What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-06-28 compared with 2022-12-29 · 120 added, 92 removed, 91 unchanged (70% of the section changed)

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All forecasts and projections in this document are “forward-looking statements,” and are based on management’s current expectations or beliefs.

From time to time, we may also provide oral and written forward-looking statements in other materials we release to the public, such as press releases, presentations to securities analysts or investors, or other communications by the Company.

other communications by the Company.

Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results.

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Architectural Framing Systems, Architectural Glass, Architectural Services and Large-Scale Optical (LSO).

During fiscal 2022, we conducted a strategic review of our business and the markets we serve in order to establish a new enterprise strategy with three key elements, as discussed below:

In fiscal 2022, we conducted a strategic review of our business and the markets we serve in order to establish a new enterprise strategy with three key elements, as discussed below:

Become the economic leader in our target markets.

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We are shifting from our historical, decentralized operating model, to one with center-led functional expertise that enables us to leverage the scale of the enterprise to better support the needs of the business.

We are establishing a Company-wide operating system with common tools and processes that are based on the foundation of Lean and Continuous Improvement.

We are establishing a Company-wide operating system with common tools and processes that are based on the foundation of Lean and Continuous Improvement, which we are calling "Apogee Management System or AMS".

This will be supported by a robust talent management program and a commitment to strong governance to ensure compliance and drive sustainable performance.

The comparative fiscal 2022 segment results for the Architectural Framing Systems and Architectural Services segments have been recast to reflect the move of the Sotawall business into the Architectural Services segment from the Architectural Framing Systems segment, effective at the start of the first quarter of fiscal 2023.

We have made significant progress toward these financial targets through the execution of our strategy.

We advanced our AMS initiatives, which have resulted in meaningful productivity improvements, particularly in Architectural Glass.

We increased our focus on differentiated products and services, and effectively managed pricing to share in the value we delivered for our customers.

We have focused on sustainable cost improvements and improvements to quality, service and delivery, while shifting mix toward more differentiated offerings.

We integrated the Sotawall business into the Architectural Services segment, in order to create a single, unified offering for larger custom curtainwall projects.

We advanced several initiatives to strengthen our core capabilities, driving the standardization of key business processes and systems.

We also relaunched our talent development and leadership training programs and added key talent across the organization.

The following selected financial data should be read in conjunction with the Company’s Form 10-K for the year ended February 25, 2023 and the consolidated financial statements, including the notes to consolidated financial statements, included therein.

Highlights of Third Quarter of Fiscal 2023 Compared to Third Quarter of Fiscal 2022

Consolidated net sales increased 10.1 percent, or $33.6 million, and 11.2 percent, or $110.6 million, for the three- and nine-month periods ended November 26, 2022, compared to the same periods in the prior year, primarily driven by flow-through from pricing actions taken to offset inflation within the Architectural Framing Systems and Architectural Glass segments.

Highlights of First Quarter of Fiscal 2024 Compared to First Quarter of Fiscal 2023

Consolidated net sales increased 1.4%, or $5.1 million, for the three-month period ended May 27, 2023, compared to the same period in the prior year, primarily driven by strong growth in the Architectural Glass segment, partially offset by a decline in the Architectural Services segment.

The relationship between various components of operations, as a percentage of net sales, is presented below:

Three Months Ended Nine Months Ended

November 26, 2022 November 27, 2021 November 26, 2022 November 27, 2021

Three Months Ended

May 27, 2023 May 28, 2022

Net sales 100.0 % 100.0 %

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Effective tax rate 25.0 % 26.0 %

Gross profit as a percent of sales (gross margin) was 23.5 percent for each of the three- and nine-month periods ended November 26, 2022, respectively, compared to 19.4 percent and 18.3 percent for the three- and nine-month periods ended November 27, 2021.

Both period improvements in gross margin were driven primarily by pricing actions that exceeded the inflation-related cost increases in the Architectural Framing Systems and Architectural Glass segments.

The nine-month period ended November 26, 2022, includes the benefits from restructuring actions completed in the second quarter of the prior year in the Architectural Glass and Architectural Framing Systems segments.

The prior-year periods included $3.6 million and $22.1 million of restructuring charges which were included in cost of sales and incurred during the three- and nine-month periods ended November 27, 2021.

