What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-10-04 compared with 2023-06-28 · 173 added, 99 removed, 112 unchanged (71% 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.

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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We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Measures

We have included in this report measures of financial performance that are not defined by GAAP.

We believe that these measures provide useful information to investors, and include these measures in other communications to investors.

For each of these non-GAAP financial measures, we are providing a reconciliation of the differences between the non-GAAP measure and the most directly comparable GAAP measure, an explanation of why we believe the non-GAAP measure provides useful information to investors, and any additional material purposes for which our management or Board of Directors uses the non-GAAP measure.

These non-GAAP measures should be viewed in addition to, and not in lieu of, the comparable GAAP measure.

Adjusted net earnings and adjusted earnings per diluted share (adjusted diluted EPS) are supplemental non-GAAP financial measures provided by the Company to assess performance on a more comparable basis from period-to-period by excluding amounts that management does not consider part of core operating results.

Management uses these non-GAAP

measures to evaluate the Company’s historical and prospective financial performance, measure operational profitability on a consistent basis, as a factor in determining executive compensation, and to provide enhanced transparency to the investment community.

We are a leader in the design and development of value-added glass and metal products and services.

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

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:

The three key elements of our enterprise strategy are discussed below:

Become the economic leader in our target markets.

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

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

We have made significant progress toward executing our enterprise strategy and underlying financial targets.

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

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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 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

May 27, 2023 May 28, 2022

Results of Operations

The following tables provide various components of operations as year over year U.S.

dollar and percentage change, as well as a percentage of net sales.

Three Months Ended % of Net Sales

(in thousands, except percentages)

August 26, 2023 August 27, 2022 $ Change

August 26, 2023 August 27, 2022

Net sales $ 353,675 $ 372,109 $ (18,434) (5.0) % 100.0 % 100.0 %

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Interest expense, net 2,230 1,698 532 31.3 0.6 0.5

Other expense, net 0.1 0.4

Other (income) expense, net (4,900) 173 (5,073) N/M (1.4) —

Earnings before income taxes 43,223 30,201 13,022 43.1 12.2 8.1

Income tax expense 2.2 2.2

Income tax expense (benefit) 9,896 (7,188) 17,084 N/M 2.8 (1.9)

Net earnings $ 33,327 $ 37,389 $ (4,062) (10.9) % 9.4 % 10.0 %

Effective tax rate 22.9 % (23.8) %

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 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.

Six Months Ended % of Net Sales

(in thousands, except percentages)

August 26, 2023 August 27, 2022 $ Change

August 26, 2023 August 27, 2022

Net sales $ 715,388 $ 728,744 $ (13,356) (1.8) % 100.0 % 100.0 %

Cost of sales 527,031 558,191 (31,160) (5.6) 73.7 76.6

Gross profit 188,357 170,553 17,804 10.4 26.3 23.4

Selling, general and administrative expenses 114,037 105,265 8,772 8.3 15.9 14.4

Operating income 74,320 65,288 9,032 13.8 10.4 9.0

Interest expense, net 4,266 2,904 1,362 46.9 0.6 0.4

Other (income) expense, net (4,612) 1,483 (6,095) N/M (0.6) 0.2

Earnings before income taxes 74,666 60,901 13,765 22.6 10.4 8.4

Income tax expense

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.

17,763 781 16,982 2,174.4 2.5 0.1

Net earnings $ 56,903 $ 60,120 $ (3,217) (5.4) % 8.0 % 8.2 %

Effective tax rate 23.8 % 1.3 %

Comparison of Second Quarter Fiscal 2024 to Second Quarter Fiscal 2023

• Consolidated net sales decreased 5.0%, or $18.4 million, to $353.7 million, primarily reflecting lower volumes in Architectural Framing Systems and Architectural Services, partially offset by strong growth in the Architectural Glass segment.

• Gross profit increased 12.3%, or $10.4 million, and gross margin increased to 27.0% compared to 22.8%.

The improvement in gross margin was primarily driven by higher gross margins in both Architectural Glass and Architectural Framing Systems and the increased mix of Architectural Glass in the consolidated results.

This was partially offset by lower margins in the Large-Scale Optical segment.

• Selling, general and administrative expenses increased $2.0 million to 15.5% of net sales compared to 14.2%.

The increase was primarily due to increased compensation-related expenses and higher consulting costs.

• Operating income grew 26.4% to $40.6 million, and operating margin increased 290 basis points to 11.5%, primarily driven by improved operating margin in Architectural Glass as well as the Architectural Glass segment comprising a higher mix of the consolidated results.

