APOGEE ENTERPRISES, INC. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Management's Annual Report on Internal Control over Financial Reporting Management of Apogee Enterprises, Inc. and its subsidiaries (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) of the Securities Exchange Act of 1934. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of March 2, 2024, using criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013) . The Company's management believes that, as of March 2, 2024, the Company's internal control over financial reporting was effective based on those criteria. Following this report are reports from the Company's independent registered public accounting firm, Deloitte & Touche LLP, on the Company's consolidated financial statements and on the effectiveness of the Company's internal control over financial reporting as of March 2, 2024. 34 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Apogee Enterprises, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Apogee Enterprises, Inc. and subsidiaries (the "Company") as of March 2, 2024 and February 25, 2023, and the related consolidated results of operations, statements of comprehensive earnings, cash flows, and shareholders' equity, for each of the three years in the period ended March 2, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 2, 2024 and February 25, 2023, and the results of its operations and its cash flows for each of the three years in the period ended March 2, 2024, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 2, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 26, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. Net Sales — Revenue Recognition for Long-Term Contracts in the Architectural Services Segment — Refer to Notes 1, 2, and 15 to the consolidated financial statements The Architectural Services segment, which provides building glass and curtainwall installation services and operates under long-term, fixed-price contracts, accounted for approximately $378.4 million, or 27 percent of total net sales for the year ended March 2, 2024. The contracts for this business typically have a single, bundled performance obligation, as the business generally provides interrelated services and integrates these services into a combined output specified by the customer. The customer obtains control of this combined output, generally installed window and curtainwall systems, over time. The Company measures progress on these contracts following an input method, by comparing total costs incurred to-date to the total estimated costs for the contract and recording that proportion of the total contract price as revenue. Given the judgments necessary to estimate total costs and profit for the contract performance obligations used to recognize revenue for long-term, fixed-price contracts in the Architectural Services segment, auditing such estimates required extensive audit effort due to the complexity of long-term contracts and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures. 35 Table of Contents How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to management’s estimates of total costs and profit for the contract performance obligations used to recognize revenue for certain long-term contracts in the Architectural Services segment included, but were not limited to the following: • We tested the effectiveness of controls over long-term contract revenue, including those over the estimates of total costs and profit for performance obligations. • We developed an expectation of the amount of total long-term contract revenue based on prior year margins applied to cost of sales in the current year and compared our expectation to the amount of long-term contract revenue ultimately recorded by management. • We evaluated management’s ability to estimate total costs and profit by comparing actual costs and profit to management’s historical estimates for performance obligations that have been fulfilled. • We selected a sample of long-term contracts from the contract portfolio and performed the following procedures: • Evaluated whether the long-term contracts were properly included in management’s calculation of long-term contract revenue based on the terms and conditions of each contract, including whether continuous transfer of control to the customer occurred as progress was made toward fulfillment of the performance obligations. • Compared the transaction prices to the consideration expected to be received based on current rights and obligations under the long-term contracts and any modifications that were agreed upon with the customers. • Tested management’s identification of distinct performance obligations by evaluating whether the underlying services are highly interdependent and interrelated. • Tested the accuracy and completeness of the costs incurred to date for the performance obligations. • We tested the mathematical accuracy of management’s calculation of long-term contract revenue for the performance obligation. • Evaluated the estimates of total cost and profit for the performance obligations by: • Comparing costs incurred to date to the costs management estimated to be incurred to date. • Evaluating management’s ability to achieve the estimates of total cost and profit by performing corroborating inquiries with the Company’s project managers and engineers, and comparing the estimates to management’s work plans, engineering specifications, and supplier contracts. /s/ Deloitte & Touche LLP Minneapolis, MN April 26, 2024 We have served as the Company's auditor since fiscal 2003. 36 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Apogee Enterprises, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Apogee Enterprises, Inc. and subsidiaries (the “Company”) as of March 2, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 2, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended March 2, 2024, of the Company and our report dated April 26, 2024, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Minneapolis, MN April 26, 2024 37 Table of Contents CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) March 2, 2024 February 25, 2023 Assets Current assets Cash and cash equivalents $ 37,216 $ 19,924 Restricted cash — 1,549 Receivables, net 173,557 197,267 Inventories, net 69,240 78,441 Contract assets 49,502 59,403 Other current assets 29,124 26,517 Total current assets 358,639 383,101 Property, plant and equipment, net 244,216 248,867 Operating lease right-of-use assets 40,221 41,354 Goodwill 129,182 129,026 Intangible assets, net 66,114 67,375 Other non-current assets 45,692 45,642 Total assets $ 884,064 $ 915,365 Liabilities and Shareholders’ Equity Current liabilities Accounts payable $ 84,755 $ 86,549 Accrued compensation and benefits 53,801 51,651 Contract liabilities 34,755 28,011 Operating lease liabilities 12,286 11,806 Other current liabilities 59,108 64,532 Total current liabilities 244,705 242,549 Long-term debt 62,000 169,837 Non-current operating lease liabilities 31,907 33,072 Non-current self-insurance reserves 30,552 29,316 Other non-current liabilities 43,875 44,183 Commitments and contingent liabilities (Note 10) Shareholders’ equity Junior preferred stock of $ 1.00 par value; authorized 200,000 shares; zero issued and outstanding — — Common stock of $ 0.33 -1/3 par value; authorized 50,000,000 shares; issued and outstanding 22,089,265 and 22,224,299 shares, respectively 7,363 7,408 Additional paid-in capital 152,818 146,816 Retained earnings 340,375 273,740 Accumulated other comprehensive loss ( 29,531 ) ( 31,556 ) Total shareholders’ equity 471,025 396,408 Total liabilities and shareholders’ equity $ 884,064 $ 915,365 See accompanying notes to consolidated financial statements. 38 Table of Contents CONSOLIDATED RESULTS OF OPERATIONS Year-Ended March 2, 2024 February 25, 2023 February 26, 2022 (In thousands, except per share data) (53 weeks) (52 weeks) (52 weeks) Net sales $ 1,416,942 $ 1,440,696 $ 1,313,977 Cost of sales 1,049,814 1,105,423 1,039,816 Gross profit 367,128 335,273 274,161 Selling, general and administrative expenses 233,295 209,485 202,643 Impairment expense on goodwill and intangible assets — — 49,473 Operating income 133,833 125,788 22,045 Interest expense, net 6,669 7,660 3,767 Other (income) expense, net ( 2,089 ) 1,507 4,409 Earnings before income taxes 129,253 116,621 13,869 Income tax expense 29,640 12,514 10,383 Net earnings $ 99,613 $ 104,107 $ 3,486 Basic earnings per share $ 4.55 $ 4.73 $ 0.14 Diluted earnings per share $ 4.51 $ 4.64 $ 0.14 Weighted average basic shares outstanding 21,871 22,007 24,920 Weighted average diluted shares outstanding 22,091 22,416 25,292 See accompanying notes to consolidated financial statements. 39 Table of Contents CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS Year-Ended March 2, 2024 February 25, 2023 February 26, 2022 (In thousands) (53 weeks) (52 weeks) (52 weeks) Net earnings $ 99,613 $ 104,107 $ 3,486 Other comprehensive earnings (loss): Unrealized gain (loss) on marketable securities, net of $ 59 , $( 131 ) and $( 96 ) of tax expense (benefit), respectively 222 ( 492 ) ( 360 ) Unrealized (loss) gain on derivative instruments, net of $( 22 ), $( 672 ) and $ 633 of tax (benefit) expense, respectively ( 72 ) ( 2,205 ) 2,074 Unrealized gain on pension obligation, net of $ 261 , $ 222 and $ 117 of tax expense, respectively 857 726 382 Foreign currency translation adjustments 1,018 ( 3,345 ) ( 309 ) Other comprehensive earnings (loss) 2,025 ( 5,316 ) 1,787 Total comprehensive earnings $ 101,638 $ 98,791 $ 5,273 See accompanying notes to consolidated financial statements. 40 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS Year-Ended March 2, 2024 February 25, 2023 February 26, 2022 (In thousands) (53 weeks) (52 weeks) (52 weeks) Operating Activities Net earnings $ 99,613 $ 104,107 $ 3,486 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 41,588 42,403 49,993 Share-based compensation 9,721 8,656 6,293 Deferred income taxes ( 9,748 ) ( 7,185 ) ( 7,956 ) Asset impairment charges 6,195 — 21,497 Loss (gain) on disposal of property, plant and equipment 826 ( 3,815 ) ( 20,987 ) Impairment expense on goodwill and intangible assets — — 49,473 Proceeds from New Markets Tax Credit transaction, net of deferred costs — 18,390 — Settlement of New Markets Tax Credit transaction ( 4,687 ) ( 19,523 ) — Non-cash lease expense 11,721 11,878 12,418 Other, net 4,615 5,399 ( 1,272 ) Changes in operating assets and liabilities: Receivables 23,993 ( 62,304 ) 7,521 Inventories 9,366 1,731 ( 7,706 ) Contract assets 9,880 ( 3,380 ) ( 897 ) Accounts payable ( 2,655 ) ( 5,491 ) 14,738 Accrued compensation and benefits 2,102 ( 1,810 ) 912 Contract liabilities 6,590 20,952 ( 14,288 ) Operating lease liability ( 12,632 ) ( 12,149 ) ( 12,720 ) Refundable and accrued income taxes 6,523 ( 6,976 ) 11,017 Other current assets and liabilities 1,143 11,813 ( 11,051 ) Net cash provided by operating activities 204,154 102,696 100,471 Investing Activities Capital expenditures ( 43,180 ) ( 45,177 ) ( 21,841 ) Proceeds from sales of property, plant and equipment 293 7,755 30,599 Purchases of marketable securities ( 2,953 ) — ( 1,038 ) Sales/maturities of marketable securities 2,165 9,712 1,563 Net cash (used) provided by investing activities ( 43,675 ) ( 27,710 ) 9,283 Financing Activities Proceeds from revolving credit facilities 196,964 485,879 — Repayment on debt — ( 151,000 ) ( 2,000 ) Repayments on revolving credit facilities ( 304,817 ) ( 327,865 ) — Proceeds from exercise of stock options — — 4,115 Repurchase of common stock ( 11,821 ) ( 74,312 ) ( 100,414 ) Dividends paid ( 21,133 ) ( 19,670 ) ( 20,266 ) Other, net ( 3,800 ) ( 4,055 ) ( 2,007 ) Net cash used by financing activities ( 144,607 ) ( 91,023 ) ( 120,572 ) Effect of exchange rates on cash ( 129 ) ( 73 ) 1,124 Increase (decrease) in cash, cash equivalents and restricted cash 15,743 ( 16,110 ) ( 9,694 ) Cash, cash equivalents and restricted cash at beginning of year 21,473 37,583 47,277 Cash and cash equivalents at end of year $ 37,216 $ 21,473 $ 37,583 Non-cash Activity Capital expenditures in accounts payable $ 3,588 $ 2,909 $ 2,326 See accompanying notes to consolidated financial statements. 41 Table of Contents Consolidated Statements of Shareholders' Equity (In thousands, except per share data) Common Shares Outstanding Common Stock at Par Value Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Total Shareholders' Equity Balance at February 27, 2021 25,714 $ 8,571 $ 154,958 $ 357,243 $ ( 28,027 ) $ 492,745 Net earnings — — — 3,486 — 3,486 Other comprehensive income, net of tax — — — — 1,787 1,787 Issuance of stock, net of cancellations 172 57 ( 190 ) 221 — 88 Share-based compensation — — 6,293 — — 6,293 Exercise of stock options 179 60 4,055 — — 4,115 Share repurchases ( 2,309 ) ( 769 ) ( 15,055 ) ( 84,590 ) — ( 100,414 ) Other share retirements ( 55 ) ( 18 ) ( 348 ) ( 1,269 ) — ( 1,635 ) Cash dividends ($ 0.8200 per share) — — — ( 20,266 ) — ( 20,266 ) Balance at February 26, 2022 23,701 $ 7,901 $ 149,713 $ 254,825 $ ( 26,240 ) $ 386,199 Net earnings — — — 104,107 — 104,107 Other comprehensive loss, net of tax — — — — ( 5,316 ) ( 5,316 ) Issuance of stock, net of cancellations 113 37 153 35 — 225 Share-based compensation — — 8,656 — — 8,656 Exercise of stock options 36 12 ( 954 ) — — ( 942 ) Share repurchases ( 1,571 ) ( 524 ) ( 10,350 ) ( 63,438 ) — ( 74,312 ) Other share retirements ( 55 ) ( 18 ) ( 402 ) ( 2,119 ) — ( 2,539 ) Cash dividends ($ 0.9000 per share) — — — ( 19,670 ) — ( 19,670 ) Balance at February 25, 2023 22,224 $ 7,408 $ 146,816 $ 273,740 $ ( 31,556 ) $ 396,408 Net earnings — — — 99,613 — 99,613 Other comprehensive income, net of tax — — — — 2,025 2,025 Issuance of stock, net of cancellations 171 58 ( 150 ) ( 40 ) — ( 132 ) Share-based compensation — — 9,721 — — 9,721 Exercise of stock options 25 8 ( 840 ) — — ( 832 ) Share repurchases ( 280 ) ( 93 ) ( 1,989 ) ( 9,739 ) — ( 11,821 ) Other share retirements ( 51 ) ( 18 ) ( 740 ) ( 2,066 ) — ( 2,824 ) Cash dividends ($ 0.9700 per share) — — — ( 21,133 ) — ( 21,133 ) Balance at March 2, 2024 22,089 $ 7,363 $ 152,818 $ 340,375 $ ( 29,531 ) $ 471,025 See accompanying notes to consolidated financial statements. 42 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies and Related Data Basis of consolidation The consolidated financial statements include the balances of Apogee Enterprises, Inc. and its subsidiaries (Apogee, we, us, our or the Company) after elimination of intercompany balances and transactions. We consolidate variable interest entities related to our New Markets Tax Credit transactions as it has been determined that the Company is the primary beneficiary of those entities' operations (refer to Note 10 for more information). Fiscal year Our fiscal year ends on the Saturday closest to the last day of February, or as otherwise determined by our Board of Directors. Fiscal 2024 consisted of 53 weeks, while fiscal 2023 and fiscal 2022 each consisted of 52 weeks. Accounting estimates The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ significantly from those estimates. Reclassifications Certain reclassifications of amounts previously reported have been made to the accompanying consolidated balance sheets, consolidated statements of cash flows and notes to consolidated financial statements to conform to current year presentation of contract assets and liabilities. These reclassifications had no impact on reported cash flows or total assets and liabilities. Cash equivalents Highly liquid investments with an original maturity of three months or less are included in cash equivalents and are stated at cost, which approximates fair value. Restricted Cash Cash held that is specifically dedicated to fund each capital project related to our New Markets Tax Credit transactions. Marketable securities To the extent the amortized cost basis of the available-for-sale securities exceeds the fair value, we assess the debt securities for credit loss. When assessing the risk of credit loss, we consider factors such as the severity and the reason of the decline in value, including any changes to the rating of the security by a rating agency or other adverse conditions specifically related to the security, and management's intended holding period and time horizon for selling. During fiscal 2024, 2023, and 2022, the Company did not recognize any credit losses related to its available-for-sale securities. Further, as of March 2, 2024 and February 25, 2023, the Company did not record an allowance for credit losses related to its available-for-sale securities. Marketable securities are included in other current and non-current assets on the consolidated balance sheets and gross realized gains and losses are included in other (income) expense, net in our consolidated results of operations. Inventories Inventories, which consist primarily of purchased glass and aluminum, are valued at lower of cost or net realizable value using the first-in, first-out (FIFO) method. Property, plant and equipment Property, plant and equipment (PP&E) is recorded at cost. Significant improvements and renewals that extend the useful life of the asset are capitalized. Repairs and maintenance are charged to expense as incurred. When an asset is retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any related gains or losses are included in selling, general and administrative expenses. Long-lived assets to be held and used, such as PP&E, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Depreciation is computed on a straight-line basis, based on estimated useful lives of 10 to 25 years for buildings and improvements; 3 to 10 years for machinery and equipment; and 3 to 7 years for computer and office equipment and furniture. 43 Table of Contents Impairment of long-lived assets Long-lived assets or asset groups, including definite-lived intangible assets subject to amortization and property and equipment, are reviewed for impairment whenever events or changes in circumstances such as asset utilization, physical change, legal factors or other matters indicate that the carrying value of those assets may not be recoverable. When this review indicates the carrying value of an asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group, an asset impairment expense is recognized in earnings in the period such a determination is made. The amount of the impairment expense recorded is the amount by which the carrying value of the impaired asset or asset group exceeds its fair value based on discounted cash flows. As a result of restructuring plans announced during the fourth quarter of fiscal 2024, asset impairments on property, plant and equipment and leases in the amount of $ 6.2 million were recorded for the year ended March 2, 2024. As a result of restructuring plans announced during the second quarter of fiscal 2022, asset impairments on property, plant and equipment and leases in the amount of $ 21.5 million were recorded for the year ended February 26, 2022. During the third quarter of fiscal 2022, an impairment of $ 3.0 million was recognized within other (income) expense within the consolidated results of operations related to a minority equity investment held by the Company. This represents a write-down of the entire investment in the other company. During the fourth quarter of fiscal 2022, based on the finalization of our plans for integrating the Sotawall business into the Architectural Services Segment, which was effective beginning in fiscal 2023, we determined that the related definite-lived intangible assets were impaired as of February 26, 2022. As such, a long-lived asset impairment charge of $ 36.7 million in finite-lived intangible assets was recognized in the fourth quarter of fiscal year 2022 within the Architectural Framing Systems Segment. Goodwill and intangible assets Goodwill Goodwill represents the excess of the cost over the net tangible and identified intangible assets of acquired businesses. We evaluate goodwill for impairment annually on the first day in our fiscal fourth quarter, or more frequently if events or changes in circumstances indicate the carrying value of the goodwill may not be recoverable. Evaluating goodwill for impairment involves the determination of the fair value of each reporting unit in which goodwill is recorded using a qualitative or quantitative analysis. A reporting unit is an operating segment or a component of an operating segment for which discrete financial information is available and reviewed by segment management on a regular basis. 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. In connection with the transition, leadership of our Sotawall and Harmon businesses was combined to form the Architectural Services reporting unit. We evaluated goodwill on a qualitative basis prior to and subsequent to this change for these reporting units and concluded no adjustment to the carrying value of goodwill was necessary as a result of this change. Concurrent with this change in composition of the operating segments effective at the start of our first quarter of fiscal 2023, goodwill was reallocated to the affected reporting units within each operating segment, using a relative fair value approach as outlined in ASC 350, Intangibles - Goodwill and Other . The reporting units for our fiscal 2024 annual impairment test align with reporting segments, with the exception of our Architectural Framing Systems Segment. This segment contains two reporting units, Window and Wall Systems and Storefront and Finishing Solutions, which represent $ 53.6 million and $ 35.7 million, of the goodwill balance at March 2, 2024, respectively. During the fourth quarter of fiscal 2024, as a result of an announced restructuring plan, we reassessed our reporting units, which led to a combination of the Window and Wall Systems and Storefront and Finishing Solutions reporting units into one Architectural Framing Systems reporting unit. We evaluated goodwill on a qualitative basis prior to and subsequent to this change and concluded that no adjustment to the carrying value of goodwill was necessary as a result of this change. In addition, no qualitative indicators of impairment were identified during the fourth quarter of fiscal 2024. Following this change, we have four reporting units, which align with our reporting segments. 44 Table of Contents We estimate the fair value of a reporting unit using both the income approach and the market approach. The income approach uses a discounted cash flow methodology that involves significant judgment and projections of future performance. Assumptions about future revenues and future operating expenses, capital expenditures and changes in working capital are based on the annual operating plan and other business plans for each reporting unit. These plans take into consideration numerous factors, including historical experience, current and future operational plans, anticipated future economic conditions and growth expectations for the industries and end markets in which we participate. These projections are discounted using a weighted-average cost of capital, which considers the risk inherent in our projections of future cash flows. We determine the weighted-average cost of capital for this analysis by weighting the required returns on interest bearing debt and common equity capital in proportion to their estimated percentages in an expected capital structure, using published data where possible. We used discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in the internally developed forecasts. The market approach uses a multiple of earnings and revenue based on guidelines for publicly traded companies. Intangible assets We have intangible assets for certain acquired trade names and trademarks which are determined to have indefinite useful lives. We test indefinite-lived intangible assets for impairment annually at the same measurement date as goodwill, the first day of our fiscal fourth quarter, or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment expense is recognized in an amount equal to that excess. If an impairment expense is recognized, the adjusted carrying amount becomes the asset's new accounting basis. Fair value of indefinite-lived intangible assets is measured using the relief-from-royalty method. This method assumes the trade name or trademark has value to the extent that the owner is relieved of the obligation to pay royalties for the benefits received from the asset. This method requires estimation of future revenue from the related asset, the appropriate royalty rate, and the weighted average cost of capital. The assessment of fair value involves significant judgment and projections about future performance. Definite-lived intangible assets are amortized based on estimated useful lives ranging from 18 months to 30 years and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We use undiscounted cash flows to determine whether impairment exists and measure any impairment loss using discounted cash flows to determine the fair value of long-lived assets. The estimated useful lives of all intangible assets are reviewed annually, and we have determined that the remaining lives were appropriate. Refer to Note 6 for additional information. Leases We have commercially negotiated leases where we recognize a right-of-use asset and lease liability on our consolidated balance sheet at lease commencement for leases with terms greater than twelve months. The initial lease liability is recognized at the present value of remaining lease payments over the lease term. Leases with an initial term of twelve months or less are not recorded on our consolidated balance sheet. We recognize lease expense for operating leases on a straight-line basis over the lease term. We combine lease and non-lease components, such as common area maintenance costs, in calculating the related asset and lease liabilities for all underlying asset groups. Refer to Note 8 for additional information. Self-Insurance We obtain commercial insurance to provide coverage for potential losses in areas such as employment practices, workers' compensation, directors and officers, automobile, architect's and engineer's errors and omissions, product rework and general liability. A substantial portion of this risk is retained on a self-insured basis through our wholly-owned insurance subsidiary. We establish a reserve for estimated ultimate losses on reported claims and those incurred but not yet reported utilizing actuarial projections. Reserves are classified within other current liabilities or non-current self-insurance reserves based on expectations of when the estimated loss will be paid. Additionally, we maintain a self-insurance reserve for health insurance programs offered to eligible employees, included within other current liabilities on the consolidated balance sheets. The reserve includes an estimate for losses on reported claims as well as for amounts incurred but not yet reported, based on historical trends. 