Gross profit as a percent of sales (gross margin) was 25.7% for the three-month period ended May 27, 2023, compared to 24.0% for the three-month period ended May 28, 2022.

The improvement was driven primarily by strong performance in the Architectural Glass segment, partially offset primarily by lower margins in the Architectural Services and Architectural Framing segment.

Selling, general and administrative (SG&A) expenses

SG&A expenses as a percent of sales were 14.1 percent and 14.3 percent for the three- and nine-month periods ended November 26, 2022, respectively, compared to 14.1 percent and 15.2 percent for the prior year three- and nine-month periods.

SG&A decreased as a percent of sales compared to the nine-month period in the prior year primarily due to the benefits realized from previously completed restructuring actions.

SG&A expenses as a percent of sales was 16.4% for the three-month period ended May 27, 2023, compared to 14.7% for the prior year three-month period.

SG&A increased as a percent of sales compared to the three-month period in the prior year primarily due to an increase in compensation related expenses, higher consulting costs, and higher allowance for credit losses.

Interest expense

Interest expense as a percent of sales was 0.6% for the three-month period ended May 27, 2023, compared to 0.3% for the prior year three-month period, primarily due to an increase in interest rates for the current year period.

Income tax expense

The effective income tax rate in the third quarter of fiscal 2023 was 24.8 percent, compared to 21.7 percent in the same period last year, and 9.3 percent for the first nine months of fiscal 2023, compared to 19.6 percent in the prior year period.

In the second quarter of fiscal 2023, the Company claimed certain tax deductions, including a worthless stock loss deduction, related to its investment in Sotawall Limited, a Canadian subsidiary.

These deductions generated a net tax benefit of 13.7 million, and reduced our effective tax rate for the nine-month period of fiscal 2023 by approximately 14.8 percentage points.

The effective income tax rate in the first quarter of fiscal 2024 was 25.0%, compared to 26.0% in the same period last year, primarily due to an increase to the valuation allowance related to foreign net operating loss carryforwards in the prior year.

Segment Analysis

The following table summarizes net sales, operating income (loss) and operating margin by segment and consolidated total.

Three Months Ended

(In thousands, except percentages) May 27, 2023 May 28, 2022

Segment net sales

Architectural Framing Systems $ 164,162 $ 163,292

Three Months Ended Nine Months Ended

(In thousands) November 26, 2022 November 27, 2021 % Change November 26, 2022 November 27, 2021 % Change

Architectural Glass 97,202 76,265

Architectural Services 89,418 103,388

Large-Scale Optical 22,456 25,162

Intersegment eliminations (11,525) (11,472)

Net sales $ 361,713 $ 356,635

Segment operating income (loss)

Architectural Framing Systems $ 19,945 $ 23,665

Architectural Glass 16,521 5,169

Architectural Services (596) 2,927

Large-Scale Optical 5,525 6,498

Corporate and other (7,628) (5,043)

Operating income $ 33,767 $ 33,216

Segment operating margin

Architectural Framing Systems 12.1 % 14.5 %

Architectural Glass 17.0 6.8

Architectural Services (0.7) 2.8

Large-Scale Optical 24.6 25.8

Corporate and other N/M N/M

Operating income 9.3 % 9.3 %

N/M Indicates calculation not meaningful.

Architectural Framing Systems

Three Months Ended

(In thousands) May 27, 2023 May 28, 2022 % Change

Net sales $ 164,162 $ 163,292 0.5 %

Operating income 19,945 23,665 (15.7) %

Operating margin 12.1 % 14.5 %

Architectural Framing Systems net sales increased $23.6 million, or 16.6 percent, and $86.0 million, or 20.7 percent, for the three- and nine-month periods ended November 26, 2022, respectively, compared to the prior year periods, primarily driven by inflation-related pricing actions.

Operating margin increased 490 basis points and 630 basis points for the three- and nine-month periods of the current year, compared to the same periods in the prior year, reflecting improved pricing and mix, which more than offset the impact of inflation, and the benefits from restructuring actions completed in the prior year, which further strengthened our competitive position and more than offset the impact of cost inflation.

As of November 26, 2022, segment backlog was approximately $246 million, compared to approximately $286 million at the end of the prior quarter of the current fiscal year, and was approximately $269 million at the end of third quarter fiscal 2022.