• Interest expense, net was $2.2 million compared to $1.7 million, reflecting a higher average interest rate, partially offset by a lower average debt level.

• Other (income) expense, net included a $4.7 million pre-tax gain related to finalization of a New Markets Tax Credit transaction realized during the second quarter of fiscal 2024.

• Income tax expense was $9.9 million, compared to a tax benefit of $7.2 million.

The prior year period included a $13.7 million tax deduction for a worthless stock loss and related discrete tax benefits.

Comparison of First Six Months of Fiscal 2024 to First Six Months of Fiscal 2023

• Consolidated net sales decreased 1.8%, or $13.4 million to $715.4 million, primarily reflecting lower volumes in Architectural Framing Systems and Architectural Services, partially offset by improved pricing, mix and volumes in the Architectural Glass segment.

• Gross profit increased 10.4%, or $17.8 million, to 26.3% of net sales compared to 23.4%.

The gross margin improvement was driven primarily by higher margins in the Architectural Glass segment and the increased mix of that segment in consolidated results.

This was partially offset by lower margins in the Architectural Services and Large Scale Optical segments.

• Selling, general and administrative expenses increased $8.8 million to 15.9% of net sales compared to 14.4%.

The increase in expenses was primarily due to increased compensation-related expenses, commissions and higher consulting costs.

• Operating income grew 13.8% to $74.3 million, and operating margin increased 140 basis points to 10.4%, primarily driven by improved operating margin in Architectural Glass as well as the Architectural Glass segment comprising a higher mix of the consolidated results.

• Interest expense, net was $4.3 million compared to $2.9 million, reflecting a higher average interest rate, partially offset by a lower average debt level.

• Other (income) expense, net included a $4.7 million pre-tax gain related to finalization of a New Markets Tax Credit transaction realized during the second quarter of fiscal 2024.

• Income tax expense was $17.8 million, compared to tax expense of $0.8 million.

The prior year period included a $13.7 million tax deduction for a worthless stock loss and related discrete tax benefits.

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

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

Three Months Ended Six Months Ended

(In thousands, except percentages) August 26, 2023 August 27, 2022 % Change August 26, 2023 August 27, 2022 % Change

Segment net sales

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Large-Scale Optical 19.7 23.8 22.1 24.8

Corporate and other N/M N/M

Corporate and other N/M N/M N/M N/M

Operating income 8.6 % 10.4 % 9.0 %

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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 $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.

Comparison of Second Quarter Fiscal 2024 to Second Quarter Fiscal 2023

• Net sales decreased $14.1 million, or 8.1%, primarily reflecting lower volume, partially offset by a more favorable sales mix.

• Operating income increased to $21.1 million, or 13.3% of net sales, compared to $20.5 million, or 11.9% of net sales.

The operating margin improvement was primarily driven by improved sales mix and cost efficiencies, partially offset by the impact of lower volume.

Comparison of First Six Months of Fiscal 2024 to First Six Months of Fiscal 2023

• Net sales decreased $13.2 million, or 3.9%, primarily reflecting lower volume, partially offset by more favorable sales mix and improved pricing.

• Operating income decreased to $41.0 million, or 12.7% of net sales, compared to $44.2 million, or 13.1% of net sales.

The operating margin decline was primarily driven by the impact of lower volume, as well as the unfavorable comparative impact of timing of inventory flows and aluminum prices in the prior year period.

These items were partially offset by improved sales mix, favorable pricing and cost efficiencies.

Architectural Glass

Comparison of Second Quarter Fiscal 2024 to Second Quarter Fiscal 2023

• Net sales increased $16.7 million, or 21.6%, primarily driven by improved pricing and mix, reflecting the strategic shift to emphasize premium, high performance products, as well as higher volume.

• Operating income increased to $17.4 million, or 18.5% of net sales, compared to $6.5 million, or 8.3% of net sales.

The operating margin improvement was primarily driven by the impact of improved pricing and mix, as well as higher volume, partially offset by cost inflation.

Comparison of First Six Months of Fiscal 2024 to First Six Months of Fiscal 2023

• Net sales increased $37.7 million, or 24.5%, driven by improved pricing, a more favorable sales mix, and higher volume, reflecting the segment's strategic shift to emphasize premium, high-performance products.

• Operating income increased to $34.0 million, or 17.7% of net sales, compared to $11.6 million, or 7.6% of net sales.