45 Table of Contents Warranty and project-related contingencies We are subject to claims associated with our products and services, principally as a result of disputes with our customers involving the performance or aesthetics of our architectural products and services. We reserve estimated exposures on known claims, as well as on a portion of anticipated claims for product warranty and rework costs, based on historical product liability claims as a ratio of sales. We also reserve for estimated backcharge exposures or other claims as they are known and reasonably estimable. Reserves are included in other current and non-current liabilities based on the estimated timing of dispute resolution. Foreign currency Local currencies are considered the functional currencies for our subsidiaries outside of the United States. Assets and liabilities of these subsidiaries are translated at the exchange rates at the balance sheet date. Income and expense items are translated using average monthly exchange rates. Translation adjustments are included in accumulated other comprehensive loss in the consolidated balance sheets. Derivatives and hedging activities We are exposed to, among other risks, the impact of changes in aluminum prices, foreign currency exchange rates, and interest rates in the normal course of business. In order to manage the exposure and volatility arising from these risks, we utilize derivative financial instruments to offset a portion of these risks. We use derivative financial instruments only to hedge identified business risks, and do not hold or issue derivative financial instruments for trading purposes and are not a party to leveraged derivatives. All derivative instruments within the scope of ASC 815, Derivatives and Hedging , are recorded as either assets or liabilities at fair value on the consolidated balance sheets. All hedging instruments that qualify for hedge accounting are designated and effective as hedges with changes recognized in other comprehensive earnings (loss). Instruments that do not qualify for hedge accounting are marked to market with changes recognized directly in earnings. Cash flows from derivative instruments are classified in the statements of cash flows in the same category as the cash flows from the items subject to designated hedge or undesignated (economic) hedge relationships. Refer to Note 4 for additional information. Revenue recognition Our significant accounting policy for revenue recognition follows ASC 606, Revenue from Contracts with Customers . We generate revenue from the design, engineering and fabrication of architectural glass, curtainwall, window, storefront and entrance systems, and from installing those products on non-residential buildings. We also manufacture value-added glass and acrylic products. Due to the diverse nature of our operations and various types of contracts with customers, we have businesses that recognize revenue at a point in time at shipment, businesses that recognize revenue following an over-time input method and businesses that recognize revenue following an over-time output method. Approximately 42 % of our fiscal 2024 revenue was recognized at the time products were shipped from our manufacturing facilities, which is when control is transferred to our customer, consistent with past practices. These businesses do not generate contract-related assets or liabilities. Variable consideration associated with these contracts and orders, generally related to early pay discounts or volume rebates, is not considered significant. Approximately 34 % of our fiscal 2024 revenue was from long-term, fixed-price contracts, following an over-time input method. The contracts for these businesses have a single, bundled performance obligation, as these businesses generally provide interrelated products and services and integrate these products and services into a combined output specified by the customer. The customer obtains control of this combined output, generally integrated window systems or installed window and curtainwall systems, over time. We measure progress on these contracts following an input method, by comparing total costs incurred to-date to the total estimated costs for the contract, and record that proport ion of the total contract price as revenue in the period. Contract costs include materials, labor and other direct costs related to contract performance. We believe this method of recognizing revenue is consistent with our progress in satisfying our contract obligations. Due to the nature of the work required under these long-term contracts, the estimation of total revenue and costs incurred throughout a project is subject to many variables and requires significant judgment. It is common for these contracts to contain potential bonuses or penalties which are generally awarded or charged upon certain project milestones or cost or timing targets, and these can be based on customer discretion. We estimate variable consideration at the most likely amount to which we expect to be entitled. We include estimated amounts in the transaction price to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on our assessments of anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. 46 Table of Contents Long-term contracts are often modified to account for changes in contract specifications and requirements of work to be performed. We consider contract modifications to exist when the modification, generally through a change order, either creates new or changes existing enforceable rights and obligations, and we evaluate these types of modifications to determine whether they may be considered distinct performance obligations. In most cases, these contract modifications are for goods or services that are not distinct from the existing contract, due to the significant integration service provided in the context of the contract. Therefore, these modifications are accounted for as part of the existing contract. The effect of a contract modification on the transaction price and our measure of progress is recognized as an adjustment to revenue, generally on a cumulative catch-up basis. Typically, under these fixed-price contracts, we bill our customers following an agreed-upon schedule based on work performed. Because the progress billings do not generally correspond to our measurement of revenue on a contract, we generate contract assets when we have recognized revenue in excess of the amount billed to the customer. We generate contract liabilities when we have billed the customer in excess of revenue recognized on a contract. A pproximately 24 % of our fiscal 2024 revenue was recognized following an over-time output method based upon units produced. The customer is considered to have control over the products at the time of production, as the products are highly customized with no alternative use, and we have an enforceable right to payment for performance completed over the production p eriod. We believe this over-time output method of recognizing revenue reasonably depicts the fulfillment of our performance obligations under our contracts. Billings still occur upon shipment. Therefore, contract assets are generated for the unbilled amounts on contracts when production is complete. Variable consideration associated with these orders, generally related to early pay discounts, is not considered significant. Additionally, we have made the following policy elections associated with revenue recognition: • We account for shipping and handling activities that occur after control of the related goods transfers to the customer as fulfillment activities, instead of assessing such activities as performance obligations. • We exclude from the transaction price all sales taxes related to revenue-producing transactions that are collected from the customer for a government authority. We are considered a pass-through conduit for collecting and remitting sales taxes. • We generally expense incremental costs of obtaining a contract when incurred because the amortization period would be less than one year. These costs primarily relate to sales commissions and are included in selling, general and administrative expenses. • We do not adjust contract price for a significant financing component, as we expect the period between when our goods and services are transferred to the customer and when the customer pays for those goods and services to be less than a year. Shipping and handling Amounts billed to a customer in a sales transaction related to shipping and handling are reported as revenue. Costs we incur for shipping and handling are reported as cost of sales. Restructuring Restructuring charges are recorded as a result of fundamental changes in the manner in which certain business functions are conducted, including initiatives to drive earnings and cash flow growth and to realign and simplify our business structure. These charges primarily consist of employee severance benefits, asset impairments on property, plant and equipment and operating lease assets and termination penalties for facility closures and consolidations. We record restructuring accruals when it is probable that a liability has been incurred and the amount of the liability is reasonably estimable. To the extent our assumptions and estimates differ from our actual costs, subsequent adjustments to restructuring accruals have been and will be required. Restructuring accruals for severance-related costs are included in accrued compensation and related benefits and accruals for remaining obligations and termination penalties are included in other current liabilities in our consolidated balance sheets. Refer to Note 16 for additional information. Research and development Research and development activities include the development of new products, the modification of existing product designs, and research related to process improvements. Our research and development expenses were $ 30.3 million, $ 25.5 million and $ 17.3 million for fiscal 2024, 2023 and 2022, respectively. These costs are expensed as incurred. Advertising Advertising costs are expensed as incurred within selling, general and administrative expenses , and were $ 1.3 million in fiscal 2024 and $ 1.2 million in fiscal 2023 and 2022. 47 Table of Contents Income taxes The Company recognizes deferred tax assets and liabilities based upon the future tax consequences of temporary differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. Refer to Note 13 for additional information. Subsequent events We have evaluated subsequent events for potential recognition and disclosure through the date of this filing and determined that there were no subsequent events that required recognition or disclosure in the consolidated financial statements. Adoption of new accounting standards At the beginning of fiscal 2024, we adopted the guidance in ASU 2022-04, Liabilities – Supplier Finance Programs, Disclosure of Supplier Finance Program Obligations. The guidance requires that entities that use supplier finance programs disclose information about the nature and potential magnitude of the programs, activity during the period, and changes from period to period. Beginning in the first quarter, we implemented a supplier financing arrangement with U.S. Bank that enables our suppliers, at their sole discretion, to sell the Company's receivables (i.e., our payment obligations to the suppliers) to U.S. Bank on a non-recourse basis in order to be paid earlier than our payment terms provide. Our suppliers’ voluntary inclusion of invoices in the supplier financing arrangement has no bearing on our payment terms, the amounts we pay, or our liquidity. We have no economic interest in a supplier’s decision to participate in the supplier financing program, and we do not provide any guarantees in connection with it. These balances are reflected in accounts payable in the consolidated balance sheets and are reflected in net cash provided by operating activities in our consolidated statements of cash flows when settled. The following table summarizes the obligation activity and outstanding as of March 2, 2024 that we have confirmed as valid to the administrators of our program with U.S. Bank: (In thousands) 2024 Balance at beginning of period $ — Obligations added to the program 33,133 Obligations settled ( 26,606 ) Balance at end of period $ 6,527 At the beginning of fiscal 2022, we adopted the guidance in ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . The amendments in this ASU removed exceptions on intra-period tax allocations and reporting and provided simplification on accounting for franchise taxes, tax basis goodwill and tax law changes. The adoption of this ASU did not have a significant impact on the consolidated financial statements. At the beginning of fiscal 2022, we adopted the guidance in ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The adoption of this ASU did not have a significant impact on the consolidated financial statements. Accounting standards not yet adopted In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures , which expands the required disclosure for reportable segments. This guidance requires entities to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all segment disclosures which are currently required annually. This ASU additionally requires entities to disclose the title and position of the individual or the name of the group or committee identified as its chief operating decision-maker. Such guidance, which is required to be applied retrospectively, is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, although early adoption is permitted. While the adoption of this ASU will not have an impact on our financial position and/or results of operations, we are currently evaluating the impact to our segment disclosures. 48 Table of Contents In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , intended to enhance the transparency and decision-usefulness of income tax disclosures. Such guidance requires entities to provide additional information within their income tax rate reconciliation, including further disclosure of federal, state, and foreign income taxes and to provide more details about these reconciling items if a quantitative threshold is met. This guidance additionally requires expanded disclosure of income taxes paid, including amounts paid for federal, state, and foreign taxes. This ASU, which is required to be applied prospectively, is effective for fiscal years beginning after December 15, 2024, although early adoption and retrospective application is permitted. While the adoption of this ASU will not have an impact on our financial position and/or results of operations, we are currently evaluating the impact on our income tax disclosures, including the processes and controls around the collection of this information. 2. Revenue, Receivables and Contract Assets and Liabilities Revenue The following table disaggregates total revenue by timing of recognition (see Note 15 for disclosure of revenue by segment): March 2, 2024 February 25, 2023 February 26, 2022 (In thousands) (53 weeks) (52 weeks) (52 weeks) Recognized at shipment $ 596,270 $ 649,792 $ 551,783 Recognized over time (input method) 483,109 514,826 503,972 Recognized over time (output method) 337,563 276,078 258,222 Total $ 1,416,942 $ 1,440,696 $ 1,313,977 Receivables Receivables reflected in the financial statements represent the net amount expected to be collected. An allowance for credit losses is established based on expected losses. Expected losses are estimated by reviewing individual accounts, considering aging, financial condition of the debtor, recent payment history, current and forecast economic conditions and other relevant factors. Upon billing, aging of receivables is monitored until collection. An account is considered current when it is within agreed upon payment terms. An account is written off when it is determined that the asset is no longer collectible. Retainage on construction contracts represents amounts withheld by our customers on long-term projects until the project reaches a level of completion where amounts are released. (In thousands) 2024 2023 Trade accounts $ 115,061 $ 140,732 Construction contracts 61,879 58,331 Total receivables 176,940 199,063 Less: allowance for credit losses 3,383 1,796 Receivables, net $ 173,557 $ 197,267 The following table summarizes the activity in the allowance for credit losses: (In thousands) 2024 2023 Beginning balance $ 1,796 $ 2,132 Additions charged to costs and expenses 2,473 394 Deductions from allowance, net of recoveries ( 901 ) ( 686 ) Other deductions 15 ( 44 ) Ending balance $ 3,383 $ 1,796 49 Table of Contents Contract assets and liabilities Contract assets consist of retainage, costs and earnings in excess of billings and other unbilled amounts typically generated when revenue recognized exceeds the amount billed to the customer. Retainage on construction contracts represents amounts withheld by our customers on long-term projects until the project reaches a level of completion where amounts are released to us from the customer. Contract liabilities consist of billings in excess of costs and earnings and other unearned revenue on contracts. The time period between when performance obligations are complete and when payment is due is not significant. In certain of our businesses that recognize revenue over time, progress billings follow an agreed-upon schedule of values. (In thousands) March 2, 2024 February 25, 2023 Contract assets $ 49,502 $ 59,403 Contract liabilities 34,755 28,011 The change in contract assets and contract liabilities was due to timing of project activity from businesses that operate under long-term contracts. Other contract-related disclosures March 2, 2024 February 25, 2023 (In thousands) (53 weeks) (52 weeks) Revenue recognized related to contract liabilities from prior year-end $ 25,342 $ 37,594 Revenue recognized related to prior satisfaction of performance obligations 9,257 16,612 Some of our contracts have an expected duration of longer than a year, with performance obligations extending over that time frame. Generally, these contracts are found in our businesses that typically operate with long-term contracts, which recognize revenue over time. The transaction price associated with unsatisfied performance obligations at March 2, 2024 are expected to be satisfied, and the corresponding revenue to be recognized, over the following estimated time periods: (In thousands) March 2, 2024 Within one year $ 460,881 Within two years 305,704 Beyond two years 119,700 Total $ 886,285 3. Supplemental Balance Sheet Information Inventories (In thousands) 2024 2023 Raw materials $ 31,363 $ 36,869 Work-in-process 12,291 18,024 Finished goods 25,586 23,548 Total inventories, net $ 69,240 $ 78,441 Other current liabilities (In thousands) 2024 2023 Warranties and backcharges $ 18,874 $ 14,872 Accrued self-insurance reserves 17,592 14,447 Income and other taxes 7,202 7,129 Other 15,440 28,084 Total other current liabilities $ 59,108 $ 64,532 50 Table of Contents Other non-current liabilities (In thousands) 2024 2023 Deferred warranty revenue $ 10,274 $ 10,352 Deferred benefit from New Markets Tax Credit transactions 9,250 9,250 Deferred compensation plan 5,938 5,577 Retirement plan obligations 4,769 5,749 Deferred tax liabilities 1,456 1,417 Other 12,188 11,838 Total other non-current liabilities $ 43,875 $ 44,183 4. Financial Instruments Marketable Securities Through our wholly-owned insurance subsidiary, Prism Assurance, Ltd. (Prism), we hold the following available-for-sale marketable securities, made up of municipal and corporate bonds: (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value March 2, 2024 $ 11,327 $ 15 $ 437 $ 10,905 February 25, 2023 10,647 — 702 9,945 Prism insures a portion of our general liability, workers' compensation and automobile liability risks using reinsurance agreements to meet statutory requirements. The reinsurance carrier requires Prism to maintain fixed-maturity investments, for the purpose of providing collateral for Prism's obligations under the reinsurance agreements. The amortized cost and estimated fair values of our municipal and corporate bonds at March 2, 2024, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities, as borrowers may have the right to call or prepay obligations with or without penalty. Investments that are due within one year are included in other current assets while those due after one year are included as other non-current assets. Gross realized gains and losses were insignificant for all periods presented. (In thousands) Amortized Cost Estimated Fair Value Due within one year $ 2,820 $ 2,798 Due after one year through five years 8,507 8,107 Total $ 11,327 $ 10,905 Derivative instruments We use interest rate swaps, currency put options, and forward purchase contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity price fluctuations. The information that follows explains the various types of derivatives and financial instruments we use, how such instruments are accounted for, and how such instruments impact our financial position and performance. In fiscal 2020, we entered into an interest rate swap with a notional value of $ 30 million with an expiration date of February 5, 2026, to hedge a portion of our exposure to variability in cash flows from interest payments on our floating-rate revolving credit facility. We periodically enter into forward purchase contracts to manage the risk associated with fluctuations in foreign currency rates (primarily related to the Canadian dollar and Euro) and aluminum prices, generally with an original maturity date of less than one year. As of March 2, 2024, we held foreign exchange option contracts and aluminum purchase contracts with U.S. dollar notional values of $ 1.4 million and $ 9.3 million, respectively. The mark to market adjustments on these derivative instruments are recorded within our consolidated balance sheets within other current assets and other current liabilities. Gains or losses associated with these instruments are recorded as a component of accumulated other comprehensive loss until which time the hedged transaction is settled and gains or losses are reclassified to earnings. 51 Table of Contents Fair value measurements Financial assets and liabilities are classified in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement: Level 1 (unadjusted quoted prices in active markets for identical assets or liabilities); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data). We do not have any Level 3 assets or liabilities. Financial assets and liabilities measured at fair value on a recurring basis were: (In thousands) Quoted Prices in Active Markets (Level 1) Other Observable Inputs (Level 2) Total Fair Value March 2, 2024 Assets: Money market funds $ 26,529 $ — $ 26,529 Municipal and corporate bonds — 10,905 10,905 Foreign currency option contract — 3 3 Interest rate swap contract — 1,292 1,292 Liabilities: Aluminum hedging contract — 529 529 February 25, 2023 Assets: Money market funds $ 8,062 $ — $ 8,062 Municipal and corporate bonds — 9,945 9,945 Interest rate swap contract — 1,817 1,817 Liabilities: Foreign currency option contract — 206 206 Aluminum hedging contract — 1,075 1,075 Money market funds and commercial paper Fair value of money market funds was determined based on quoted prices for identical assets in active markets. Commercial paper was measured at fair value using inputs based on quoted prices for similar securities in active markets. These assets are included within cash and cash equivalents on our consolidated balance sheets. Municipal and corporate bonds Municipal and corporate bonds were measured at fair value based on market prices from recent trades of similar securities and are classified within our consolidated balance sheets as other current or other non-current assets based on maturity date. Derivative instruments The interest rate swap is measured at fair value using other observable market inputs, based off benchmark interest rates. Forward foreign exchange and forward purchase aluminum contracts are measured at fair value using other observable market inputs, such as quotations on forward foreign exchange points, foreign currency exchange rates and forward purchase aluminum prices. Derivative positions are primarily valued using standard calculations and models that use as their basis readily observable market parameters. Industry standard data providers are our primary source for forward and spot rate information for interest and currency rates and aluminum prices. Nonrecurring fair value measurements We measure certain financial instruments at fair value on a nonrecurring basis including goodwill, intangible assets, property and equipment and right-of-use lease assets. These assets were initially measured and recognized at amounts equal to the fair value determined as of the date of acquisition or purchase, subject to changes in value only for foreign currency translation. Periodically, these assets are tested for impairment, by comparing their respective carrying values to the estimated fair value of the reporting unit or asset group in which they reside. In the event any of these assets were to become impaired, we would recognize an impairment expense equal to the amount by which the carrying value of the reporting unit, impaired asset or asset group exceeds its estimated fair value. 52 Table of Contents Fair value measurements of reporting units are estimated using an income approach involving discounted cash flow models that contain certain Level 3 inputs requiring significant management judgment, including projections of economic conditions, customer demand and changes in competition, revenue growth rates, gross profit margins, operating margins, capital expenditures, working capital requirements, terminal growth rates and discount rates. Fair value measurements of the reporting units associated with our goodwill balances and our indefinite-lived intangible assets are estimated at least annually in the fourth quarter of each fiscal year for purposes of impairment testing if a quantitative analysis is performed. Fair value measurements for long-lived assets or asset groups, including intangible assets subject to amortization, property and equipment and right-of-use lease assets, are valued using undiscounted cash flows to determine whether impairment exists and measure any impairment loss using discounted cash flows to determine the fair value of long-lived assets. 5. Property, Plant and Equipment (In thousands) 2024 2023 Land $ 3,637 $ 3,600 Buildings and improvements 189,675 188,949 Machinery and equipment 391,236 376,721 Computer and office equipment and furniture 62,586 69,465 Construction in progress 42,099 41,842 Total property, plant and equipment 689,233 680,577 Less: accumulated depreciation 445,017 431,710 Net property, plant and equipment $ 244,216 $ 248,867 Depreciation expense was $ 37.6 million, $ 38.2 million, and $ 42.2 million in fiscal 2024, 2023, and 2022, respectively. 6. Goodwill and Other Intangible Assets Goodwill Refer to Note 1 to the consolidated financial statements for a description of the Accounting Policy related to Goodwill. Goodwill represents the excess of the cost over the net tangible and identified intangible assets of acquired businesses. We evaluate goodwill for impairment annually as of the first day of our fiscal fourth quarter, or more frequently if events or changes in circumstances indicate the carrying value of goodwill may not be recoverable, as described in Note 1. Based on the impairment analysis performed in the fourth quarter, estimated fair value was in excess of carrying value at all of our reporting units. The carrying amount of goodwill attributable to each reporting segment was: (In thousands) Architectural Framing Systems Architectural Glass Architectural Services Large-Scale Optical Total Balance at February 26, 2022 $ 93,181 $ 25,244 $ 1,120 $ 10,557 $ 130,102 Reallocation among reporting units (1) ( 2,048 ) — 2,048 — — Foreign currency translation ( 996 ) 57 ( 137 ) — ( 1,076 ) Balance at February 25, 2023 90,137 25,301 3,031 10,557 129,026 Foreign currency translation 49 100 7 — 156 Balance at March 2, 2024 $ 90,186 $ 25,401 $ 3,038 $ 10,557 $ 129,182 (1) Represents the reallocation of goodwill as a result of transitioning Sotawall from the Architectural Framing Systems Segment to the Architectural Services Segment as of the start of the first quarter of fiscal 2023. 53 Table of Contents Intangible assets Indefinite-lived intangible assets We have intangible assets for certain acquired trade names and trademarks which are determined to have indefinite useful lives. We test indefinite-lived intangible assets for impairment annually at the same measurement date as goodwill, the first day of our fiscal fourth quarter, or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired as described in Note 1. Based on our annual analysis, the fair value of each of our trade names and trademarks exceeded the carrying amount. During fiscal 2022, as a result of triggering events resulting from the finalization of our plans for integrating the Sotawall business into the Architectural Services Segment, beginning in fiscal 2023, it was determined that the carrying value of the Sotawall trade name exceeded fair value by $ 12.7 million as it was determined to have an immaterial fair value, resulting in the trade name being fully impaired as of fiscal 2022 year end. This amount was recognized as impairment expense in the fourth quarter ended February 26, 2022. Definite-lived intangible assets Long-lived assets or asset groups, including intangible assets subject to amortization and property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of those assets may not be recoverable, as described in Note 1. Due to triggering events as a result of finalization of our plans for integrating the Sotawall business into the Architectural Services Segment, beginning in fiscal 2023, we determined that certain related finite-lived intangible assets were impaired as of February 26, 2022. As such, a long-lived asset impairment charge of $ 36.7 million in finite-lived intangible assets was recognized in the fourth quarter of fiscal year 2022. The gross carrying amount of our intangible assets and related accumulated amortization was: (In thousands) Gross Carrying Amount Accumulated Amortization Foreign Currency Translation Net March 2, 2024 Definite-lived intangible assets: Customer relationships $ 86,798 $ ( 53,200 ) $ 246 $ 33,844 Other intangibles 37,505 ( 32,250 ) 150 5,405 Total 124,303 ( 85,450 ) 396 39,249 Indefinite-lived intangible assets: Trademarks 26,851 — 14 26,865 Total intangible assets $ 151,154 $ ( 85,450 ) $ 410 $ 66,114 February 25, 2023 Definite-lived intangible assets: Customer relationships $ 89,495 $ ( 49,404 ) $ ( 2,697 ) $ 37,394 Other intangibles 39,404 ( 35,229 ) ( 1,045 ) 3,130 Total 128,899 ( 84,633 ) ( 3,742 ) 40,524 Indefinite-lived intangible assets: Trademarks 27,129 — ( 278 ) 26,851 Total intangible assets $ 156,028 $ ( 84,633 ) $ ( 4,020 ) $ 67,375 Amortization expense on finite-lived intangible assets was $ 4.9 million, $ 4.2 million and $ 7.8 million in fiscal 2024, 2023 and 2022, respectively. All amortization expense is included within selling, general and administrative expenses. Estimated future amortization expense for finite-lived intangible assets is: (In thousands) 2025 2026 2027 2028 2029 Estimated amortization expense $ 4,824 $ 4,824 $ 4,822 $ 4,801 $ 4,167 7. Debt As of March 2, 2024, we had a committed revolving credit facility with Wells Fargo Bank, N.A. as administrative agent, and other lenders (U.S. credit facility) with maximum borrowings of up to $ 385 million and a maturity of August 5, 2027. Outstanding borrowings under the revolving credit facility were $ 50.0 million and $ 156.0 million as of March 2, 2024 and February 25, 2023, respectively. 54 Table of Contents We also maintain two Canadian committed, revolving credit facilities with the Bank of Montreal totaling $ 25.0 million USD (Canadian facilities). The Canadian facilities expire annually in February, but can be renewed each year solely at our discretion until August 5, 2027. Therefore, we classify all outstanding amounts under these facilities as long-term debt within our consolidated balance sheets. At March 2, 2024, we had no outstanding borrowings under these Canadian facilities. At February 25, 2023, outstanding borrowings under these Canadian facilities were $ 1.8 million. 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 March 2, 2024, we were in compliance with both financial covenants. The revolving credit facilities also contain 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 facilities, 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 Secured Overnight Financing Rate (SOFR), or, in the case of the Canadian facilities, Canadian Overnight Repo Rate Average (CORRA) plus, in each a margin based on the Leverage Ratio (as defined in the Credit Agreements). For Base Rate borrowings, the margin ranges from 0.125 % to 0.75 %. For Term SOFR and CORRA borrowings, the margin ranges from 1.125 % to 1.75 %, with an incremental Term SOFR and CORRA adjustment of 0.10 % and 0.29547 %. The U.S. credit facility also contains an "accordion" provision. Under this provision, we can request that the facility be increased by as much as $ 200.0 million. Any Lender may elect or decline to participate in the requested increase at the Lender’s sole discretion. At March 2, 2024, we had a total of $ 15.0 million of ongoing letters of credit related to industrial revenue bonds, construction contracts and insurance collateral that expire in fiscal year 2025 and reduce borrowing capacity under the revolving credit facility. As of March 2, 2024, the amount available for revolving borrowings was $ 320.0 million and $ 25.0 million under the U.S. credit facility and Canadian facilities, respectively. At March 2, 2024, debt included $ 12.0 million of industrial revenue bonds that mature in fiscal years 2036 through 2043. The fair value of our U.S. credit facility, Canadian credit facilities and industrial revenue bonds approximated carrying value at March 2, 2024, and would be classified as Level 2 within the fair value hierarchy described in Note 4, due to the variable interest rates on these instruments. Debt maturities and other selected information follows: (In thousands) 2025 2026 2027 2028 2029 Thereafter Total Maturities $ — $ — $ — $ 50,000 $ — $ 12,000 $ 62,000 (In thousands, except percentages) 2024 2023 Average daily borrowings during the year $ 130,939 $ 225,773 Weighted average interest rate during the year 6.03 % 3.54 % (In thousands) March 2, 2024 February 25, 2023 February 26, 2022 Interest on debt $ 8,704 $ 8,558 $ 3,228 Interest rate swap (income) expense ( 893 ) ( 418 ) 467 Other interest expense 178 294 866 Interest expense, net $ 7,989 $ 8,434 $ 4,561 Interest payments were $ 9.3 million in fiscal 2024, $ 8.2 million in fiscal 2023 and $ 3.5 million in fiscal 2022. 55 Table of Contents 8. Leases We have operating leases for certain of the buildings and equipment used in our operations. We determine if an arrangement contains a lease at inception. Under ASU 2016-20, Leases , we have elected the package of practical expedients permitted under the transition guidance in adopting ASC 842, which, among other things, allowed us to carry forward our historical lease classification. Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Lease expense is recognized on a straight-line basis over the lease term. Our leases have remaining lease terms of one to ten years , some of which include renewal options that can extend the lease for up to an additional ten years , at our sole discretion. We have made an accounting policy election not to record leases with an original term of twelve months or less on our consolidated balance sheet; such leases are expensed on a straight-line basis over the lease term. As of March 2, 2024, we have one additional future operating lease commitment of $ 13.7 million that is signed but has not yet commenced, for one facility located in Texas within our Architectural Services Segment. In determining lease asset value, we consider fixed or variable payment terms, prepayments, incentives, and options to extend, terminate or purchase. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. We use a discount rate for each lease based upon an estimated incremental borrowing rate over a similar term. We have elected the practical expedient to account for lease and non-lease components (e.g., common-area maintenance costs) as a single lease component. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease expense were as follows: (In thousands) March 2, 2024 February 25, 2023 Operating lease cost $ 14,312 $ 12,336 Short-term lease cost 1,349 1,579 Variable lease cost 2,629 3,487 Sublease income ( 1,479 ) ( 671 ) Total lease cost $ 16,811 $ 16,731 Other supplemental information related to leases are as follows: (In thousands) March 2, 2024 February 25, 2023 Cash paid for amounts included in the measurement of operating lease liabilities $ 14,656 $ 14,086 Lease assets obtained in exchange for new operating lease liabilities $ 11,883 $ 11,359 Weighted-average remaining lease term - operating leases 4.0 years 4.5 years Weighted-average discount rate - operating leases 3.2 % 3.1 % Future maturities of lease liabilities are as follows: (In thousands) 2024 Fiscal 2025 $ 12,498 Fiscal 2026 11,206 Fiscal 2027 10,845 Fiscal 2028 6,421 Fiscal 2029 1,991 Thereafter 1,826 Total lease payments 44,787 Less: Amounts representing interest 594 Present value of lease liabilities $ 44,193 56 Table of Contents 9. Employee Benefit Plans 401(k) Retirement Plan We sponsor a single 401(k) retirement plan covering substantially all full-time, non-union employees, as well as union employees at two of our manufacturing facilities. Under the plan, employees are allowed to contribute up to 60 % of eligible earnings to the plan, up to statutory limits. On January 1, 2023, we began matching 100 % of the first two percent contributed and 50 % of the next four percent contributed on eligible compensation that non-union employees contribute. Previously, we matched 100 % of the first one percent contributed and 50 % of the next five percent contributed on eligible compensation that non-union employees contribute. We contribute to the union plans based on the contractual terms. In total, our matching contributions were $ 9.6 million in fiscal 2024, $ 8.6 million in fiscal 2023 and $ 7.7 million in fiscal 2022. Deferred Compensation Plan We maintain a plan that allows participants to defer compensation. The deferred compensation liability was $ 5.9 million and $ 9.5 million at March 2, 2024 and February 25, 2023, respectively. We have investments in corporate-owned life insurance policies (COLI) of $ 8.5 million and money market funds (classified as cash equivalents) of $ 0.3 million with the intention of utilizing them as long-term funding sources for this plan. The COLI assets are recorded at their net cash surrender values and are included in other non-current assets in the consolidated balance sheets. Plans under Collective Bargaining Agreements We contribute to a number of multi-employer union retirement plans, which provide retirement benefits to the majority of our union-represented employees; none of the plans is considered significant. However, the risks of participating in these multi-employer plans are different from single-employer plans in the following aspects: • Assets contributed to these plans by one employer may be used to provide benefits to employees of other participating employers • If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers • If we choose to stop participating in some of these plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability Our participation in these plans is outlined in the following table. The most recent Pension Protection Act zone status available in 2024 and 2023 relates to the plan years ending December 31, 2023 and December 31, 2022, respectively. The zone status is based on information that we have received from each plan, certified by an actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are between 65% and 80% funded, and plans in the green zone are at least 80% funded. 57 Table of Contents Pension Protection Act Zone Status Contributions (In thousands) Pension Fund EIN/Pension Plan Number 2024 2023 2024 2023 2022 FIP/RP Status Pending/Implemented (2) Minimum Contribution Surcharge Imposed Expiration Date of Collective Bargaining Agreement (1) Iron Workers Local Union No. 5 and Iron Workers Employers Association Employees Pension Trust Fund 521075473 Green Green $ 1,015 $ 1,359 $ 1,454 No No No 5/31/2017 International Painters and Allied Trades Industry Pension Fund 526073909 Red Red 971 869 932 Implemented No No 11/30/2017 Ironworkers Local 580 Pension Fund 136178514 Green Green 883 596 31 Implemented No Yes 6/30/2023 Western Glaziers Retirement Plan (Washington) 916123685 Green Green 423 815 160 No No No 6/30/2017 Iron Workers Mid-America Pension Fund 366488227 Green Green 237 429 431 No No No 5/31/2017 Glazier's Union Local 27 Pension and Retirement Plan 366034076 Green Green 145 174 290 No No No 5/31/2017 Atlanta Ironworkers Local Union 387 Pension Plan 586051152 Green Green 109 125 209 No No No 1/31/2017 Western Glaziers Retirement Fund (Oregon and Southwest Washington) 936074376 Green Green 22 441 — No No No 11/30/2017 Other funds 801 493 530 Total contributions $ 4,606 $ 5,301 $ 4,037 (1) Plans include contributions required by collective bargaining agreements which have expired, but contain provisions automatically renewing their terms in the absence of a subsequent negotiated agreement. (2) FIP is defined as Funding Improvement Plan; RP is defined as Rehabilitation Plan The Company was listed in the plans' Forms 5500 as providing more than 5% of the total contributions for the following plans and plan years: Pension Fund Year contributions to Plan Exceeded More Than 5 Percent of Total Contributions Iron Workers Local Union No. 5 and Iron Workers Employers Association Employees Pension Trust Fund 2024, 2023 and 2022 Western Glaziers Retirement Plan (Washington) 2022 Iron Workers Mid-America Pension Fund 2023 and 2022 Atlanta Ironworkers Local Union 387 Pension Plan 2023 Amounts contributed in fiscal 2024, 2023, and 2022 to defined contribution multiemployer plans were $ 2.2 million, $ 2.2 million and $ 1.6 million, respectively. Obligations and Funded Status of Defined-Benefit Pension Plans We sponsor the Tubelite Inc. Hourly Employees' Pension Plan, a defined-benefit pension plan that was frozen to new entrants in fiscal 2004, with no additional benefits accruing to plan participants after such time. We also sponsor an unfunded SERP, a defined-benefit pension plan that was frozen to new entrants in fiscal 2009, with no additional benefits accruing to plan participants after such time. 58 Table of Contents The following tables present reconciliations of the benefit obligation and the funded status of these plans. The Tubelite plan uses a measurement date as of the calendar month-end closest to our fiscal year-end, while the SERP uses a measurement date aligned with our fiscal year-end. (In thousands) 2024 2023 Change in projected benefit obligation Benefit obligation beginning of period $ 10,260 $ 12,405 Interest cost 497 380 Actuarial gain ( 973 ) ( 1,484 ) Benefits paid ( 887 ) ( 1,041 ) Benefit obligation at measurement date 8,897 10,260 Change in plan assets Fair value of plan assets beginning of period $ 3,992 $ 5,044 Actual return on plan assets 53 ( 706 ) Company contributions 635 695 Benefits paid ( 887 ) ( 1,041 ) Fair value of plan assets at measurement date 3,793 3,992 Underfunded status $ ( 5,104 ) $ ( 6,268 ) The funded status was recognized in the consolidated balance sheets as follows: (In thousands) 2024 2023 Other non-current assets $ 111 $ 161 Current liabilities ( 446 ) ( 680 ) Other non-current liabilities ( 4,769 ) ( 5,749 ) Total $ ( 5,104 ) $ ( 6,268 ) The following was included in accumulated other comprehensive loss and has not yet been recognized as a component of net periodic benefit cost: (In thousands) 2024 2023 Net actuarial loss $ 2,851 $ 3,968 The net actuarial gain recognized in comprehensive earnings, net of tax expense, was $ 0.9 million in fiscal 2024, and $ 0.7 million in fiscal 2023. Components of the defined-benefit pension plans' net periodic benefit cost: (In thousands) 2024 2023 2022 Interest cost $ 497 $ 380 $ 339 Expected return on assets ( 120 ) ( 84 ) ( 85 ) Amortization of unrecognized net loss 62 254 270 Net periodic benefit cost $ 439 $ 550 $ 524 Total net periodic pension benefit cost is expected to be approximately $ 0.5 million in fiscal 2025. The estimated net actuarial gain for the defined-benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost for fiscal 2025 is $ 0.2 million, net of tax expense. 59 Table of Contents Additional Information Assumptions Benefit Obligation Weighted-Average Assumptions 2024 2023 2022 Discount rate 5.15 % 5.10 % 3.20 % Net Periodic Benefit Expense Weighted-Average Assumptions 2024 2023 2022 Discount rate 5.10 % 3.20 % 2.60 % Expected long-term rate of return on assets 4.50 % 2.75 % 2.50 % Discount rate. The discount rate reflects the current rate at which the defined-benefit plans' pension liabilities could be effectively settled at the end of the year based on the measurement date. The discount rate was determined by matching the expected benefit payments to payments from the Principal Discount Yield Curve. There are no known or anticipated changes in the discount rate assumption that will have a significant impact on pension expense in fiscal 2025. Expected return on assets. The expected long-term rate of return on assets is based on historical long-term rates of return achieved by the plan investments, the plan's investment strategy, and current and projected market conditions. During fiscal 2019, the assets of the Tubelite plan were moved from investment in a short-term bond fund to various duration fixed income funds. The investments are carried at fair value based on prices from recent trades of similar securities, which would be classified as Level 2 in the valuation hierarchy. We do not maintain assets intended for the future use of the SERP. Contributions Company contributions to the plans for fiscal 2024 were $ 0.6 million and fiscal 2023 were $ 0.7 million, which equaled or exceeded the minimum funding requirements. Estimated Future Benefit Payments The following benefit payments, which reflect expected future service, are expected to be paid by the plans: (In thousands) 2025 2026 2027 2028 2029 2030-2034 Estimated future benefit payments $ 826 $ 795 $ 793 $ 780 $ 767 $ 3,526 10. Commitments and Contingent Liabilities Bond commitments In the ordinary course of business, predominantly in the Architectural Services and Architectural Framing Systems Segments, we are required to provide surety or performance bonds that commit payments to our customers for any non-performance. At March 2, 2024, $ 1.3 billion of these types of bonds were outstanding, of which, $ 463.3 million is on our backlog. These bonds have expiration dates that align with completion of the purchase order or contract. We have never been required to make payments under surety or performance bonds with respect to our existing businesses. Warranty and project-related contingencies We reserve estimated exposures on known claims, as well as on a portion of anticipated claims, for product warranty and rework costs, based on historical product liability claims as a ratio of sales. Claim costs are deducted from the accrual when paid. Factors that could have an impact on the warranty accrual in any given period include the following: changes in manufacturing quality, changes in product mix, and any significant changes in sales volume. (In thousands) 2024 2023 Balance at beginning of period $ 17,893 $ 13,923 Additional accruals 15,775 13,621 Claims paid ( 12,306 ) ( 9,651 ) Balance at end of period $ 21,362 $ 17,893 Additionally, we are subject to project management and installation-related contingencies as a result of our fixed-price material supply and installation service contracts, primarily in our Architectural Services segment and certain of our Architectural Framing Systems businesses. We manage the risk of these exposures through contract negotiations, proactive project management and insurance coverages. 60 Table of Contents Letters of credit At March 2, 2024, we had $ 15.0 million of ongoing letters of credit, all of which have been issued under our revolving credit facility, as discussed in Note 7. Purchase obligations Purchase obligations for raw material commitments and capital expenditures totaled $ 41.2 million as of March 2, 2024. Environmental liability In fiscal 2008, we acquired one manufacturing facility which has certain historical environmental conditions. Remediation of these conditions is ongoing without significant disruption to our operations. The estimated remaining liability for these remediation activities was $ 0.4 million at March 2, 2024 and February 25, 2023, respectively. New Markets Tax Credit (NMTC) transactions We have two outstanding NMTC arrangements which help to support operational expansion. Proceeds received from investors on these transactions are included within other non-current liabilities on our consolidated balance sheets. The NMTC arrangements are subject to 100% tax credit recapture for a period of seven years from the date of each respective transaction. Upon the termination of each arrangement, these proceeds will be recognized in earnings in exchange for the transfer of tax credits. The direct and incremental costs incurred in structuring these arrangements have been deferred and are included in other non-current assets on our consolidated balance sheets. These costs will be recognized in conjunction with the recognition of the related proceeds on each arrangement. During the construction phase or for working capital purposes for each project, we are required to hold cash dedicated to fund each capital project which is classified as restricted cash on our consolidated balance sheets. Variable-interest entities, which have been included within our consolidated financial statements, have been created as a result of the structure of these transactions, as investors in the programs do not have a material interest in their underlying economics. During the second quarter of fiscal 2024, one NMTC transaction was settled as expected and as a result, a $ 4.7 million benefit was recorded in other (income) expense, net. The table below provides a summary of our outstanding NMTC transactions (in thousands): Inception date Termination date Proceeds received Deferred costs Net benefit May 2022 (1) August 2025 $ 6,052 $ 1,604 $ 4,448 September 2018 September 2025 3,198 1,031 2,167 Total $ 9,250 $ 2,635 $ 6,615 (1) Continuation of the August 2018 NMTC financing transaction Litigation The Company is a party to various legal proceedings incidental to its normal operating activities. In particular, like others in the construction supply and services industry, the Company is routinely involved in various disputes and claims arising out of construction projects, sometimes involving significant monetary damages or product replacement. We have in the past and are currently subject to product liability and warranty claims, including certain legal claims related to a commercial sealant product formerly incorporated into our products. In December 2022, the claimant in an arbitration of one such claim was awarded $ 20 million. The Company has appealed the award and believes, after taking into account all currently available information, including the advice of counsel and the likelihood of available insurance coverage, that this award will not have a material adverse effect on the Company's business, financial condition, results of operations or cash flows. The Company is also subject to litigation arising out of areas such as employment practices, workers compensation and general liability matters. Although it is very difficult to accurately predict the outcome of any such proceedings, facts currently available indicate that no matters will result in losses that would have a material adverse effect on the results of operations, cash flows or financial condition of the Company. 61 Table of Contents 11. Shareholders' Equity Share Repurchases During fiscal 2004, the Board of Directors authorized a share repurchase program, with subsequent increases in authorization. We repurchased 279,916 shares under the program during fiscal 2024, for a total cost of $ 11.8 million. We repurchased 1,571,139 shares under the program, for a total cost of $ 74.3 million, in fiscal 2023, and repurchased 2,292,846 shares under the program, for a total cost of $ 100.0 million, in fiscal 2022. We have repurchased a total of 11,276,517 shares, at a total cost of $ 393.5 million, since the inception of this program. On October 6, 2023, the Board of Directors increased the share repurchase authorization by 2 million shares. We have remaining authority to repurchase 2,973,483 shares under this program, which has no expiration date. In addition to the shares repurchased under this repurchase plan, during fiscal 2024, 2023 and 2022, the Company also withheld $ 2.5 million, $ 2.3 million and $ 2.1 million, respectively, of Company stock from employees in order to satisfy stock-for-stock option exercises or tax obligations related to stock-based compensation, pursuant to terms of Board and shareholder-approved compensation plans. Accumulated Other Comprehensive Loss The following summarizes the accumulated other comprehensive loss, net of tax, at March 2, 2024 and February 25, 2023: (In thousands) 2024 2023 Net unrealized loss on marketable securities $ ( 328 ) $ ( 550 ) Net unrealized gain on derivative instruments 440 512 Pension liability adjustments ( 2,187 ) ( 3,044 ) Foreign currency translation adjustments ( 27,456 ) ( 28,474 ) Total accumulated other comprehensive loss $ ( 29,531 ) $ ( 31,556 ) 12. Share-Based Compensation We have a 2019 Stock Incentive Plan and a 2019 Non-Employee Director Stock Plan (the Plans) that provide for the issuance of 1,150,000 and 150,000 shares, respectively, for various forms of stock-based compensation to employees and non-employee directors. Awards under these Plans may be in the form of incentive stock options (to employees only), non-statutory options, stock-settled stock appreciation rights (SARs), or nonvested share awards and units, all of which are granted at a price or with an exercise price equal to the fair market value of the Company’s stock at the date of award. We also have 2009 Non-Employee Director Stock Incentive Plan under which deferred restricted stock units were allocated, in addition to deferred restricted stock units acquired pursuant to a dividend equivalent reinvestment feature. As of June 23, 2019, no additional awards can be made under the 2009 Non-Employee Director Stock Incentive Plan. We recorded share-based compensation expense, in which we account for any forfeitures as they occur, as follows: (In thousands) 2024 2023 2022 Restricted stock awards and restricted stock unit awards $ 6,753 $ 5,607 $ 5,345 Performance stock unit awards 2,714 2,389 501 Stock options 254 660 447 Share-based compensation expense 9,721 8,656 6,293 Stock Options Stock option and SAR activity for the current fiscal year is summarized below: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value at Year-End Outstanding at February 25, 2023 158,000 $ 23.04 Awards exercised ( 86,458 ) 23.04 Awards canceled ( 71,542 ) 23.04 Outstanding at March 2, 2024 — $ — 0.0 years $ — 62 Table of Contents For the fiscal year ended March 2, 2024, there were no cash proceeds from the exercise of stock options as all stock options were exercised on a stock-for-stock basis. The aggregate intrinsic value of securities exercised (the amount by which the stock price on the date of exercise exceeded the stock price of the award on the date of grant) was $ 1.8 million. For the fiscal year ended February 25, 2023, there were no cash proceeds from the exercise of stock options as all stock options were exercised on a stock-for-stock basis. The aggregate intrinsic value of securities exercised was $ 2.7 million. Service Condition Awards Nonvested share awards and units generally vest over a two , three or four-year period. The following table summarizes nonvested restricted stock awards and restricted stock units activity for fiscal 2024: Number of Shares and Units Weighted Average Grant Date Fair Value February 25, 2023 375,080 $ 35.89 Granted 199,138 43.38 Vested ( 166,957 ) 32.54 Canceled ( 22,800 ) 42.82 March 2, 2024 384,461 $ 40.28 Performance Condition Awards In fiscal 2022, the Compensation Committee of the Board of Directors implemented an executive compensation program for certain key employees. In each of the first quarters of fiscal 2024, 2023 and fiscal 2022, we issued performance shares in the form of nonvested share unit awards, which give the recipient the right to receive shares earned at the end of the respective three -fiscal-year performance period. The number of share units issued at grant is equal to the target number of performance shares and allows for the right to receive a variable number of shares, ranging from 0 % to 200 % of target, dependent on achieving a defined performance goal and being employed at the end of the performance period. The following table summarizes nonvested performance share units granted and outstanding for which all plans are at maximum achievement of 200 % of target: Number of Shares and Units Weighted Average Grant Date Fair Value February 25, 2023 79,699 $ 40.83 Granted 48,483 43.61 Canceled ( 13,078 ) 41.80 March 2, 2024 115,104 $ 41.89 At March 2, 2024, there was $ 11.2 million of total unrecognized compensation cost related to nonvested share and nonvested share unit awards, which is expected to be recognized over a weighted average period of approximately 21 months. The total fair value of shares vested during fiscal 2024 was $ 5.8 million. 13. Income Taxes Earnings before income taxes consisted of the following: (In thousands) 2024 2023 2022 United States $ 133,185 $ 126,859 $ 70,039 International ( 3,932 ) ( 10,238 ) ( 56,170 ) Earnings before income taxes $ 129,253 $ 116,621 $ 13,869 63 Table of Contents The components of income tax expense for each of the last three fiscal years are as follows: (In thousands) 2024 2023 2022 Current Federal $ 32,900 $ 9,621 $ 13,806 State and local 6,172 7,670 4,823 International 286 231 39 Total current 39,358 17,522 18,668 Deferred Federal ( 8,361 ) ( 5,120 ) ( 1,528 ) State and local ( 1,387 ) ( 2,487 ) ( 4,270 ) International — 422 ( 2,158 ) Total deferred ( 9,748 ) ( 7,185 ) ( 7,956 ) Total non-current tax (benefit) expense 30 2,177 ( 329 ) Total income tax expense $ 29,640 $ 12,514 $ 10,383 Income tax payments, net of refunds, were $ 33.0 million, $ 27.4 million and $ 8.2 million in fiscal 2024, 2023 and 2022, respectively. The following table provides a reconciliation of the statutory federal income tax rate to our consolidated effective tax rates: 2024 2023 2022 Statutory federal income tax rate 21.0 % 21.0 % 21.0 % State and local income taxes, net of federal tax benefit 2.4 3.5 16.4 Foreign tax rate differential ( 0.2 ) ( 0.2 ) ( 15.4 ) Valuation allowance 1.0 ( 4.7 ) 63.2 Nontaxable gain (loss) on life insurance policies — 0.2 1.2 Deduction for foreign derived intangible income ( 0.3 ) ( 0.2 ) ( 2.6 ) Research & development tax credit ( 1.3 ) ( 1.5 ) ( 9.4 ) §162(m) Executive Compensation Limitation 0.8 0.8 3.5 Tax benefit of share based awards ( 0.6 ) ( 0.8 ) ( 5.2 ) Worthless stock deduction — ( 6.0 ) — Other, net 0.1 ( 1.4 ) 2.2 Consolidated effective income tax rate 22.9 % 10.7 % 74.9 % The effective tax rate for fiscal 2024 increased 12.2 percentage points from fiscal 2023, primarily due to the impact of discrete items in fiscal 2023. 64 Table of Contents Deferred tax assets and deferred tax liabilities at March 2, 2024 and February 25, 2023 were: (In thousands) 2024 2023 Deferred tax assets Accrued expenses $ 4,565 $ 1,862 Deferred compensation 11,138 9,666 Section 174 capitalized costs 12,450 12,222 Goodwill and other intangibles 2,342 4,316 Liability for unrecognized tax benefits 2,122 1,884 Unearned income 7,467 11,007 Operating lease liabilities 13,064 13,639 Net operating losses and tax credits 12,332 11,459 Other 4,773 3,656 Total deferred tax assets 70,253 69,711 Less: valuation allowance ( 10,803 ) ( 9,048 ) Deferred tax assets, net of valuation allowance 59,450 60,663 Deferred tax liabilities Depreciation 20,510 21,965 Operating lease, right-of-use assets 11,955 12,660 Bad debt 8,291 8,262 Prepaid expenses 2,131 2,467 Other 2,520 3,546 Total deferred tax liabilities 45,407 48,900 Net deferred tax assets (liabilities) $ 14,043 $ 11,763 The Company has state and foreign net operating loss carryforwards with a tax effect of $ 12.3 million. A valuation allowance of $ 9.0 million has been established for these net operating loss carryforwards due to the uncertainty of the use of the tax benefits in future periods. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing Deferred Tax Assets. This has resulted in valuation allowances being recorded against Deferred Tax Assets in prior years in Brazil, Canada and various states. The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions, Canada, Brazil and other international jurisdictions. The Company is no longer subject to U.S. federal tax examinations or state and local tax examinations for years prior to fiscal 2021. The Company is not currently under U.S. federal examination for years subsequent to fiscal 2020, and there is very limited audit activity of the Company’s income tax returns in U.S. state jurisdictions or international jurisdictions. The Company considers the earnings of its non-U.S. subsidiaries to be indefinitely invested outside of the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and specific plans for reinvestment of those subsidiary earnings. Should the Company decide to repatriate the foreign earnings, it would need to adjust the income tax provision in the period it was determined that the earnings will no longer be indefinitely invested outside the U.S. If we were to prevail on all unrecognized tax benefits recorded, $ 3.3 million, $ 3.8 million and $ 1.7 million for fiscal 2024, 2023 and 2022, respectively, would benefit the effective tax rate. Also included in the balance of unrecognized tax benefits for fiscal 2024, 2023 and 2022 are $ 1.8 million, $ 1.5 million, and $ 1.7 million, respectively, of tax benefits that, if recognized, would result in decreases to deferred taxes. Penalties and interest related to unrecognized tax benefits are recorded in income tax expense. For fiscal 2024, 2023 and 2022, we accrued penalties and interest related to unrecognized tax benefits of $ 0.6 million, $ 0.4 million, and $ 0.3 million, respectively. 65 Table of Contents The following table provides a reconciliation of the total amounts of gross unrecognized tax benefits: (In thousands) 2024 2023 2022 Gross unrecognized tax benefits at beginning of year $ 5,312 $ 3,321 $ 3,755 Gross increases in tax positions for prior years 91 2,298 108 Gross decreases in tax positions for prior years ( 65 ) ( 255 ) ( 145 ) Gross increases based on tax positions related to the current year 579 291 420 Gross decreases based on tax positions related to the current year — ( 27 ) — Settlements ( 354 ) — ( 147 ) Statute of limitations expiration ( 510 ) ( 316 ) ( 670 ) Gross unrecognized tax benefits at end of year $ 5,053 $ 5,312 $ 3,321 In December 2021, the OECD issued model rules for a new global minimum tax framework (“Pillar Two”), and various governments around the world have issued, or are in the process of issuing, legislation to implement these rules. The Company is within the scope of the OECD Pillar Two model rules and is assessing the impact thereof. As of March 4, 2024, we believe the implementation of these rules will not have a material impact on our financial results. 14. Earnings per Share Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding, including the dilutive effects of stock options, SARs and nonvested shares. The following table presents a reconciliation of the share amounts used in the computation of basic and diluted earnings per share: (In thousands) 2024 2023 2022 Basic earnings per share - weighted average common shares outstanding 21,871 22,007 24,920 Weighted average effect of nonvested share grants and assumed exercise of stock options 220 409 372 Diluted earnings per share - weighted average common shares and potential common shares outstanding 22,091 22,416 25,292 Stock awards excluded from the calculation of earnings per share because the award price was greater than the average market price of the common shares 31 97 1 15. Business Segment Data We have four reporting segments: • The Architectural Framing Systems Segment designs, engineers, fabricates and finishes the aluminum window, curtainwall, storefront and entrance systems for the exterior of buildings. • The Architectural Glass Segment coats and fabricates high-performance glass used in custom window and wall systems on non-residential buildings. • The Architectural Services Segment integrates technical services, project management, and field installation services to design, engineer, fabricate, and install building glass and curtainwall systems. • The Large-Scale Optical (LSO) Segment manufactures high-performance glazing products for the custom framing, fine art, and engineered optics markets. Segment net sales is defined as net sales for a certain segment and includes revenue related to intersegment transactions. We report net sales intersegment eliminations separately to exclude these sales from our consolidated total. Segment operating income is equal to net sales, less cost of goods sold, SG&A, and any asset impairment charges associated with the segment. Segment operating income includes operating income related to intersegment sales transactions and excludes certain corporate costs that are not allocated at a segment level. We report these unallocated corporate costs separately in Corporate and other. Operating income does not include other income or expense, interest expense or a provision for income taxes. 66 Table of Contents (In thousands) 2024 2023 2022 Net Sales Architectural Framing Systems $ 601,736 $ 649,778 $ 546,557 Architectural Glass 378,449 316,554 309,241 Architectural Services 378,422 410,627 407,421 Large-Scale Optical 99,223 104,215 101,673 Intersegment elimination ( 40,888 ) ( 40,478 ) ( 50,915 ) Total $ 1,416,942 $ 1,440,696 $ 1,313,977 Operating Income (Loss) Architectural Framing Systems $ 64,833 $ 81,875 $ 38,088 Architectural Glass 68,046 28,610 1,785 Architectural Services 11,840 18,140 ( 22,071 ) Large-Scale Optical 24,233 25,348 23,618 Corporate and other ( 35,119 ) ( 28,185 ) ( 19,375 ) Total $ 133,833 $ 125,788 $ 22,045 Depreciation and Amortization Architectural Framing Systems $ 19,226 $ 19,386 $ 20,361 Architectural Glass 11,955 11,964 14,564 Architectural Services 4,011 3,953 7,495 Large-Scale Optical 3,040 3,088 3,185 Corporate and other 3,356 4,012 4,388 Total $ 41,588 $ 42,403 $ 49,993 Capital Expenditures Architectural Framing Systems $ 4,733 $ 11,432 $ 7,344 Architectural Glass 12,142 5,613 5,865 Architectural Services 3,166 3,683 3,449 Large-Scale Optical 16,896 13,474 2,250 Corporate and other 6,243 10,975 2,933 Total $ 43,180 $ 45,177 $ 21,841 Identifiable Assets Architectural Framing Systems $ 363,512 $ 426,946 $ 414,012 Architectural Glass 208,651 207,730 225,362 Architectural Services 131,651 141,840 114,120 Large-Scale Optical 83,731 69,035 56,926 Corporate and other 96,519 69,814 77,443 Total $ 884,064 $ 915,365 $ 887,863 Due to the varying combinations and integration of individual window, storefront and curtainwall systems, it is impractical to report product revenues generated by class of product beyond the segment revenues currently reported. 67 Table of Contents The following table presents net sales, based on the location in which the sale originated, and long-lived assets, representing property, plant and equipment, net of related depreciation, by geographic region. (In thousands) 2024 2023 2022 Net Sales United States $ 1,295,436 $ 1,301,168 $ 1,194,141 Canada 101,055 120,565 102,027 Brazil 20,451 18,963 17,809 Total $ 1,416,942 $ 1,440,696 $ 1,313,977 Long-Lived Assets United States $ 235,398 $ 239,847 $ 239,264 Canada 6,345 6,330 7,742 Brazil 2,473 2,690 2,989 Total $ 244,216 $ 248,867 $ 249,995 Our export net sales from U.S. operations were $ 47.6 million, $ 56.2 million, and $ 59.5 million in fiscal 2024, 2023, and 2022, respectively, representing approximately 3 %, 4 %, and 5 % of consolidated net sales in each of these fiscal years, respectively. 16. Restructuring During the fourth quarter of fiscal 2024, we announced strategic actions to further streamline our business operations, enable a more efficient cost model, and better position the Company for profitable growth (referred to as “Project Fortify”). Project Fortify will primarily impact the Architectural Framing Systems Segment and include: • Eliminating certain lower-margin product and service offerings, enabling consolidation into a single operating entity. • Transferring production operations from the Company’s facility in Walker, Michigan, to the Company’s facilities in Monett, Missouri and Wausau, Wisconsin. • Simplifying the segment’s brand portfolio and commercial model to improve flexibility, better leverage the Company’s capabilities, and enhance customer service. Additionally, the Company will implement actions to optimize processes and streamline resources in its Architectural Services and Corporate Segments. The Company expects these actions to be substantially complete by the third quarter of fiscal 2025. The Company expects to incur approximately $ 16 million to $ 18 million of pre-tax charges in connection with Project Fortify, including: • $ 7 million to $ 9 million of severance and employee related costs; • $ 2 million to $ 3 million of contract termination costs: and • $ 6 million to $ 7 million of other expenses. During the second quarter of fiscal 2022, we announced plans to realign and simplify our business structure, which resulted in the closure of two facilities within the Architectural Glass Segment, in Dallas, Texas and Statesboro, Georgia. These closures were made in order to concentrate this segment on premium, high-performance products. Additionally, employee termination costs were incurred related to these facility closures, realignment of the Architectural Framing Systems Segment, and within the Corporate office. During the fourth quarter of fiscal 2022, as a result of the announced restructuring plan, we sold a building in Statesboro, Georgia within our Architectural Glass Segment for $ 29.1 million. The carrying value of the building was $ 9.4 million, and we recognized a gain on this sale of approximately $ 19.5 million, net of associated transaction costs, which is included as a reduction of cost of sales within our consolidated statements of operations. During the first quarter of fiscal 2023, we completed the execution of these plans with the sale of the remaining manufacturing assets at our Architectural Glass location, in Dallas, Texas, for $ 4.1 million. The remaining assets had a carrying value of $ 3.4 million, and we recognized a gain on the sale of approximately $ 0.6 million, net of associated transaction costs, which is included as a reduction of cost of sales within our consolidated statements of operations. 68 Table of Contents During fiscal 2024, we incurred $ 12.4 million of pre-tax costs associated Project Fortify, of which $ 5.5 million is included within cost of sales and $ 6.9 million is included within selling, general and administrative expenses. During fiscal 2023, we incurred $ 0.1 million of additional pre-tax costs associated with the finalization of the restructuring plans that were announced in fiscal 2022. During fiscal 2022, we incurred $ 30.5 million of pre-tax costs associated with the execution of the restructuring plans that were announced in fiscal 2022, of which $ 28.2 million is included within cost of sales and $ 2.3 million is included within selling, general and administrative expenses, excluding the gain on sale mentioned above, within our consolidated statements of operations. (In thousands) Architectural Framing Architectural Glass Architectural Services Corporate & Other Total March 2, 2024 Asset impairment on property, plant and equipment $ 2,329 $ — $ 49 $ 3,851 $ 6,229 Termination benefits 3,348 — 2,475 56 5,879 Other restructuring charges 293 — 2 — 295 Total restructuring charges $ 5,970 $ — $ 2,526 $ 3,907 $ 12,403 February 25, 2023 Termination benefits — 116 — — 116 Total restructuring charges $ — $ 116 $ — $ — $ 116 February 26, 2022 Asset impairment on property, plant and equipment 54 21,443 — — 21,497 Termination benefits 1,435 3,718 — 1,039 6,192 Other restructuring charges 244 1,935 — 644 2,823 Total restructuring charges $ 1,733 $ 27,096 $ — $ 1,683 $ 30,512 The following table summarizes our restructuring related accrual balances included within accrued payroll and related benefits and other current liabilities in the consolidated balance sheets. All remaining accrual balances are expected to be paid within fiscal 2025. (In thousands) Architectural Framing Architectural Glass Architectural Services Corporate & Other Total Balance at February 26, 2022 $ 440 $ 737 $ — $ 228 $ 1,405 Restructuring expense — 116 — — 116 Payments ( 227 ) ( 813 ) — ( 214 ) ( 1,254 ) Other adjustments ( 151 ) ( 17 ) — ( 14 ) ( 182 ) Balance at February 25, 2023 $ 62 $ 23 $ — $ — $ 85 Restructuring expense 3,985 — 2,477 56 6,518 Payments ( 1,233 ) ( 23 ) ( 410 ) — ( 1,666 ) Balance at March 2, 2024 $ 2,814 $ — $ 2,067 $ 56 $ 4,937 The charges presented in the rollforward of our restructuring accruals do not include items charged directly to expense as incurred, as those items are not reflected in accrued payroll and related benefits and other current liabilities in the consolidated balance sheets. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 69 Table of Contents