Architectural Framing Systems net sales increased $0.9 million, or 0.5%, for the three-month period ended May 27, 2023, compared to the prior year period, driven by improved pricing and mix, which offset lower volume, as the segment continues to increase focus on target markets where it can provide differentiated offerings.

Operating margin decreased 240 basis points for the three-month period of the current year, compared to the same period in the prior year, primarily reflecting favorable timing of inventory flows and aluminum prices in the prior year, which did not repeat in this year's first quarter.

As of May 27, 2023, segment backlog was approximately $221 million, compared to approximately $243 million at the end of the prior quarter, and to approximately $310 million at the end of the first quarter of fiscal 2023.

Backlog represents the dollar amount of signed contracts or firm orders, generally as a result of a competitive bidding process, which may be expected to be recognized as revenue in the future.

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In addition to backlog, we have a substantial amount of projects with short lead times that book-and-bill within the same reporting period and are not included in backlog.

We have strong visibility into future business commitments beyond backlog, as projects awarded, verbal commitments and bidding activities are not included in backlog.

Architectural Services

Three Months Ended Nine Months Ended

(In thousands) November 26, 2022 November 27, 2021 % Change November 26, 2022 November 27, 2021 % Change

We have visibility into future business commitments beyond backlog, as projects awarded, verbal commitments and bidding activities are not included in backlog.

Architectural Glass

Three Months Ended

(In thousands) May 27, 2023 May 28, 2022 % Change

Net sales $ 97,202 $ 76,265 27.5 %

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Operating margin 17.0 % 6.8 %

Architectural Services net sales decreased $3.4 million, or 3.2 percent for the three-month period ended November 26, 2022, respectively, compared to the same period in the prior year, driven by decreased project activity.

In the comparative nine-month period ended November 26, 2022 net sales increased $19.6 million, or 6.7 percent compared to the same period in the prior year, driven by increased volume from executing projects in backlog.

Operating margin decreased 150 basis points and 200 basis points in the three- and nine-month periods of the current year, respectively, compared to the same periods in the prior year, primarily reflecting lower profitability on legacy Sotawall projects and costs related to investments to support future growth, partially offset by higher volume.

As of November 26, 2022, segment backlog was approximately $741 million, compared to approximately $785 million at the end of the prior quarter of the current fiscal year, and was approximately $722 million at the end of third quarter of fiscal 2022.

Backlog, a non-GAAP financial measure, and the implication thereof is described within the Architectural Framing Systems discussion above.

Architectural Glass

Three Months Ended Nine Months Ended

(In thousands) November 26, 2022 November 27, 2021 % Change November 26, 2022 November 27, 2021 % Change

Net sales increased $20.9 million, or 27.5%, for the three-month period ended May 27, 2023, compared to the same period in the prior year, driven by improved pricing, higher volume, and a more favorable sales mix, reflecting the segment's strategic shift to emphasize premium, high-performance products.

Operating margin increased by 10.2 percentage points primarily driven by improved pricing, favorable mix, and increased volume, partially offset by cost inflation.

Architectural Services

Three Months Ended

(In thousands) May 27, 2023 May 28, 2022 % Change

Net sales $ 89,418 $ 103,388 (13.5) %

Operating income (loss) 7,461 (1,277) 684.3 % 19,087 (16,143) 218.2 %

Operating (loss) income (596) 2,927 N/M

Operating margin (0.7) % 2.8 %

Net sales increased $7.3 million, or 9.8 percent, for the three-month period ended November 26, 2022, compared to the same period in the prior year, primarily reflecting improved pricing and mix.

Net sales decreased $1.5 million, or 0.6 percent for the nine-month period ended November 26, 2022, compared to the same period in the prior year, primarily reflecting lower volume, mostly offset by improved pricing and mix.

In the current quarter, the segment had operating income of $7.5 million and operating margin of 9.1 percent, compared to operating loss of $1.3 million and negative operating margin of 1.7 percent in the same period of the prior year.

The current year third quarter reflects improved pricing, mix and productivity gains, which combined to offset the impact of inflation, while the prior year period included $3.5 million of restructuring costs.