The operating margin improvement was primarily driven by the improved pricing and mix and the impact of higher volume, partially offset by cost inflation.

Architectural Services

Comparison of Second Quarter Fiscal 2024 to Second Quarter Fiscal 2023

• Net sales decreased $18.7 million, or 17.5%, primarily reflecting lower project volume due to a higher mix of projects in earlier stages of completion.

• Operating income was $3.5 million, or 4.0% of net sales, compared to $5.5 million, or 5.1% of net sales.

The decline in operating margin was primarily driven by the impact of lower project volume.

Comparison of First Six Months of Fiscal 2024 to First Six Months of Fiscal 2023

• Net sales decreased $32.6 million, or 15.5%, primarily reflecting lower project volume due to a higher mix of projects in earlier stages of completion.

• Operating income was $2.9 million, or 1.6% of net sales, compared to $8.4 million, or 4.0% of net sales.

The decline in operating margin was primarily due to the impact of lower project volume.

Large-Scale Optical (LSO)

Comparison of Second Quarter Fiscal 2024 to Second Quarter Fiscal 2023

• LSO net sales decreased $1.5 million, or 6.0%, primarily reflecting lower volume driven by customer inventory destocking, partially offset by a more favorable mix.

• Operating income was $4.7 million, or 19.7% of net sales, compared to $6.0 million, or 23.8% of net sales.

The decline in operating margin was primarily driven by the impact of lower volume, partially offset by improved price and mix.

Comparison of First Six Months of Fiscal 2024 to First Six Months of Fiscal 2023

• LSO net sales decreased $4.2 million, or 8.4%, primarily reflecting lower volume due to customer inventory destocking, partially offset by a more favorable mix.

• Operating income was $10.2 million, or 22.1% of net sales, compared to $12.5 million, or 24.8% of net sales.

The decline in operating margin was primarily driven by the impact of lower volume, partially offset by improved price and mix.

Corporate and other

Comparison of Second Quarter Fiscal 2024 to Second Quarter Fiscal 2023

• Our corporate and other expense was $6.1 million, compared to $6.4 million.

Comparison of First Six Months of Fiscal 2024 to First Six Months of Fiscal 2023

• Our corporate and other expense increased to $13.8 million, compared to $11.4 million, primarily due to an increase in compensation expense and higher consulting costs.

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 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 %

Operating income 16,521 5,169 219.6 %

Operating margin 17.0 % 6.8 %

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.

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

Architectural Framing Systems

As of August 26, 2023, segment backlog was approximately $197 million, compared to approximately $221 million at the end of the prior quarter, and to approximately $286 million at the end of the second quarter of fiscal 2023.

The reduction in backlog was primarily driven by a decline in our longer-cycle business, reflecting delays in award activity, and a continued strategic shift toward projects that allow for more attractive margins.

Architectural Services

Three Months Ended

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

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

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

Operating margin (0.7) % 2.8 %

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

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

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

Operating income 5,525 6,498 (15.0) %

Operating margin 24.6 % 25.8 %

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.

As of August 26, 2023, segment backlog was approximately $674 million, compared to approximately $709 million at the end of the prior quarter, and to approximately $785 million at the end of the second quarter of fiscal 2023.

The decline was primarily driven by delays in award activity.

Net earnings, diluted EPS, adjusted net earnings (non-GAAP), and adjusted diluted EPS (non-GAAP)

In order to provide a better understanding of the impact of certain items on our net earnings and diluted EPS, the tables that follow report the comparative impact of certain items on net earnings and diluted EPS for the periods presented below.

Adjusted net earnings and adjusted diluted EPS are considered non-GAAP financial measures as contemplated by SEC Regulation G, Rule 100.

For additional information regarding management’s decision to present this non-GAAP financial information, see the introduction to this Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Three Months Ended Six Months Ended

(In thousands) August 26, 2023 August 27, 2022 % change August 26, 2023 August 27, 2022 % change

Net earnings $ 33,327 $ 37,389 (10.9) % $ 56,903 $ 60,120 (5.4) %

NMTC settlement gain (1)

(4,687) — (4,687) —

Worthless stock deduction and related discrete tax benefits (2)

— (13,702) — (13,702)

Income tax impact on above adjustments 1,148 — 1,148 —

Adjusted net earnings $ 29,788 $ 23,687 25.8 % $ 53,364 $ 46,418 15.0 %

Three Months Ended Six Months Ended

August 26, 2023 August 27, 2022 % change August 26, 2023 August 27, 2022 % change

$ 1.52 $ 1.68 (9.5) % $ 2.57 $ 2.66 (3.4) %

NMTC settlement gain (1)

(0.21) (0.21) —

Worthless stock deduction and related discrete tax benefits (2)

— (0.62) — (0.61)

Income tax impact on above adjustments 0.05 — 0.05 —

Adjusted diluted EPS

$ 1.36 $ 1.06 28.3 % $ 2.41 $ 2.06 17.0 %

Weighted average diluted shares outstanding 21,962 22,245 22,105 22,563

(1) Realization of a New Market Tax Credit (NMTC) benefit during the second quarter of fiscal 2024, which was recorded in other (income) expense, net.

