.	The average of the closing prices of one share of the Common Stock on the New York Stock Exchange for those days on which it trades during the fifteen (15) calendar days immediately following the Accelerated Vesting Date shall be the FMV.

ARTICLE 11. TERMINATION AND AMENDMENT

The Board of Directors may at any time terminate, suspend or amend the terms of this Plan; provided, however, that the termination, suspension or amendment of this Plan shall not, without the consent of the Holder, alter or impair any rights or obligations with respect to any Rights theretofore granted hereunder.

ARTICLE 12. RIGHTS AGREEMENT

Rights granted hereunder shall be evidenced by a Stock Appreciation Rights Agreement designating the name of the Holder, the number of Rights granted to the Holder by the Board of Directors of the Company, the method of determining the Base Value and the Normal Vesting Date and an Accelerated Vesting Date of the Rights, and such other terms, conditions and provisions not inconsistent with the terms and conditions of this Plan as the Administrative Committee deems advisable.

ARTICLE 13. MISCELLANEOUS PROVISIONS

13.1 Nothing contained in this Plan shall obligate the Company to continue a person as a Director for any period nor shall this Plan interfere in any way with the right of the Company to reduce such Holder’s compensation.

13.2 Subject to Section 8, the provisions of this Plan shall inure to the benefit of and be binding upon each Holder and the heirs, successors and assigns of each Holder.

13.3 Where the context so requires, references herein to the singular shall include the plural, and vice versa, and references to a particular gender shall include either or both additional genders.

13.4 This Plan shall be construed, administered and enforced in accordance with the laws of the United States, to the extent applicable hereto, as well as the laws of the State of Texas.

13.5 No action taken under the Plan by the Administrative Committee shall be legally binding on a Holder if it is not taken in good faith.

ARTICLE 14. DEFINITIONS

14.1 As used herein, the following terms have the meaning hereinafter set forth unless the context clearly indicates to the contrary:

(a) “Change in Control” means one or more of the following events:

(i)

more of the combined voting power of the Company’s then outstanding Common Stock and any other class or classes of the Company’s outstanding securities ordinarily entitled to vote in elections of directors (collectively, “Voting Securities”) (other than through the purchase of Voting Securities from the Company); or

(ii)

Shares representing 50 percent or more of the combined voting power of the Company’s Voting Securities are purchased pursuant to a tender offer or exchange offer (other than an offer by the Company or its subsidiaries or affiliates); or

(iii)

During any two consecutive years, individuals who, at the beginning of such period constituted the entire Board of Directors, cease to constitute a majority of the Directors, unless the election of each was approved by at least two-thirds of the Directors still in office who were Directors at the beginning of the period.

(b) “Code” means the Internal Revenue Code of 1986, as amended.

(c) “Permanent Disability” shall mean the inability for a period of at least six (6) consecutive months to carry out the duties and responsibilities of a Director.

(d) “Removal” means the termination of a person’s status as a Director by shareholder vote or as a result of the person’s disqualification for service as a Director.

(e) “Retirement” means (i) the expiration of the Director’s term as a Director without reelection to a new term or (ii) the voluntary resignation of a Director with the approval of a majority of the other members of the Board of Directors.

(f) “Subsidiary” of the Company means an entity directly or indirectly controlled by the Company.

(g) “Surviving Entity” means an entity continuing after a merger, consolidation or other reorganization to which the Company is a party, more than fifty percent (50%) of the outstanding voting securities of which are owned in the aggregate by persons who were shareholders of the Company prior to the merger, consolidation or reorganization.

Adopted by the Nominating and Corporate Governance Committee on April 6, 2004.

EXHIBIT 10.54

AZZ incorporated

FISCAL YEAR 2005 STOCK APPRECIATION RIGHTS

PLAN FOR KEY EMPLOYEES

DATED April 6, 2004

AZZ incorporated

FISCAL YEAR 2005 STOCK APPRECIATION RIGHTS

PLAN FOR KEY EMPLOYEES

TABLE OF CONTENTS



ARTICLE 1 Purpose of Plan

ARTICLE 2 Administration of Plan

ARTICLE 3 Eligibility and Grant

ARTICLE 4 Terms of Rights

ARTICLE 5 Limitations on Number of Rights and Date of Grant

ARTICLE 6 Appreciation Amount

ARTICLE 7 Payment of Appreciation Amount

ARTICLE 8 Nature of Rights

ARTICLE 9 Termination of Rights

ARTICLE 10 Adjustment to Rights

ARTICLE 11 Termination and Amendment

ARTICLE 12 Rights Agreement

ARTICLE 13 Miscellaneous Provisions

ARTICLE 14 Definitions

AZZ incorporated, a Texas corporation (the “Company”), hereby establishes and sets forth the terms of the AZZ incorporated, FISCAL YEAR 2005 STOCK APPRECIATION RIGHTS PLAN FOR KEY EMPLOYEES (the “Plan”) to be effective March 1, 2004.

ARTICLE I. PURPOSE OF PLAN

The purpose of this Plan is to enable the Company to attract and retain key employees of the highest caliber by offering to them an opportunity to share in increases in the value of the Company to which they contribute. This Plan will seek to accomplish this purpose by granting such employees stock appreciation rights (collectively, the “Rights” and individually, a “Right”), which will be associated with shares of common stock of the Company, one dollar ($1.00) par value (the “Common Stock”), and which will be subject to all of the terms and conditions contained in this Plan.

ARTICLE 2. ADMINISTRATION OF PLAN

2.1 This Plan shall be administered by the Compensation Committee of the Board of Directors of the Company (the “Administrative Committee”).

2.3 The Administrative Committee shall have the following rights and powers:

AZZ incorporated FISCAL YEAR 2005

STOCK APPRECIATION RIGHTS PLAN FOR KEY EMPLOYEES

Page 2

ARTICLE 3. ELIGIBILITY AND GRANT

3.1 An individual shall be eligible to participate in this Plan provided that such individual (i) is an employee of the Company or a Subsidiary of the Company (as defined below), (ii) is determined by the Administrative Committee to be a key employee of the Company or a Subsidiary of the Company, and (iii) is selected by the Administrative Committee to receive Rights under this Plan.

3.2 A key employee of the Company so selected by the Administrative Committee may be granted a Right only by a written Stock Appreciation Rights Agreement signed by the Company and such key employee, in form and substance approved by the Administrative Committee, in accordance with Article 12 hereof. Each key employee of the Company who so enters into a written Stock Appreciation Rights Agreement with the Company shall sometimes be referred to in this Plan as a “Holder.”

ARTICLE 4. TERMS OF RIGHTS

Each Right granted to a Holder selected by the Administrative Committee in accordance with Section 3 shall have the following terms:

4.1 The Right shall be granted effective as of the effective date of the Stock Appreciation Rights Agreement evidencing the grant of the Right;

4.2 The Right shall be associated with one share of Common Stock;

4.3 Unless it earlier terminates as provided in Section 9, the Right shall vest (if the Holder is still employed by the Company at such time) upon the public release of financial results by the Company for its fiscal year ending on February 28, 2007 (the “Normal Vesting Date”) or (if the Holder is still employed by the Company at such time) upon the occurrence of an Accelerating Event under Section 10.2, which shall accelerate vesting (the “Accelerated Vesting Date”) as provided in Section 10.2;

AZZ incorporated FISCAL YEAR 2005

STOCK APPRECIATION RIGHTS PLAN FOR KEY EMPLOYEES

Page 3

ARTICLE 5. LIMITATIONS ON NUMBER OF RIGHTS AND DATE OF GRANT

5.1 The aggregate number of Rights that may be granted under this Plan shall be one hundred fifteen thousand (115,000). This number shall be subject to any adjustment required or permitted pursuant to the provisions of Section 10.

5.2 No Rights may be granted under this Plan after March 31, 2004.

ARTICLE 6. APPRECIATION AMOUNT

ARTICLE 7. PAYMENT OF APPRECIATION AMOUNT

AZZ incorporated FISCAL YEAR 2005

STOCK APPRECIATION RIGHTS PLAN FOR KEY EMPLOYEES

Page 4

ARTICLE 8. NATURE OF RIGHTS

ARTICLE 9. TERMINATION OF RIGHTS

All of the Rights of a Holder shall terminate if the Holder sells, assigns, pledges or otherwise transfers, or attempts to sell, assign, pledge or otherwise transfer, any Rights or any other rights that the Holder may have under this Plan; provided, however, that the foregoing shall not apply to a transfer occurring upon the death of the Holder pursuant to the will of the Holder or applicable laws of descent and distribution or to a transfer or assignment pursuant to a qualified domestic relations order (within the meaning of Section 414(p) of the Code). Additionally, all the rights of a Holder shall terminate if the Holder ceases to be an employee (of either the Company or one of its Subsidiaries) unless such termination of employment is due to death, Permanent Disability or Termination Without Cause. Termination of the Rights of a Holder under this Section shall terminate any rights to unpaid Appreciation Amounts.

ARTICLE 10. ADJUSTMENTS TO RIGHTS

AZZ incorporated FISCAL YEAR 2005

STOCK APPRECIATION RIGHTS PLAN FOR KEY EMPLOYEES

Page 5

Rights, the Administrative Committee may declare a Restructuring Event to have occurred, in which case an Accelerated Vesting Date will be established as provided in Section 10.2(i).

10.2 In the event of (i) a Restructuring Event, (ii) the dissolution or liquidation of the Company, a merger or other reorganization of the Company with one or more entities as a result of which the Company will not be the Surviving Entity, or a sale of all or substantially all of the assets of the Company, (iii) a Change in Control, (iv) a voluntary or involuntary petition is filed for or against the estate of the Holder under the bankruptcy laws of the United States or under the insolvency laws of any state, and in the case of an involuntary petition, the petition is not dismissed within sixty (60) days following the date of filing thereof, or (v) the termination of the employment of a Holder due to death, Permanent Disability (as defined below) or Termination Without Cause, (each an “Accelerating Event”), an Accelerated Vesting Date shall be established and a period (an “Accelerated Determination Period”) for the determination of the FMV shall be established as follows:


Accelerating Event	Accelerated Vesting Date	Accelerated Determination Period and FMV
(i) A Restructuring Event.	Date of such formal action as may be required to cause the material alteration in the Company’s capital structure.	Closing Price of one share of Common Stock on the New York Stock Exchange on the last day before the Vesting Date on which shares of Common Stock traded shall be the FMV.

(ii) Dissolution, liquidation, merger or other reorganization in which the Company is not the Surviving Entity.	Date of Filing of Articles of Dissolution or Articles of Merger or other documents formalizing a reorganization.	Closing Price of one share of Common Stock on the New York Stock Exchange on the last day before the Vesting Date on which shares of Common Stock traded shall be the FMV.

(iii) Change in Control.	Public announcement of an event constituting a Change in Control.	The average of the closing prices of one share of the Common Stock on the New York Stock Exchange for those days on which it trades during the fifteen (15) calendar days immediately following the Accelerated Vesting Date shall be the FMV.


AZZ incorporated FISCAL YEAR 2005 STOCK APPRECIATION RIGHTS PLAN FOR KEY EMPLOYEES		Page 6


(iv) Bankruptcy	The date a voluntary petition is filed or sixty days following the date of filing of an involuntary petition, if not dismissed by that date.	The average of the closing prices of one share of the Common Stock on the New York Stock Exchange for those days on which it trades during the fifteen (15) calendar days immediately following the Accelerated Vesting Date shall be the FMV.

(v) Termination of employment due to death, Permanent Disability or Termination Without Cause.	The last day of the Holders’s employment by the Company.	The average of the closing prices of one share of the Common Stock on the New York Stock Exchange for those days on which it trades during the fifteen (15) calendar days immediately following the Accelerated Vesting Date shall be the FMV.

ARTICLE 11. TERMINATION AND AMENDMENT

ARTICLE 12. RIGHTS AGREEMENT

Rights granted hereunder shall be evidenced by a Stock Appreciation Rights Agreement designating the name of the Holder, the number of Rights granted to the Holder, the method of determining the Base Value and the Normal Vesting Date and an Accelerated Vesting Date of the Rights, and such other terms, conditions and provisions not inconsistent with the terms and conditions of this Plan as the Administrative Committee deems advisable.

ARTICLE 13. MISCELLANEOUS PROVISIONS

13.1 Nothing contained in this Plan shall obligate the Company to employ a Holder for any period nor shall this Plan interfere in any way with the right of the Company to reduce such Holder’s compensation or benefits.

13.2 Subject to Section 8, the provisions of this Plan shall inure to the benefit of and be binding upon each Holder and the heirs, successors and assigns of each Holder.

AZZ incorporated FISCAL YEAR 2005

STOCK APPRECIATION RIGHTS PLAN FOR KEY EMPLOYEES

Page 7

13.4 This Plan shall be construed, administered and enforced in accordance with the laws of the United States, to the extent applicable hereto, as well as the laws of the State of Texas.

13.5 No action taken under the Plan by the Administrative Committee shall be legally binding on a Holder if it is not taken in good faith.

ARTICLE 14. DEFINITIONS

14.1 As used herein, the following terms have the meaning hereinafter set forth unless the context clearly indicates to the contrary:

(a)	“Change in Control” means one or more of the following events:

(i)

Any person within the meaning of Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) other than the Company (including its affiliates, directors or executive officers) has become the beneficial owner, within the meaning of Rule 13d-3 under the Exchange Act, of 50 percent or more of the combined voting power of the Company’s then outstanding Common Stock and any other class or classes of the Company’s outstanding securities ordinarily entitled to vote in elections of directors (collectively, “Voting Securities”) (other than through the purchase of Voting Securities from the Company); or

(ii)

(iii)

(b)	“Code” means the Internal Revenue Code of 1986, as amended.

AZZ incorporated FISCAL YEAR 2005

STOCK APPRECIATION RIGHTS PLAN FOR KEY EMPLOYEES

Page 8

(c)	“Permanent Disability” has the meaning provided for that term in Section 22(e)(3) of the Code.

(d)	“Subsidiary” of the Company means an entity directly or indirectly controlled by the Company.

(e)

“Surviving Entity” means an entity continuing after a merger, consolidation or other reorganization to which the Company is a party, more than fifty percent (50%) of the outstanding voting securities of which are owned in the aggregate by persons who were shareholders of the Company prior to the merger, consolidation or reorganization.

(f)

“Termination Without Cause” means termination of employment of an employee for a reason other than: (i) conviction of such employee of a crime involving moral turpitude or a crime for which a term of imprisonment in a federal or state penitentiary is an available sentence, (ii) commission by such employee of any willful malfeasance or gross negligence in the discharge of such employee’s duties owed to the Company or any of its Subsidiaries that has a material adverse effect on the Company or any of its Subsidiaries, their business or reputations, or (iii) failure by such employee, as determined by the Board of Directors, to correct within five days after written notice, any specific failure in performance of the duties of the employee owed to the Company or any of its Subsidiaries.

Adopted by the Compensation Committee on April 6, 2004.

AZZ incorporated FISCAL YEAR 2005

STOCK APPRECIATION RIGHTS PLAN FOR KEY EMPLOYEES

Page 9

EXHIBIT 31.1

CERTIFICATIONS

I, David H. Dingus, certify that:

I have reviewed this quarterly report on Form 10-Q of AZZ incorporated.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have;

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made know to us by others within those entities, particularly during the period in which this report is being prepared;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions);

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date		September 21, 2004

By		/s/ David H. Dingus
		President and Chief Executive Officer
		David H. Dingus

EXHIBIT 31.2

CERTIFICATIONS

I, Dana L. Perry, certify that:

I have reviewed this quarterly report on Form 10-Q of AZZ incorporated.

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions);

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date		September 21, 2004

By		/s/ Dana L. Perry
		Vice President and Chief Financial Officer
		Dana L. Perry

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, David H. Dingus, the President and Chief Executive Officer of AZZ incorporated (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the period ended August 31, 2004 (the “Report”). The undersigned hereby certifies that:

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: 9/21/04		/s/ David H. Dingus
		David H. Dingus
		President and Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Dana Perry, the Vice President and Chief Financial Officer of AZZ incorporated (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the period ended August 31, 2004 (the “Report”). The undersigned hereby certifies that:

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: 9/21/04		/s/ Dana Perry
		Dana Perry
		Vice President and Chief Financial Officer

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