For the nine-months ended November 26, 2022, the segment had operating income of $19.1 million and operating margin of 8.1 percent, compared to operating loss of $16.1 million and negative operating margin of 6.8 percent in the same period of the prior year, primarily related to the restructuring costs of $20.9 million incurred during the prior fiscal year.

In addition, while the current-year period reflects improved pricing, productivity gains and the positive impacts of restructuring actions completed during the prior year, all of which offset the impact of inflation.

N/M Indicates calculation not meaningful.

Architectural Services net sales decreased $14.0 million, or 13.5% for the three-month period ended May 27, 2023, compared to the same period in the prior year, primarily reflecting lower volume.

In the current quarter, the segment had negative operating margin of 0.7%, compared to operating margin of 2.8% in the same period of the prior year, primarily due to the impact of lower estimated profitability levels on certain projects, the unfavorable leverage impact of lower net sales, and severance costs related to a facility closure.

As of May 27, 2023, segment backlog was approximately $709 million, compared to approximately $727 million at the end of the prior quarter, and to approximately $681 million at the end of the first quarter of fiscal 2023.

Backlog, a non-GAAP financial measure, and the implications thereof, are described within the Architectural Framing Systems discussion above.

Large-Scale Optical (LSO)

Three Months Ended Nine Months Ended

(In thousands) November 26, 2022 November 27, 2021 % Change November 26, 2022 November 27, 2021 % Change

Three Months Ended

(In thousands) May 27, 2023 May 28, 2022 % Change

Net sales $ 22,456 $ 25,162 (10.8) %

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Operating margin 24.6 % 25.8 %

LSO net sales decreased $0.7 million, or 2.5 percent, for the three-month period ended November 26, 2022 compared to the same period in the prior year driven by lower volume.

In the comparative nine-month period ended November 26, 2022, net sales increased $1.9 million, or 2.5 percent, compared to the same period in the prior year, primarily driven by improved pricing.

Operating margin increased 480 basis points and 240 basis points in the three- and nine-month periods of the current year, compared to the same periods in the prior year, primarily driven by lower operating costs.

A significant portion of the lower operating costs was a non-recurring property tax adjustment contributing to a 210 basis points and 80 basis points of the margin increase for the three- and nine-month periods of the current year, respectively.

LSO net sales decreased $2.7 million, or 10.8%, for the three-month period ended May 27, 2023 compared to the same period in the prior year, primarily reflecting lower volume due to timing of customer orders and customer inventory destocking.

Operating margin decreased 120 basis points in the three-month period of the current year, compared to the same period in the prior year, primarily reflecting the unfavorable leverage impact of lower net sales.

Corporate and other

Our corporate and other expenses increased $2.6 million for the three-month period ended May 27, 2023 compared to the same period in the prior year, primarily due to an increase in compensation expense and higher consulting costs.

Liquidity and Capital Resources

Selected cash flow data Nine Months Ended

(In thousands) November 26, 2022 November 27, 2021

Selected cash flow data Three Months Ended

(In thousands) May 27, 2023 May 28, 2022

Operating Activities

Net cash provided by operating activities $ 51,112 $ 86,291

Net cash provided (used) by operating activities $ 21,287 $ (30,462)

Investing Activities

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Proceeds from sales of property, plant and equipment 66 4,087

Net cash used by investing activities (6,932) (938)

Financing Activities

Borrowings on line of credit 105,852 161,000

Repayment on debt (151,000) (2,000)

Payments on line of credit (105,000) (62,000)

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Dividends paid (5,245) (4,793)

Net cash (used) provided by financing activities (11,263) 17,624

We rely on cash provided by operations for the Company’s material cash requirements, including working capital needs, capital expenditures, satisfaction of contractual commitments (including principal and interest payments on our outstanding indebtedness) and shareholder return through dividend payments and share repurchases.

Operating Activities.

Net cash provided by operating activities was $51.1 million for the first nine months of fiscal 2023, compared to $86.3 million of net cash provided by operating activities in the prior year period, reflecting increased working capital required to support revenue growth and inflation.

Net cash provided by operating activities was $21.3 million for the first three months of fiscal 2024, compared to $30.5 million of net cash used by operating activities in the prior year period, primarily reflecting lower working capital requirements for the current year period.

Investing Activities.

Net cash used by investing activities was $12.0 million for the first nine months of fiscal 2023, driven primarily by capital expenditures of $18.1 million, partially offset by proceeds received from sales of property, plant and equipment of $5.2 million.

In the first nine months of the prior year, net cash used by investing activities was $11.6 million, primarily driven by capital expenditures of $13.1 million.

The majority of our capital expenditures in the current year and prior year periods are smaller in nature to support future growth and cost reduction initiatives.

Net cash used by investing activities was $6.9 million for the first three months of fiscal 2024, driven primarily by capital expenditures of $7.4 million.

In the first three months of the prior year, net cash used by investing activities was $0.9 million, primarily driven by capital expenditures of $5.1 million, partially offset by proceeds from sales of property, plant and equipment of $4.1 million.

The majority of our capital expenditures in the current year and prior year periods are to support future growth and cost reduction initiatives.

Financing Activities.

Net cash used by financing activities was $51.6 million for the first nine months of fiscal 2023, compared to net cash used by financing activities of $44.0 million in the prior year period.

The current year period was primarily driven by share repurchases and dividend payments totaling $88.7 million, partially offset by net debt borrowings of $40.9 million, while the prior year period included $44.2 million of share repurchases and dividend payments.

We paid dividends totaling $14.4 million ($0.6600 per share) in the first nine months of fiscal 2023, compared to $15.1 million ($0.6000 per share) in the comparable prior year period.

During the first nine months of fiscal 2023, we repurchased 1,571,139 shares under our authorized share repurchase program, for a total cost of $74.3 million.

In the first nine months of fiscal 2022, we repurchased 755,384 shares under the share repurchase program, for a total cost of $28.8 million.

Net cash used by financing activities was $11.3 million for the first three months of fiscal 2024, compared to net cash provided by financing activities of $17.6 million in the prior year period.

The usage in the current year period was primarily driven by share repurchases and dividend payments totaling $10.4 million, while the prior year period included $99.0 million of net debt borrowings, partially offset by $79.1 million of share repurchases and dividend payments.

We paid dividends totaling $5.2 million ($0.24 per share) in the first three months of fiscal 2024, compared to $4.8 million ($0.22 per share) in the comparable prior year period.

During the first three months of fiscal 2024, we repurchased 119,916 shares under our authorized share repurchase program, for a total cost of $5.2 million.

In the first three months of fiscal 2023, we repurchased 1,571,139 shares under the share repurchase program, for a total cost of $74.3 million.

In fiscal 2004, announced on April 10, 2003, the Board of Directors authorized the repurchase of 1,500,000 shares of Company stock.

The Board increased the authorization by 750,000 shares, announced on January 24, 2008;

by 1,000,000 shares on each of the announcement dates of October 8, 2008, January 13, 2016, January 9, 2018, January 14, 2020, October 7, 2021, and June 22, 2022;

and by 2,000,000 shares, on each of the announcement dates of October 3, 2018 and January 14, 2022.

The repurchase program does not have an expiration date.

Since the inception of the share repurchase program in 2004, we have purchased a total of 11,116,517 shares, at a total cost of $386.8 million.

As of November 26, 2022, we had remaining authority to repurchase an additional 1,253,399 shares under this program.

We will continue to evaluate making future share repurchases, considering our cash flow, debt levels and market conditions, in the context of all our capital allocation options, with the goal of maximizing long-term value for our shareholders.

As of May 27, 2023, we had remaining authority to repurchase an additional 1,133,483 shares under this program.

We may also elect to repurchase additional shares of common stock under our authorization, subject to limitations contained in our debt agreements and based upon our assessment of a number of factors, including share price, trading volume and general market conditions, working capital requirements, general business conditions, financial conditions, any applicable contractual limitations, and other factors, including alternative investment opportunities.

We may finance share repurchases with available cash, additional debt or other sources of financing.

Additional Liquidity Considerations.

We periodically evaluate our liquidity requirements, cash needs and availability of debt resources relative to acquisition plans, significant capital plans, and other working capital needs.

During the second quarter ended August 27, 2022, we amended and extended our committed revolving credit facility to include maximum borrowings of up to $385 million with a maturity of August 2027.

As part of the amendment, we repaid the $150 million term loan with borrowings under the revolving credit facility.

As of November 26, 2022, outstanding borrowings under our revolving credit facility were $188.0 million, while there were no outstanding borrowings under the revolving credit facility as of February 26, 2022.

As of the end of the first quarter of fiscal 2024, we had a committed revolving credit facility with maximum borrowings of up to $385 million, with a maturity date of August 5, 2027, and two Canadian committed, revolving credit facilities totaling $25 million (USD).

At May 27, 2023, we had outstanding borrowings under our committed, revolving credit facility of $155.0 million, and $3.7 million outstanding under the Canadian committed, revolving credit facility.

We are required to make periodic interest payments on our outstanding indebtedness, and future interest payments will be determined based on the amount of outstanding borrowings and prevailing interest rates during that time.

Our revolving credit facility contains two maintenance financial covenants that require us to stay below a maximum debt-to-EBITDA ratio and maintain a minimum ratio of EBITDA-to-interest expense.

Our revolving credit facility contains two maintenance financial covenants that require us to stay below a maximum debt-to-EBITDA ratio of 3.25 and maintain a minimum ratio of EBITDA-to-interest expense of 3.00.

In the event we make an acquisition for which the purchase price is greater than $75 million, we can elect to increase the maximum debt-to-EBITDA ratio to 3.75 for a period of four consecutive fiscal quarters, commencing with the fiscal quarter in which a qualifying acquisition occurs.

No more than two acquisition "holidays" can occur during the term of the facility, and at least two fiscal quarters must separate qualifying acquisitions.

Both ratios are computed quarterly, with EBITDA calculated on a rolling four-quarter basis.

At November 26, 2022, we were in compliance with both financial covenants.

Additionally, at November 26, 2022, we had a total of $12.3 million of ongoing letters of credit related to industrial revenue bonds, construction contracts and insurance collateral that expire in fiscal years 2024 to 2032 and reduce borrowing capacity under the revolving credit facility.

At May 27, 2023, we were in compliance with both financial covenants (which are identical in both of our revolving credit facilities).

Borrowings under the credit facility bear floating interest at either the Base Rate or Term SOFR, plus a margin based on the Leverage Ratio (as defined in the Credit Agreement).

For Base Rate borrowings the margin ranges from 0.125% to 0.75%.

For Term SOFR borrowings the margin ranges from 1.135% to 1.85%.

The facility also contains an "accordion" provision.

Under this provision, we can request that the facility be increased by as much $200.0 million.

Any Lender may elect or decline to participate in the requested increase at the Lender’s sole discretion.

Additionally, at May 27, 2023, we had a total of $12.3 million of ongoing letters of credit related to industrial revenue bonds, construction contracts and insurance collateral that expire in fiscal years 2024 to 2032 and reduce borrowing capacity under the revolving credit facility.

As of May 27, 2023, the amount available for revolving borrowings under the Wells Fargo credit facility was $217.7 million.

We acquire the use of certain assets through operating leases, such as property, manufacturing equipment, vehicles and other equipment.

Future payments for such leases, excluding leases with initial terms of one year or less, were $51.1 million at November 26, 2022, with $3.2 million payable during the remainder of fiscal 2023.

As of November 26, 2022, we had $222.2 million of open purchase obligations, of which payments totaling $53.4 million are expected to become due within the remainder of fiscal 2023.

Future payments for such leases, excluding leases with initial terms of one year or less, were $46.7 million at May 27, 2023, with $9.5 million payable during the remainder of fiscal 2024.

As of May 27, 2023, we had $31.6 million of open purchase obligations, of which payments totaling $22.4 million are expected to become due during the remainder of fiscal 2024.

These purchase obligations primarily relate to raw material commitments and capital expenditures and are not expected to impact future liquidity, as amounts should be recovered through customer billings.

We expect to make contributions of $0.7 million to our defined-benefit pension plans in fiscal 2024, which will equal or exceed our minimum funding requirements.

As of November 26, 2022, we had reserves of $5.5 million for unrecognized tax benefits.

As of May 27, 2023, we had reserves of $5.2 million for unrecognized tax benefits.

We are unable to reasonably estimate in which future periods the remaining unrecognized tax benefits will ultimately be settled.