(2) Worthless stock deduction and related discrete income tax benefits from the impairment of the Sotawall business in fiscal 2023, which were recorded in income tax expense (benefit).

Comparison of Second Quarter Fiscal 2024 to Second Quarter Fiscal 2023

• Net earnings were $33.3 million, compared to $37.4 million.

Diluted EPS was $1.52, compared to $1.68.

• Adjusted net earnings increased 25.8% to $29.8 million, compared to $23.7 million.

Adjusted diluted EPS increased 28.3% to $1.36, compared to $1.06.

Comparison of First Six Months of Fiscal 2024 to First Six Months of Fiscal 2023

• Net earnings were $56.9 million, compared to $60.1 million.

Diluted EPS was $2.57, compared to $2.66.

• Adjusted net earnings increased 15.0% to $53.4 million, compared to $46.4 million.

Adjusted diluted EPS increased 17.0% to $2.41, compared to $2.06.

Liquidity and Capital Resources

Selected cash flow data Three Months Ended

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

Operating Activities

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

Investing Activities

Capital expenditures (7,398) (5,125)

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

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

Repurchase and retirement of common stock (5,193) (74,312)

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.

We rely on cash provided by operations for our 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 $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.

Net cash provided by operating activities was $62.6 million for the first six months of fiscal 2024, compared to $2.6 million of net cash used by operating activities in the prior year period, primarily reflecting improved working capital in the current year period.

Investing Activities.

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.

Net cash used by investing activities was $15.1 million for the first six months of fiscal 2024, compared to $4.7 million in the prior year, driven primarily by higher capital expenditures to fund strategic initiatives.

Financing Activities.

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.

Net cash used by financing activities was $50.1 million for the first six months of fiscal 2024, compared to net cash provided by financing activities of $0.5 million in the prior year period.

The increase in cash used for financing activities was primarily driven by higher net debt payments in the current year period.

We paid dividends totaling $10.5 million ($0.48 per share) in the first six months of fiscal 2024, compared to $9.6 million ($0.44 per share) in the comparable prior year period.

During the first six months of fiscal 2024, we repurchased 279,916 shares under our authorized share repurchase program, for a total cost of $11.8 million.

In the first six 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.

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Since the inception of the share repurchase program in 2004, we have purchased a total of 11,276,517 shares, at a total cost of $393.5 million.

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

As of August 26, 2023, we had remaining authority to repurchase an additional 973,483 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.

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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.

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.

As of the end of the second quarter of fiscal 2024, we had a committed revolving credit facility in the U.S.

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 August 26, 2023, we had outstanding borrowings under our committed, revolving credit facility of $130.0 million, and $3.7 million outstanding under the Canadian committed, revolving credit facilities.

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 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.

Our revolving credit facilities contain 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.

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

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).

At August 26, 2023, we were in compliance with both financial covenants (which are identical in both of our revolving credit facilities).

credit facility also contains an acquisition holiday.

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.

Borrowings under the credit facilities 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.

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.

Additionally, at August 26, 2023, we had a total of $15.2 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 U.S.

revolving credit facility.

As of August 26, 2023, the amount available for revolving borrowings under the Wells Fargo credit facility was $239.8 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 $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.

Future payments for such leases, excluding leases with initial terms of one year or less, were $48.1 million at August 26, 2023, with $6.6 million payable during the remainder of fiscal 2024.

As of August 26, 2023, we had $30.4 million of open purchase obligations, of which payments totaling $20.7 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 May 27, 2023, we had reserves of $5.2 million for unrecognized tax benefits.

As of August 26, 2023, we had reserves of $5.3 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 May 27, 2023, $1.3 billion of these types of bonds were outstanding, of which $503.4 million is in our backlog.

At August 26, 2023, $1.3 billion of these types of bonds were outstanding, of which $452.4 million is in our backlog.

These bonds do not have stated expiration dates.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis