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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the Quarterly Period Ended: May 31, 2004

For the transition period from              to             

Commission File Number 1-12777

AZZ incorporated

(Exact name of registrant as specified in its charter)

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.

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AZZ incorporated

INDEX

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PART I. FINANCIAL INFORMATION

AZZ incorporated

CONSOLIDATED CONDENSED BALANCE SHEET

See Accompanying Notes to Consolidated Condensed Financial Statements

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PART I. FINANCIAL INFORMATION

AZZ incorporated

CONSOLIDATED CONDENSED INCOME STATEMENT

See Accompanying Notes to Consolidated Condensed Financial Statements

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PART I. FINANCIAL INFORMATION

AZZ incorporated

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW

See Accompanying Notes to Consolidated Condensed Financial Statements

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AZZ incorporated

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies

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

Total comprehensive income for the quarter ended May 31, 2003 was $903,599 consisting of net income of $882,989 and changes in accumulated other comprehensive income of $20,610.

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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 compensation for the three periods ended May 31, 2004 and 2003:

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A reserve has been established 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:

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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 period ended May 31, 2004, consolidated net revenues, increased 9%, as compared to the same period in fiscal 2004, to $39.7 million for the three-month period. For the quarter ended May 31, 2004, the Electrical and Industrial Products Segment contributed 70% of the Company’s revenues and the Galvanizing Services Segment generated 30% of the combined revenues.

Revenues for the Electrical and Industrial Products Segment increased $3.4 million or 14% for the three-month period ended May 31, 2004, as compared to the same period in fiscal 2003. The increased revenue was due to increased shipments to the power transmission and distribution market as well as a modest increase in shipments to the industrial market. The power generation and industrial automation markets remained at low levels.

The Electrical and Industrial Products Segment’s backlog was $51.9 million as of May 31, 2004, as compared to $45.7 million at May 31, 2003, an improvement of 13%. Backlog at February 29, 2004 was $53.1 million. The Company’s incoming orders totaled $38.5 million for a book to ship ratio of 97%. Incoming orders increased 17% as compared to the same period in fiscal 2003, and compare favorably to incoming orders in the fourth quarter of fiscal 2004, reflecting a 16% increase.

Revenues in the Galvanizing Services Segment were $12.1 million for the three-month period ended May 31, 2004 unchanged from the same period last year. The Galvanizing Services Segment was able to generate the same revenue for the three-month period as compared to the same period in the prior year on less production due to increased prices as a result of some easing of pricing pressures in their markets.

Consolidated operating income (net sales less operating expenses) increased $707,000 or 20% for the three-month period ended May 31, 2004 to $4.3 million as compared to $3.5 million for the same period in fiscal 2004. The Electrical and Industrial Products Segment generated 45% of the operating income for the third quarter of fiscal 2004, while the Galvanizing Services Segment produced the remaining 55%.

Operating income in the Electrical and Industrial Products Segment increased $370,000 or 24% for the three- month period ended May 31, 2004, to $1.9 million as compared to $1.5 million, for the same

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period in fiscal 2004. Operating margins benefited from the leverage that was obtained from the modest improvements in volumes. Operating margins also benefited from the resizing of our cost structure to better match business levels. Increasing cost of copper, aluminum, and steel adversely impacted the operating margins and partially offset previously implemented cost reductions for the first quarter ended May 31, 2004. As a result of difficult market conditions, this segment was unable to fully recover these increased costs through customer price increases.

In the Galvanizing Services Segment, operating income for the three-month period ended May 31, 2004 increased 17% or $336,000 to $2.3 million as compared to $2 million for the same period in fiscal 2004. Operating income and margins benefited from a favorable mix, cost containments, operational efficiencies, and some easing of pricing pressures. It is anticipated that during the second quarter of fiscal 2005 operating margins will be impacted by higher cost of zinc. The cost of zinc is estimated to increase approximately 17% as compared to cost recognized during the first quarter of fiscal 2005.

Consolidated general and administrative, and selling expenses (selling, general and administrative expense, and other (income) expense) for the three-month period ended May 31, 2004, increased $546,000 or 12.9% as compared to the same period in fiscal 2004. The increase relates to additional expenses related to our Enterprise Resource Planning software implementation in the amount of approximately $100,000 and higher professional services cost related to the implementation of Sarbanes-Oxley. In addition, the prior year quarter ended May 31, 2003 included the gain on the sale of vacant land in the amount of $95,000. As a percentage of sales, consolidated general and administrative, and selling expenses were 12% for the three-month period ended May 31, 2004, as compared to 11.6% for the three-month period in fiscal 2004. Without the gain from the sale of vacant land, the three-month period ended May 31, 2003 would have reflected, as a percentage of sales, consolidated general and administrative, and selling expense of 11.9% as compared to the 12% for the quarter ended May 31, 2004.

Net interest expense for the three-month period ended May 31, 2004 was $442,000, a decline of 34% compared to the same period in fiscal 2004. As of May 31, 2004, the Company had outstanding debt of $30 million, a decrease of $875,000 as compared to February 29, 2004 and a decrease of $10 million as compared to the same period in fiscal 2004. With the continued reductions of debt, the long-term debt to equity ratio improved to .35 to 1 for the current period as compared to .54 to 1 for the same period in fiscal 2004. Variable interest rates increased 5% to 3.50% for the period ended May 31, 2004 as compared to 3.32% last year.

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

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 $2.5 million for the three-month period ended May 31, 2004, as compared to $3.8 million for the same period in fiscal 2004. Net cash provided by operations was generated from $1.2 million in net income, $1.5 million in depreciation and amortization of intangibles and debt issue costs, and partially offset by a reduction in cash flow in the amount of approximately $.2 million from net changes in operating assets and liabilities and other adjustments. Accounts receivables and

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revenue in excess of billings balances increased for the period creating negative cash flow for these accounts in the amount of $2.8 million and $.3 million, respectively. The increases in these accounts are the result of increased revenues for the Company’s Electrical and Industrial Products Segment, primarily to the power transmission and distribution market. Accounts receivable days outstanding for the quarter ended May 31, 2004 were 56 days as compared to 58 days as February 29, 2004 and 57 days as of May 31, 2003. Positive cash flow was recognized due to decreased inventory and prepaid expense balances in the amount of $1.6 million and $.1 million, respectively, and increased balances for accounts payables and other accrued liabilities and income taxes, in the amount of $.5 million and $.6 million, respectively. The inventory turns improved to 8.85 for the period ended May 31, 2004 as compared to 6.4 at end of February 29, 2004 and 8.24 for the period ended May 31, 2003. Inventory turns improved as a result of increased shipments for the first quarter combined with improved management of raw materials.

For the three-month period ended May 31, 2004, capital improvements were made in the amount of $2 million and long-term debt was repaid in the amount of $.9 million. Approximately one-half of the capital money invested during the quarter relates to the Company’s new ERP system it is implementing. The Company received proceeds from the exercise of stock options in the amount of $.1 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, 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 May 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 May 31, 2004, the Company had $22 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 November 2006, with the remaining balance of approximately $8.25 million, in the absence of any prepayments, will be due on December 2006. At May 31, 2004, the Company had approximately $10.3 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 2.25% at May 31, 2004 and correlated to an interest rate of 5.82% on the term note and 3.50% on the revolving line of credit at May 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.

The Company utilizes interest rate swap agreements to protect against volatile interest rates and manage interest expense. At May 31, 2004, the Company had a $2.5 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 5.82%. At May 31, 2004, the notional amount of this swap was $15 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. At May 31, 2004 the fair value of the February 1999 swap was a liability of $80,000. 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 $217,000 as of May 31, 2004. The accumulated balance in other comprehensive income is a loss of $210,000, net of tax of $129,000, as of May 31, 2004. This amount will be charged to interest expense over the respective terms of the two swaps.

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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 May 31, 2004, the future minimum payments required under these operating leases are summarized as follows:

Long-term debt and letters of credit

As of May 31, 2004 the Company had outstanding debt in the amount of $30 million, which consisted of a $22 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 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:

At May 31, 2004, the Company had outstanding letters of credit in the amount of $1.7 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. In addition, as of May 31, 2004 a warranty reserve in the amount of $936,000 has been established to offset any future warranty claims.

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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 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.

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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.

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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

Attached is Exhibit 99.11, AZZ incorporated’s Press Release reporting the Company’s unaudited earnings and other selected financial information for the first quarter ended May 31, 2004, dated June 24, 2004.

Attached is Exhibit 99.12 Unaudited Financial and Other Statistical Information for the three-month period ended May 31, 2004, and Guidance for Fiscal Year 2005, which compiles AZZ incorporated’s unaudited financial and other statistical information for the quarter ended May 31, 2004 and provides forward looking guidance for the current fiscal year ending February 28, 2005. The guidance for the current fiscal year ending February 28, 2005 consists of either a projected range or management’s estimate of most likely results. These projections involve risk and uncertainties, the outcome of which cannot be foreseen at this time and, therefore, actual results may vary from these forecasts.

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.

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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.

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EXHIBIT

INDEX

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