We are required, in the ordinary course of business, to provide surety or performance bonds that commit payments to our customers for any non-performance.

At November 26, 2022, $1.4 billion of these types of bonds were outstanding, of which $578.7 million is in our backlog.

At May 27, 2023, $1.3 billion of these types of bonds were outstanding, of which $503.4 million is in our backlog.

These bonds do not have stated expiration dates.

We have never been required to make payments under surety or performance bonds with respect to our existing businesses.

During calendar year 2020, we took advantage of the option to defer remittance of the employer portion of Social Security tax as provided in the Coronavirus Aid, Relief, and Economic Security Act.

This deferral allowed us to retain cash during calendar year 2020 that would have otherwise been remitted to the federal government.

We paid our first installment of these deferred social security taxes, totaling approximately $6.8 million, in the fourth quarter of fiscal 2022, and paid our final installment of approximately $6.8 million at the start of the fourth quarter of fiscal 2023.

Due to our ability to generate strong cash from operations and our borrowing capability under our committed revolving credit facility, we believe that our sources of liquidity will be adequate to meet our short-term and long-term liquidity and capital expenditure needs.

In addition, we believe we have the ability to obtain both short-term and long-term debt to meet our financing needs for the foreseeable future.

We also believe we will be able to operate our business so as to continue to be in compliance with our existing debt covenants over the next fiscal year.

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

Based on our year-to-date results and increasing confidence in our outlook, we have narrowed our guidance for full-year adjusted earnings to a range of $3.90 to $4.05 per diluted* share, up from the previously announced range of $3.75 to $4.05.

We expect full year revenue growth of approximately 10 percent, primarily driven by growth in our Architectural Framing Systems segment.

The company continues to expect full-year capital expenditures of approximately $40 million.

* A reconciliation of non-GAAP guidance on adjusted earnings per diluted share (“Adjusted EPS”) to GAAP guidance is not available on a forward-looking basis without unreasonable effort due to the uncertainty of the magnitude and timing of future adjustments.

These adjustments may include the impact of such items as impairment charges, restructuring costs, acquired project-related charges, and gains or losses from significant asset sales.

Accordingly, the company is unable to provide a reconciliation of Adjusted EPS to the most directly comparable GAAP financial measure or address the probable significance of the unavailable information, which could be material to the company's future financial results computed in accordance with GAAP.

We continue to evaluate acquisition opportunities on a regular basis.

We may finance acquisition activity with available cash, the issuance of shares of common stock, additional debt, or other sources of financing, depending upon the size and nature of any such transaction and the status of the capital markets at the time of such acquisition.

Due to our ability to generate strong cash from operations and our borrowing capability under our committed revolving credit facilities, we believe that our sources of liquidity will be adequate to meet our short-term and long-term liquidity and capital expenditure needs.

In addition, we believe that we have the ability currently to obtain both short-term and long-term debt to meet our financing needs for the foreseeable future.

We also believe that we will be able to operate our business so as to continue to be in compliance with our existing debt covenants over the next fiscal year.

Related Party Transactions

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Critical Accounting Policies

There have been no material changes to our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the fiscal year ended February 26, 2022, except as noted below.

Impairment of goodwill, indefinite-lived intangible assets and long-lived assets

At the beginning of the first quarter of fiscal 2023, we began management of the Sotawall and Harmon businesses under the Architectural Services segment in order to create a single, unified offering for larger custom curtainwall projects, which resulted in the combination of the Sotawall and Harmon reporting units into a single reporting unit.

We evaluated goodwill on a qualitative basis prior to and subsequent to this change for these reporting units and concluded that no adjustment to the carrying value of goodwill was necessary.

Concurrent with the move of Sotawall from the Architectural Framing Systems segment to the Architectural Services segment effective at the start of our first quarter of fiscal 2023, goodwill was reallocated to the affected reporting units within each segment, using a relative fair value approach as outlined in ASC 350, Intangibles - Goodwill and Other .

In addition, for all reporting units, no qualitative indicators of impairment were identified during the first quarter of fiscal 2023, and therefore, no interim quantitative goodwill impairment evaluation was performed.

There have been no material changes to our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the fiscal year ended February 25, 2023.

Quantitative and Qualitative Disclosures About Market Risk

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis