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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the Fiscal Year Ended: February 29, 2004

Commission File No. 1-12777

AZZ incorporated

(Exact name of registrant as specified in its charter)

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

Securities registered pursuant to section 12(b) of the act:

Securities registered pursuant to section 12(g) of the act: None

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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

The aggregate market value of Common Stock held by non-affiliates on May 17, 2004, was approximately $75,406,000. As of May 17, 2004, there were 5,236,496 shares of AZZ incorporated Common Stock $1.00 par value outstanding.

Documents Incorporated By Reference

Part III incorporates information by reference from the Proxy Statement for the 2004 Annual Meeting of Shareholders of Registrant.

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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.

PART I

Item 1. Business

AZZ incorporated (“AZZ” or the “Company”) was established in 1956 and incorporated under the laws of the State of Texas. The Company is an electrical equipment and components manufacturer serving the global markets of power generation, transmission and distribution, and the general industrial markets as well as a leading provider of hot dip galvanizing services to the steel fabrication market nationwide.

The Company offers products through two distinct business segments, the Electrical and Industrial Products Segment and the Galvanizing Services Segment.

Electrical and Industrial Products Segment

The Electrical and Industrial Products Segment produces highly engineered specialty electrical products as well as lighting and tubular products. The Company markets and sells its products throughout the global market place. The electrical products of this segment are defined as products that are designed, manufactured and configured to distribute electrical power to and from generators, transformers, switching devices or other electrical configurations. These electrical systems are supplied to the power generation, power transmission and power distribution markets as well as the general industrial market. While serving many of the same markets, the industrial products are defined as industrial lighting and tubular products used for petro-chemical and industrial applications. Lighting products are provided to the petroleum, food processing, and power generation industries and to industrial industries with unique lighting challenges. The principal market for tubular products is the petroleum industry. The markets for the Company’s Electrical and Industrial Products Segment are highly competitive and consist of a few large multinational companies, as well as numerous small independents. Competition is based primarily on product quality, range of product line, price and service. While some of these companies are much larger and better financed than the Company, the Company believes that it can compete favorably with them. Copper, aluminum and steel are the primary raw materials used in this segment and are readily available. This segment’s products are sold through manufacturers’ representatives and the Company’s internal sales force. This segment is not dependent on any single customer and the loss of any single customer would not have a material adverse effect on consolidated revenues or net income of the Company. Backlog of orders was approximately $53.1 million at February 29, 2004, $49.1 million at February 28, 2003 and

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$85.3 million at February 28, 2002. All of the year-end backlog should be delivered during the next 18 months. Orders included in the backlog are represented by contracts and purchase orders that the Company believes to be firm. Total employment in this segment is 567 persons.

Galvanizing Services Segment

The Galvanizing Services Segment provides hot dip galvanizing to the steel fabrication industry through facilities located throughout the South and Southwest United States. The eleven galvanizing plants of the Company are located in Texas, Louisiana, Alabama, Mississippi, Arkansas, and Arizona. Hot dip galvanizing is a metallurgical process by which molten zinc is applied to a customer’s material. The zinc bonding provides corrosion protection of fabricated steel for extended periods of up to 50 years. Galvanizing is a highly competitive business and the Company competes with other galvanizing companies, captive galvanizing facilities operated by manufacturers, and alternate forms of corrosion protection such as paint. The Company is limited, to some extent, in its galvanizing market to areas within a relatively close proximity of its existing locations due to freight cost. Zinc, the principal raw material used in the galvanizing process, is readily available, but has volatile pricing. The Company manages its exposure to commodity pricing of zinc by utilizing contracts with zinc suppliers that include protective caps to guard against rising commodity prices. This segment typically serves fabricators and/or manufacturers involved in the highway construction, electrical utility, transportation, water treatment, agriculture, petrochemical and chemical, pulp and paper industries, and numerous OEM’s. The market in general is broken into two major categories, being large structural steel projects and custom fabrication. This segment is not dependent on any single customer and the loss of any customer would not have a material adverse effect on consolidated revenues or net income of the Company. The backlog of galvanizing orders generally is nominal due to the short time requirement involved in the process. Total employment in this segment is 392 persons.

General

The Company does not have a material portion of business that may be subject to renegotiations of profits or termination of contracts or subcontracts at the election of the government. There were no material amounts spent on research and development activities during the proceeding three fiscal years.

Environmental

The Company is subject to various environmental protection reviews by state and federal government agencies. The ultimate liability, if any, which might result from such reviews or for additional clean-up and remediation expenses cannot presently be determined; however, as a result of an internal analysis and information developed from prior clean-up efforts, management believes the results of the reviews will not have a material impact on the Company and that the recorded reserves for estimated costs are adequate. The Company has reserved $505,000 and $561,000 as of February 29, 2004 and February 28, 2003, respectively, for estimated costs related to environmental protection and regulatory compliance. In order to maintain permits to operate certain of the Company’s facilities, future capital expenditures for equipment may be required to meet new or existing environmental regulations.

Legal

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.

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Executive Officers of the Registrant

Each executive officer was elected by the Board of Directors to hold office until the next Annual Meeting or until his successor is elected. There are no family relationships between Executive Officers of the Registrant.

Available Information

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and its rules and regulations. The Exchange Act requires us to file reports, proxy statements and other information with the SEC. Copies of these reports, proxy statements and other information can be inspected and copied at:

SEC Public Reference Room

450 Fifth Street, N.W.

Room 1024

Washington, D.C. 20549

You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain copies of any material we have filed with the SEC by mail at prescribed rates from:

Public Reference Section

Securities and Exchange Commission

450 Fifth Street N.W.

Washington, D.C. 20549-0004

You may obtain these materials electronically by accessing the SEC’s Website on the Internet at:

http://www.sec.gov

In addition, we make available, free of charge, on our internet Website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file this material with, or furnish it to, the SEC. You may review these documents, under the heading “Investor Relations,” subheading “SEC Filings,” by accessing our Website:

http://www.azz.com

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Also, reports and other information concerning us are available for inspection and copying at:

New York Stock Exchange

20 Broad Street

New York, New York 10005

Corporate Governance

The Company’s Board of Directors, with the assistance of its Nominating and Corporate Governance Committee, has adopted Corporate Governance Guidelines that set forth the Board’s policies regarding corporate governance. You may review the Corporate Governance Guidelines under the Heading “Investor Relations,” subheading “Corporate Governance,” by accessing our Website:

http://www.azz.com

You may also obtain a copy of the Corporate Governance Guidelines by mailing a request to:

AZZ incorporated

Investor Relations

University Centre I, Suite 200

1300 South University Drive

Fort Worth, TX 76107

In connection with the Board of Directors’ responsibility to oversee our legal compliance and conduct, the board has adopted a Code of Ethics which applies to the Company’s officers, directors and employees. You may review the Code of Ethics under the heading “Investor Relations,” subheading “Corporate Governance,” by accessing our Website:

http://www.azz.com

You may also obtain a copy of the Code of Ethics by mailing a request to:

AZZ incorporated

Investor Relations

University Centre I, Suite 200

1300 South University Drive

Fort Worth, TX 76107

The Board of Directors has adopted charters for each of its Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. You may review a copy of the charters of each of these Committees under the heading “Investor Relations,” subheading “Corporate Governance,” by accessing our Website:

http://www.azz.com

You may also obtain a copy of the charters by mailing a request to:

AZZ incorporated

Investor Relations

University Centre I, Suite 200

1300 South University Drive

Fort Worth, TX 76107

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Item 2. Properties

The following table sets forth information about the Company’s principal facilities owned or leased on February 29, 2004:

Item 3. Legal Proceedings

Environmental Proceedings

The Company is subject to various environmental protection reviews by state and federal government agencies. The ultimate liability, if any, which might result from such reviews or additional clean-up and remediation expenses cannot presently be determined; however, as a result of an internal analysis and prior clean-up efforts, management believes the results will not have a material impact on the Company and that the recorded reserves for estimated losses are adequate. The Company has reserved $505,000 and $561,000 as of February 29, 2004 and February 28, 2003, respectively, for estimated cost related to environmental compliance. In order to maintain permits to operate certain of the Company’s facilities, future capital expenditures for equipment may be required to meet new or existing environmental regulations.

Other 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 4. Submission of Matters to a Vote of Security Holders

No matter was submitted during the fourth quarter of the fiscal year ended February 29, 2004, to a vote of security holders through the solicitation of proxies or otherwise.

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PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

The common stock, $1.00 par value, of Registrant (“Common Stock”) is traded on the New York Stock Exchange and its symbol is AZZ. The Company was listed on the New York Stock Exchange and started trading on March 20, 1997. Prior to that date, the Company’s stock traded on the NASDAQ National Market.

The following table sets forth the high and low sales prices of the Company’s Common Stock on the New York Stock Exchange on a quarterly basis for the Company’s two fiscal years ended February 29, 2004 and February 28, 2003. No dividends were declared during that period.

Effective January 7, 1999, the Board of Directors approved a stock rights plan, which authorized and declared a dividend distribution of one right for each share of common stock outstanding at the close of business on February 4, 1999. The rights are exercisable at an initial exercise price of $60, subject to certain adjustments as defined in the agreement, if a person or group acquires 15% or more of the Company’s common stock or announces a tender offer that would result in ownership of 15% or more of the common stock. Alternatively, the rights may be redeemed at one cent per right at any time until ten business days following the first public announcement of the acquisition of 15% of the Company’s common stock. The rights expire on January 7, 2009.

The approximate number of holders of record of common stock of Registrant at May 17, 2004 was 690.

Item 6. Selected Financial Data

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Item 7. Management’s Discussion and Analysis of Financial Condition And Results of Operations

Overview

AZZ incorporated (the “Company”) operates two distinct segments, the Electrical and Industrial Products Segment and the Galvanizing Services Segment. The Electrical and Industrial Products Segment serves the power generation, transmission and distribution markets as well as the general industrial market. The Galvanizing Services Segment consists of eleven hot dip galvanizing facilities located throughout the South and Southwest United States that provides a value added galvanizing service to the steel fabrication industry.

For the fiscal year-ended February 29, 2004, the Company recorded revenues of $136.2 million compared to the prior year’s revenues of $183.4 million. Approximately 65% of the Company’s revenues were generated from the Electrical and Industrial Products Segment and approximately 35% were generated from the Galvanizing Services Segment. Net income for fiscal 2004 was $4.3 million compared to $8.6 million in the fiscal 2003. Net income as a percent of sales was 3.1% for fiscal 2004 as compared to 4.7% for fiscal 2003. The reduction in net income as a percentage of sales was primarily due to lower operating margins in the Electrical and Industrial Products Segment. The lower operating margins for this segment are a reflection of the markets in which we participate. These markets continue to be very competitive as a result of the capacity expansion that occurred during the strong power generation market and has produced more capacity than can be absorbed by the current market. Earnings per share decreased by 51.5% to $.79 per share for fiscal 2004 compared to $1.63 per share in fiscal 2003, on a diluted basis.

Results of Operations

Year ended February 29, 2004 (2004) compared with year ended February 28, 2003 (2003)

Revenues

The Company’s consolidated net revenues for fiscal 2004 decreased by $47.2 million or 26%, as compared to fiscal 2003.

The Electrical and Industrial Products Segment produces highly engineered specialty products supplied to the power generation, power transmission, power distribution markets and general industrial markets as well as lighting and tubular products to the industrial and petroleum markets. The segment recorded revenues for fiscal 2004 of $88.9 million, a decrease of 34% below the fiscal 2003 results of $134.9 million. The reduced revenues result primarily from lower demand from the domestic power generation market in fiscal 2004 as compared to fiscal 2003. This segment has worked through the backlog that was related to the domestic power generation projects. In addition to the lack of new domestic power generation projects, the low capital spending levels in the industrial market in fiscal 2004 had a negative impact on this segment’s revenues. The Federal Reserve Industrial Capacity Utilization report, while showing improvement in recent months, still remains below 80% utilization. Factory utilization was at 76.6% at February 29, 2004 an increase from the 75.7% posted at November 30, 2003. A return to utilization levels experienced between 1992 and 2000, which averaged 82.6%, would have a positive impact on many of this segment’s operations, which are dependant on the industrial market. The Company has continued to intensify its efforts to increase its presence in international markets and improve its position in industrial and utility markets through improvements in this segment’s distribution networks. In fiscal 2004, there were some encouraging results from the efforts in the international markets with the consummation of a co-branding and co-operative agreement with Jiangsu Changjiang Electric Group Co., Ltd. of China, and improved representation in the Middle East and Asia. These programs will better position the Company to take advantage of these markets, which are currently experiencing growth.

The Electrical and Industrial Products Segment ended fiscal 2004 with a backlog of $53.1 million, an increase of 8% as compared to fiscal 2003 backlog of $49.1 million. The segment recorded a book-to-ship ratio of 1.03 to 1 for fiscal 2004 as compared to .80 to 1 in the prior year. The backlog continues to be heavily weighted towards the distribution market. The backlog was aided by bookings for this segment’s high voltage bus duct product during the later part of fiscal 2004. Despite some modest improvements in our markets, as

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indicated by the book-to-ship ratio, they still remain extremely competitive and price sensitive as the capacity expansion that occurred during the strong power generation market has resulted in much more capacity than can be absorbed by the current market demand. Going into fiscal 2005, the Company’s major concern for the Electrical and Industrial Products Segment remains its ability to sustain the book-to-ship ratio equivalent to the one that was obtained in fiscal 2004.

The Company’s Galvanizing Services Segment, which is made up of eleven hot dip galvanizing facilities, generated revenues of $47.3 million, a 3% decrease from the prior year’s revenues of $48.5 million. The decline in revenue for fiscal 2004 was created by the increase in steel prices during the fourth quarter, which impacted many of our steel fabrication customers and delayed some scheduled projects. Due to this segment’s broad customer base, and multiple locations it was able to minimize the impact of the increased steel prices on its operations. As steel prices stabilize, revenues should return to levels experienced in fiscal 2003 and any improvements in the economy or the industrial market should provide additional opportunities for increased revenues.

Operating Income

The Company’s consolidated operating income (see note 12 to Note to Consolidated Financial Statements) decreased 37% to $15 million in fiscal 2004 as compared to $23.8 million in fiscal 2003. Consolidated operating margins as a percent of sales declined in fiscal 2004 to 11% as compared to fiscal 2003 operating margins of 13%. The decline in operating income and margins was the direct result of lower revenues, primarily in the Electrical and Industrial Segment and intense competition in both of the Company’s segments, which again resulted from difficult market conditions. The Company has sized its operations in both of its segments to reflect the extremely competitive conditions facing each of them and has continued to improve operating efficiencies which should result in improved financial performance. While significant progress has been made in this area, the Company continues to search out and seek additional improvements. During the fourth quarter of fiscal 2004, the Company began the implementation of a new ERP system, which is scheduled for completion by the end of fiscal 2005. Once the conversion is completed additional efficiencies should be recognized. The Electrical and Industrial Products Segment generated 42% of the operating income for fiscal 2004, while the Galvanizing Services Segment produced the remaining 58%.

Operating income for the Electrical and Industrial Products Segment declined $8.5 million or 57% for fiscal 2004, to $6.4 million as compared to $14.9 million for fiscal 2003. Operating margins for this segment declined to 7.2% for the current year as compared to 11% for fiscal 2003. The operating profits and margins were significantly impacted by a 34% reductions in revenues coupled with continued price competition within the markets in which these products are sold. While the Company continued to implement operational efficiencies and cost reductions it could not offset the dramatic reductions in revenues. The Company continues to align and consolidate resources to match current market conditions, while still maintaining its ability to capitalize on opportunities that arise as market conditions improve.

Operating income for the Galvanizing Service Segment declined $321,000 or 4% for fiscal 2004, to $8.6 million as compared to $9 million for the prior year. Operating margins were consistent at 18% for the compared periods of fiscal 2004 and 2003. The operating income decline is attributable to a slight reduction in revenues and increased cost for natural gas. This segment continues to benefit from the sizing of its operations to match market conditions. The recent metal commodity pricing including the cost of zinc is of concern. This increase may have an adverse impact on this segment’s operating results in Fiscal 2005. Difficult market conditions may inhibit the ability to fully recover through increased selling prices the anticipated increases in the cost of zinc. It is difficult to determine at this time what the overall customer reaction will be to our attempted recovery of the increased cost of zinc. This is a critical factor that impacts all participants in the hot dip galvanizing business.

General Corporate Expense

General corporate expenses were $5.9 million for fiscal 2004 and fiscal 2003. As a percent of sales, general corporate expenses were 4.3% for fiscal 2004 as compared to 3.2% in fiscal 2003. The percentage increase

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results from a 26% reduction in revenues for fiscal 2004. During fiscal 2004, other income was recorded in the amount of $298,000 for the gain on the sale of vacant land located at two of the Company’s facilities

Interest expense for fiscal 2004 was $2.4 million, a decrease of 39% as compared to $3.9 million in fiscal 2003. The decrease in interest expense resulted from significant reductions of outstanding debt and record low interest rates on our variable debt instruments. The Company ended fiscal 2004 with outstanding bank debt of $30.9 million, a decrease of 31% or $13.7 million as compared to the $44.6 million outstanding at the end of fiscal 2003. The Company’s long-term debt to equity ratio improved to .37 to 1 for fiscal 2004 as compared to .60 to 1 for fiscal 2003.

Provision For Income Taxes

The provision for income taxes reflects an effective tax rate of 38% for fiscal 2004 and 2003.

Year ended February 28, 2003 (2003) compared with year ended February 28, 2002 (2002)

Revenues

The Company’s consolidated net revenues for fiscal 2003 increased by $30.5 million or 20%, to $183.4 million, as compared to $152.9 million for fiscal 2002. Excluding the acquisitions made in the later part of fiscal 2002, revenues for fiscal 2003 declined 3% to $126.1 million, as compared to $130.5 million in fiscal 2002.

The Electrical and Industrial Products Segment recorded revenues for fiscal 2003 of $134.9 million, an increase of 31% over the fiscal 2002 results of $103.3 million. The full year of revenues received during fiscal 2003 from the Company’s fiscal 2002 acquisitions accounted for the increased revenues for this segment. Revenues from the acquisitions of Central Electric Company and Carter & Crawley, Inc. for the full year of operation in fiscal 2003 as compared to four months of operations in fiscal 2002 increased $34.8 million or 155%. Excluding the acquisitions, revenues for the Electrical and Industrial Products Segment decreased 4% to $77.6 million for fiscal 2003. The decline in revenue resulted from a weak industrial market for all of fiscal 2003 and a significant reduction in the fourth quarter in sales to the power generation market. The Company aggressively attempted to offset the downturn in the power generation market and weak industrial market with an increased presence in the international market place, an increased presence in the power distribution and transmission markets, as well as the industrial markets in general, but was hampered by the overall weak economic conditions and intense competition in all markets served.

The Electrical and Industrial Products Segment ended fiscal 2003 with a backlog of $49.1 million, a decrease of 43% from a backlog of $85.3 million at the end of fiscal 2002. The backlog excluding acquisitions decreased 60% to $18.6 million at the end of fiscal 2003. Activity levels for 2003 for the industry returned to levels prior to the dynamic expansion of the domestic power generation market as a result of deregulation.

The Company’s Galvanizing Services Segment generated revenues of $48.5 million, a 2% decrease from the prior year’s revenues of $49.6 million. The continuation of the weakness in the overall economic environment from fiscal 2002 prevented any internal growth in our Galvanizing Services Segment for fiscal 2003.

Operating Income

The Company’s consolidated operating income (see note 12 to Note to Consolidated Financial Statements) increased 10% to $23.8 million in fiscal 2003 as compared to $21.8 million in fiscal 2002. Improved operating income was the result of increased revenues from our Electrical and Industrial Products Segment and cost containments implemented across all of our operating segments. Consolidated operating margins as a percent of sales declined in fiscal 2003 to 13% from the previous years operating margins of 14.2%. The overall decrease in margins resulted from the softness and intense competition in the Electrical and Industrial Products Segment’s markets, as well as the closure of the Company’s Nashville facility. As a result of the changing market

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conditions, the Company implemented stringent cost controls, improved operating efficiencies, accelerated the assimilation of the prior year acquisitions, and aggressively pursued all market opportunities. With these actions, the Company has positioned itself to better manage operations under these market conditions, while maintaining it’s ability to capitalize on future improvements in the economy.

In the Electrical and Industrial Products Segment, operating income for fiscal 2003 increased to $14.9 million, an increase of 2% as compared to $14.6 million in fiscal 2002. These results were aided by the elimination in fiscal 2003 in accordance with SFAS No. 142 of goodwill amortization, which has been taken in the amount of $750,000 in fiscal 2002. Operating margins for this segment were 11% for fiscal 2003 as compared to 14.1% for fiscal 2002. Margins decreased for fiscal 2003 as compared to fiscal 2002 due to the softness in the markets served, the intense competition in our markets, and additional costs that were incurred with the closure of the Company’s facility located in Nashville, Tennessee and its consolidation with other Company operations.. The Company incurred $545,500 in cost associated with closing the Nashville facility. These cost consisted of a $280,000 write-off of the locations leasehold improvements, $207,500 lease termination costs, and $58,000 in severance cost paid. As of February 28, 2003, the operation was totally transferred to two of the Company’s other facilities.

In the Galvanizing Services Segment, operating income increased 25% to $9 million for fiscal 2003 as compared $7.2 million in fiscal 2002. Operating margins were 18% for fiscal 2003 as compared to 14% in fiscal 2002. These results were aided by the elimination in fiscal 2003 in accordance with SFAS No. 142 of goodwill amortization which has been taken in the amount of $490,000 for fiscal 2002. During fiscal 2003, the segment benefited from the stabilization of natural gas and reduced zinc costs. Costs containments implemented in fiscal 2002 and continued in fiscal 2003 contributed to the higher margins experienced.

General Corporate Expense

General corporate expenses for fiscal 2003 were $5.9 million, a decrease of 8% from fiscal 2002. As a percent of sales, general corporate expenses were 3.2% for fiscal 2003 as compared to 4.2% in fiscal 2002. The decrease is attributable to lower cost for professional services and employee benefit programs.

Interest expense for fiscal 2003 was $3.9 million, an increase of 64% as compared to $2.4 million fiscal 2002. The increased interest expense relates to higher levels of debt created by the prior years acquisitions. The Company ended fiscal 2003 with outstanding bank debt of $44.5 million, a decrease of 30% or $19 million as compared to the $63.5 million outstanding at the end of fiscal 2002.

Provision For Income Taxes

The provision for income taxes reflects an effective tax rate of 38% for fiscal 2003 and 2002.

Liquidity and Capital Resources

The Company has historically met its liquidity and capital resource 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, debt repayment and possible future acquisitions.

The Company’s operating activities generated cash flows of approximately $15 million, $22.9 million, and $14.2 million during fiscal 2004, 2003, and 2002, respectively. Cash flow from operations in fiscal 2004 included net income in the amount of $4.3 million, depreciation and amortization of intangibles and debt issue costs in the amount of $6.1 million, and net changes in operating assets and liabilities and other increases in cash flows from operations of $4.6 million. Due to reduced business levels, primarily in our Electrical and Industrial Products Segment in fiscal 2004 as compared to fiscal 2003, the Company’s working capital requirements were reduced. By the continued efficient management of working capital, the Company was able to reduce accounts receivable,

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inventories, and revenues in excess of billings by $6.6 million, $900,000, and $2.2 million, respectively. Accounts receivable days outstanding for fiscal 2004 were 58 days as compared to 56 days in fiscal 2003 and inventory turns were 6.3 times for fiscal 2004 as compared to 6.4 times in fiscal 2003. The increase in cash flow from decreases in accounts receivable, inventories, and revenue in excess of billings was partially offset by decreases in accounts payable and accrued liabilities, and prepaid and other assets in the amount of $1.5 million, $4 million and $300,000, respectively. Increases in cash flows from changes in deferred tax liabilities, provision for bad debt, and other non-cash transactions accounted for the remaining $700,000 net change in operating assets and liabilities.

During fiscal 2004 cash flow from operations was used to make capital improvements of $3.6 million and to reduce debt by $13.7 million. The breakdown of capital spending by segment for fiscal 2004, 2003, and 2002 can be found in Note 12 of the Notes to Consolidated Financial Statements. In the fourth quarter of fiscal 2004, the Company began the implementation of a new ERP system, which is scheduled for completion in fiscal 2005. The capital expenditures in fiscal 2004 for the ERP system were $860,000 and it is estimated that additional capital outlay of approximately $2 million will be incurred in fiscal 2005 to complete the implementation. The Company received proceeds from the sale of property and equipment, consisting mainly of vacant land, in the amount of $725,000 and proceeds from the exercise of stock options in the amount of $1.1 million. There were no cash dividends declared or paid in fiscal 2004 and no resumption of a cash dividend is currently anticipated.

On November 1, 2001, the Company entered into 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. The availability under the revolving credit facility is contingent on asset-based collateral of inventories and accounts receivables. The remaining balance outstanding on the term-loan is payable in quarterly installments of $1.375 million through November 2006, with any remaining balance, which will be approximately $8.25 million in absence of any prepayments due December 2006. At the end of fiscal 2004, the Company had $23.4 million outstanding under the term note and $7.5 outstanding on the revolving credit facility. The revolving credit facility expires on November 1, 2005. At February 29, 2004, the Company had approximately $10.3 million available under the revolving credit facility.

On March 7, 2003, the Company amended its credit facility to reduce the amortization on the term note to $5.5 million annually from $