What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-09 compared with 2024-01-03 · 165 added, 177 removed, 95 unchanged (78% of the section changed)

1 unchanged sentence

Forward-looking statements

This Quarterly Report on Form 10-Q, including the section, Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

This Quarterly Report on Form 10-Q, including the section, Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains certain statements that are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements reflect our current views with respect to future events and financial performance.

The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “should,” "will," "continue" and similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

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

Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “should,” "will," "continue" or similar words or expressions.

All forecasts and projections in this document are “forward-looking statements,” and are based on management’s current expectations or beliefs of the Company's near-term results, based on current information available pertaining to the Company.

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

1 unchanged sentence

Accordingly, we wish to caution investors that any forward-looking statements made by or on behalf of the Company are subject to uncertainties and other factors that could cause actual results to differ materially from such statements.

Information about factors that could materially affect our results can be found in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended February 25, 2023 and in subsequent filings with the U.S.

These uncertainties and other risk factors include, but are not limited to, the risks and uncertainties set forth under “Risk Factors” section of our Annual Report on Form 10-K for the year ended March 2, 2024 and in subsequent filings with the U.S.

Securities and Exchange Commission, including this Quarterly Report on Form 10-Q.

4 unchanged sentences

Non-GAAP Measures

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

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

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

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

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

Management uses these non-GAAP

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

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

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

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

For each of these non-GAAP financial measures, we provide a reconciliation of the differences between the non-GAAP measure and the most directly comparable U.S.

GAAP measure (see "Reconciliation of Non-GAAP Financial Measures" in this Item 2 below), and an explanation of why we believe the non-GAAP measure provides useful information to management and investors.

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

GAAP measure.

We are a leading provider of architectural products and services for enclosing buildings, and high-performance glass and acrylic products used in applications for preservation, protection and enhanced viewing.

Our four reporting segments are:

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

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

Our enterprise strategy is based on the following three key elements:

Become the economic leader in our target markets.

We will attempt to achieve this by developing a deep understanding of our target markets and aligning our businesses with clear go-to-market strategies to drive value for our customers through differentiated product and service offerings.

We will also strive to build a relentless focus on operational execution, driving productivity improvements, and maintaining a competitive cost structure, so that we may bring more value to our customers and improve our own profitability.

We are developing a deep understanding of our target markets and aligning our businesses with clear go-to-market strategies to drive value for our customers through differentiated product and service offerings.

We are focused on operational execution, driving productivity improvements, and maintaining a competitive cost structure, so that we may bring more value to our customers and improve our own profitability.

Actively manage our portfolio to drive higher margins and returns.

We intend to shift our business mix toward higher operating margin offerings and improve our return on invested capital performance.

We plan to accomplish this by allocating resources to grow our top performing businesses, actively addressing underperforming businesses, and investing to add new differentiated product and service offerings to accelerate our growth.

We are shifting our business mix toward higher operating margin offerings in order to improve our return on invested capital performance.

We expect to accomplish this by allocating resources to grow our top performing businesses, actively addressing underperforming businesses, and investing to add new differentiated product and service offerings to accelerate our growth and increase margins.

Strengthen our core capabilities.

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

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

We plan to support this through a robust talent management program and a commitment to strong governance to ensure compliance and drive sustainable performance.

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

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

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

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

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

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

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

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

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

In fiscal 2022, we established a Company-wide operating system with common tools and processes based on the foundation of Lean and Continuous Improvement, which we call the "Apogee Management System".

Our strategy is supported by a robust talent management program and a commitment to strong governance to ensure compliance and drive sustainable performance.

We set this strategy by developing a deep knowledge of the markets we serve and by gaining extensive input from customers and industry influencers, along with detailed competitive benchmarking.

We continually analyze our portfolio of products,

services, and capabilities to identify the best areas for future profitable growth.

We also evaluate our operating model to ensure we have the organizational structure and capabilities needed to deliver consistent profitable growth.

Through this work, we validate strengths that we can leverage and identify opportunities to improve our performance.

In fiscal 2024, we drove further progress toward our strategic goals and financial targets.

We continued the deployment of the Apogee Management System across our business, supporting sustainable cost and productivity improvements.

We invested in organic growth initiatives, including capacity expansion in the Large-Scale Optical Segment and geographic growth in the Architectural Services Segment.

We increased our focus on differentiated products and services, and continued to diversify the mix of architectural projects that we serve while leaning more heavily into higher, value-added products.

We also advanced several initiatives to strengthen our core capabilities, driving the standardization of key business processes and systems, and strengthening talent management and leadership development programs.

The following selected financial data should be read in conjunction with the Company’s Form 10-K for the year ended March 2, 2024 and the consolidated financial statements, including the notes to consolidated financial statements, included therein.

Results of Operations

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(in thousands, except percentages)

November 25, 2023 November 26, 2022 $ Change

November 25, 2023 November 26, 2022

June 1, 2024 May 27, 2023 % Change

June 1, 2024 May 27, 2023

Net sales $ 331,516 $ 361,713 (8.3) % 100.0 % 100.0 %

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Other expense, net

890 552 338 61.2 0.3 0.2

Earnings before income taxes 35,303 31,619 3,684 11.7 10.4 8.6

Income tax expense 8,329 7,854 475 6.0 2.5 2.1

Net earnings $ 26,974 $ 23,765 $ 3,209 13.5 % 7.9 % 6.5 %

Effective tax rate 23.6 % 24.8 %

Nine Months Ended % of Net Sales

(in thousands, except percentages)

November 25, 2023 November 26, 2022 $ Change

November 25, 2023 November 26, 2022

Net sales $ 1,055,102 $ 1,096,591 $ (41,489) (3.8) % 100.0 % 100.0 %

Cost of sales 776,440 839,430 (62,990) (7.5) 73.6 76.5

Gross profit 278,662 257,161 21,501 8.4 26.4 23.5

Selling, general and administrative expenses 166,695 157,112 9,583 6.1 15.8 14.3

Operating income 111,967 100,049 11,918 11.9 10.6 9.1

Interest expense, net 5,720 5,494 226 4.1 0.5 0.5

Other (income) expense, net

(143) 288 N/M — 0.1

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Income tax expense 10,063 7,867 27.9 3.0 2.2

26,092 8,635 17,457 202.2 2.5 0.8

Net earnings $ 31,011 $ 23,576 31.5 % 9.4 % 6.5 %

Effective tax rate 24.5 % 25.0 %

Comparison of Third Quarter Fiscal 2024 to Third Quarter Fiscal 2023

• Consolidated net sales decreased 7.6%, or $28.1 million, to $339.7 million, primarily reflecting lower volumes, partially offset by improved mix and pricing.

• Gross profit increased 4.3%, or $3.7 million, and gross margin increased to 26.6%, compared to 23.5%.

The improvement in gross margin was primarily driven by higher pricing, improved product mix, lower short-term incentive compensation expense, and lower insurance-related expense, partially offset by the impact of lower volume and a less favorable mix of projects in Architectural Services.

• Selling, general and administrative expenses increased $0.8 million to 15.5% of net sales, compared to 14.1%, primarily due to higher salaries and benefits costs, partially offset by lower short-term incentive compensation expense.

• Operating income grew 8.3% to $37.6 million, and operating margin increased 170 basis points to 11.1%, primarily driven by improved segment operating margin in Architectural Glass as well as the Architectural Glass segment comprising a higher mix of the consolidated results, partially offset by lower segment operating margin in Architectural Framing Systems.

• Interest expense, net was $1.5 million, compared to $2.6 million, reflecting a lower average debt level, partially offset by higher average interest rates.

• Income tax expense was $8.3 million, compared to $7.9 million.

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

• Consolidated net sales decreased 3.8%, or $41.5 million, to $1.1 billion, primarily reflecting lower volumes in Architectural Framing Systems, Architectural Services and Large-Scale Optical, partially offset by improved mix in the Architectural Glass and Architectural Framing Systems segments, as well as improved pricing in the Architectural Glass segment.

• Gross profit increased 8.4%, or $21.5 million, to 26.4% of net sales, compared to 23.5%.

The gross margin improvement was primarily driven by higher margins in Architectural Glass, due to increased pricing and mix, as well as lower short-term incentive compensation expense, primarily in Architectural Framing and Architectural Services, and lower insurance-related expense.

This was partially offset by the impact of lower volume and a less favorable mix of projects in Architectural Services.

• Selling, general and administrative expenses increased $9.6 million to 15.8% of net sales, compared to 14.3%.

The increase in expenses was primarily due to increased salaries and benefits and consulting costs, partially offset by lower short-term incentive compensation expense.

• Operating income grew 11.9% to $112.0 million, and operating margin increased 150 basis points to 10.6%, primarily driven by improved operating margin in Architectural Glass as well as the Architectural Glass segment comprising a higher mix of the consolidated results.

• Interest expense, net was $5.7 million, compared to $5.5 million, reflecting a higher average interest rate, partially offset by a lower average debt level.

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

• Income tax expense was $26.1 million, compared to $8.6 million.

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

N/M Indicates calculation not meaningful.

Comparison of First Quarter Fiscal 2025 to First Quarter Fiscal 2024

• Consolidated net sales decreased 8.3%, to $331.5 million, primarily driven by lower volume.

• Gross margin increased to 29.8%, compared to 25.7%, primarily driven by a more favorable mix of projects in Architectural Services, favorable material costs, lower insurance-related costs, and productivity gains, partially offset by the impact of lower volume and $0.6 million of restructuring costs associated with Project Fortify.

• Selling, general and administrative (SG&A) expenses decreased $1.7 million to 17.3% of net sales, compared to 16.4% of net sales.

The increase in SG&A as a percentage of sales was primarily due to unfavorable sales leverage, partially offset by lower bad debt expense.

• Operating income grew to $41.4 million from $33.8 million, and operating margin increased 320 basis points to 12.5%.

The improvement in operating margin was primarily driven by a more favorable mix of projects in Architectural Services, favorable material costs, lower insurance-related costs, productivity gains, and lower bad debt expense, which more than offset the impact of lower volume, $1.1 million of restructuring costs related to Project Fortify, and unfavorable segment mix.

Adjusted operating income grew 25.9% to $42.5 million, and adjusted operating margin improved to 12.8%.

• Interest expense, net was $0.5 million, compared to $2.0 million, primarily driven by lower average debt levels.

• Income tax expense as a percentage of earnings before income tax was 24.5%, compared to 25.0% for the same period last year.

The decrease in the effective tax rate was primarily due to a decrease in tax expense for discrete items, partially offset by an increase in non-deductible executive compensation expense.

Segment Analysis

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

Three Months Ended Nine Months Ended

(In thousands, except percentages) November 25, 2023 November 26, 2022 % Change November 25, 2023 November 26, 2022 % Change

Three Months Ended

(In thousands, except percentages) June 1, 2024 May 27, 2023 % Change

Segment net sales

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Architectural Glass 17,091 16,521 3.5

Architectural Services 5,288 6,032 (12.3) 8,211 14,449 (43.2)

Architectural Services 5,623 (596) N/M

Large-Scale Optical 4,846 5,525 (12.3)

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Large-Scale Optical 22.9 24.6

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

Corporate and Other

Operating income 12.5 % 9.3 %

N/M Indicates calculation not meaningful.

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 in Corporate and Other.

Operating income does not include other income or expense, interest expense or a provision for income taxes.

Architectural Framing Systems

Comparison of Third Quarter Fiscal 2024 to Third Quarter Fiscal 2023

• Net sales were $139.6 million, compared to $165.0 million, primarily reflecting lower volume due to slowing demand in our short-cycle business, partially offset by a more favorable sales mix.

• Operating income was $17.0 million, or 12.2% of net sales, compared to $22.1 million, or 13.4% of net sales, primarily reflecting the impact of lower volume.

This result was partially offset by improved sales mix, improved productivity, and lower short-term incentive compensation-related expenses.

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

• Net sales were $462.5 million, compared to $501.2 million, primarily reflecting lower volume, partially offset by more favorable sales mix and improved pricing.

• Operating income was $58.0 million, or 12.5% of net sales, compared to $66.3 million, or 13.2% of net sales, primarily driven by the impact of lower volume.

This result was partially offset by improved sales mix and lower short-term incentive compensation-related expenses.

Comparison of First Quarter Fiscal 2025 to First Quarter Fiscal 2024

• Net sales were $133.2 million, compared to $164.2 million, primarily reflecting reduced volume due to lower end market demand and the exit of certain lower-margin product lines as part of Project Fortify.

• Operating income was $18.3 million, or 13.8% of net sales, compared to $19.9 million, or 12.1% of net sales.

The 170 basis point improvement in operating margin was primarily driven by favorable material costs, favorable mix, productivity gains, and lower bad debt expense, partially offset by the impact of lower volume and $1.0 million of restructuring charges as part of Project Fortify.

Adjusted operating income was $19.3 million, or 14.5% of net sales, compared to $19.9 million, or 12.1% of net sales.

Architectural Glass

Comparison of Third Quarter Fiscal 2024 to Third Quarter Fiscal 2023

• Net sales increased $9.4 million, or 11.6%, primarily driven by improved mix and pricing, reflecting the strategic shift to emphasize premium, high performance products, partially offset by lower volume.

• Operating income increased to $15.2 million, or 16.7% of net sales, compared to $7.5 million, or 9.1% of net sales.

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

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

• Net sales increased $47.1 million, or 20.0%, driven by improved pricing, a more favorable sales mix, and higher volume, reflecting the segment's strategic shift to emphasize premium, high-performance products.

Comparison of First Quarter Fiscal 2025 to First Quarter Fiscal 2024

• Net sales were $86.7 million, compared to $97.2 million, reflecting lower volume due to lower end-market demand, partially offset by improved pricing.

• Operating income increased to $17.1 million, or 19.7% of net sales, compared to $16.5 million, or 17.0% of net sales.

The operating margin improvement was primarily driven by improved pricing and mix, partially offset by cost inflation.

The 270 basis point improvement in operating margin was primarily driven by productivity gains and improved pricing, partially offset by the impact of lower volume.

Architectural Services

Comparison of Third Quarter Fiscal 2024 to Third Quarter Fiscal 2023

• Net sales were $94.7 million, compared to $102.0 million, primarily reflecting a less favorable mix of projects in the quarter.

• Operating income was $5.3 million, or 5.6% of net sales, compared to $6.0 million, or 5.9% of net sales.

The change in operating margin was primarily driven by a less favorable mix of projects, partially offset by lower short-term incentive compensation expense.

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

• Net sales were $272.1 million, compared to $312.2 million, primarily reflecting lower project volume due to a higher mix of projects in earlier stages of completion and a less favorable mix of projects.

• Operating income was $8.2 million, or 3.0% of net sales, compared to $14.4 million, or 4.6% of net sales.

The decline in operating margin was primarily driven by lower project volume due to a higher mix of projects in earlier stages of completion and a less favorable mix of project, partially offset by lower short-term incentive compensation expense .

Comparison of First Quarter Fiscal 2025 to First Quarter Fiscal 2024

• Net sales were $99.0 million, compared to $89.4 million, primarily due to a more favorable mix of projects and increased volume.

• Operating income increased to $5.6 million, or 5.7% of net sales, compared to an operating loss of $0.6 million, or (0.7)% of net sales, primarily driven by a more favorable mix of projects.

Large-Scale Optical (LSO)

Comparison of Third Quarter Fiscal 2024 to Third Quarter Fiscal 2023

• LSO net sales were $26.0 million, compared to $26.7 million, primarily reflecting lower volume from slower retail demand, partially offset by a more favorable mix and pricing.

• Operating income was $7.1 million, with operating margin improving to 27.3% of net sales, compared to 26.7% due to favorable mix and pricing.

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

• LSO net sales were $72.1 million, compared to $77.0 million, primarily reflecting lower volume due to customer destocking and slower demand in the retail markets, partially offset by a more favorable mix and pricing.

• Operating income was $17.3 million, or 24.0% of net sales, compared to $19.6 million, or 25.5% of net sales, primarily driven by the impact of lower volume, partially offset by more favorable mix and pricing.

Comparison of First Quarter Fiscal 2025 to First Quarter Fiscal 2024

• LSO net sales were $21.2 million, compared to $22.5 million, primarily reflecting lower volume in the retail channel, partially offset by a more favorable mix.

• Operating income was $4.8 million, or 22.9% of net sales, compared to $5.5 million, or 24.6% of net sales.

The 170 basis point decline in operating margin primarily reflects the impact of lower volume, partially offset by cost savings and improved mix.

Corporate and Other

Comparison of Third Quarter Fiscal 2024 to Third Quarter Fiscal 2023

• Corporate and other expense was $6.9 million, compared to $7.9 million, primarily reflecting lower insurance-related costs.

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

• Corporate and other expense was $20.6 million, compared to $19.4 million primarily due to an increase in compensation expense and higher consulting costs, partially offset by lower insurance-related costs.

Comparison of First Quarter Fiscal 2025 to First Quarter Fiscal 2024

• Corporate and Other expense was $4.5 million, compared to $7.6 million, primarily due to lower insurance-related costs.

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

Backlog is most meaningful for Architectural Services due to the longer-term nature of their projects.

Backlog is not a term defined under U.S.

GAAP and is not a measure of contract profitability.

We view backlog as one indicator of future revenues, particularly in our longer-lead time

We view backlog as one indicator of future revenues, particularly in our longer-lead time businesses.

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

Architectural Framing Systems

As of November 25, 2023, segment backlog was approximately $183.9 million, compared to approximately $197.5 million at the end of the prior quarter, and to approximately $246.2 million at the end of the third quarter of fiscal 2023.

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

Architectural Services

As of November 25, 2023, segment backlog was approximately $776.5 million, compared to approximately $674.4 million at the end of the prior quarter, and to approximately $740.9 million at the end of the third quarter of fiscal 2023.

As of June 1, 2024, segment backlog was approximately $866.9 million, compared to approximately $807.8 million at the end of the prior quarter.

The increase in backlog compared to the prior quarter was primarily driven by several large project awards in the current quarter.

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

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

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

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

Three Months Ended Nine Months Ended

(In thousands) November 25, 2023 November 26, 2022 % change November 25, 2023 November 26, 2022 % change

Net earnings $ 26,974 $ 23,765 13.5 % $ 83,877 $ 83,885 — %

NMTC settlement gain (1)

Reconciliation of Non-GAAP Financial Measures

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

Management uses these non-GAAP measures as noted below:

• We use adjusted operating income, adjusted operating margin, adjusted net earnings, and adjusted diluted EPS to provide meaningful supplemental information about our operating performance by excluding amounts that are not considered part of core operating results to enhance comparability of results from period to period.

• We believe adjusted EBITDA and adjusted EBITDA margin metrics provide useful information to investors and analysts about our core operating performance.

These non-GAAP measures should be viewed in addition to, and not as an alternative to, the reported financial results of the Company prepared in accordance with U.S.

Other companies may calculate these measures differently, thereby limiting the usefulness of the measures for comparison with other companies.

Reconciliation of Non-GAAP Financial Measures

Adjusted Operating Income and Adjusted Operating Margin

Three Months Ended June 1, 2024

(In thousands, except percentages)

Architectural Framing Systems Architectural Glass Architectural Services LSO Corporate and Other Consolidated

Operating income $ 18,336 $ 17,091 $ 5,623 $ 4,846 $ (4,515) $ 41,381

Restructuring costs (1)

998 — — — 124 1,122

Worthless stock deduction and related discrete tax benefits (2)

Adjusted operating income $ 19,334 $ 17,091 $ 5,623 $ 4,846 $ (4,391) $ 42,503

Operating margin

13.8 % 19.7 % 5.7 % 22.9 % N/M 12.5 %

Restructuring costs (1)

0.7 % — % — % — % N/M 0.3 %

Adjusted operating margin

14.5 % 19.7 % 5.7 % 22.9 % N/M 12.8 %

Three Months Ended May 27, 2023

Architectural Framing Systems Architectural Glass Architectural Services LSO Corporate and Other Consolidated

Operating income (2)

$ 19,945 $ 16,521 $ (596) $ 5,525 $ (7,628) $ 33,767

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

Adjusted net earnings $ 26,974 $ 23,765 13.5 % $ 80,338 $ 70,183 14.5 %

Three Months Ended Nine Months Ended

November 25, 2023 November 26, 2022 % change November 25, 2023 November 26, 2022 % change

Operating margin (2)

12.1 % 17.0 % (0.7) % 24.6 % N/M 9.3 %

(1) Restructuring charges related to Project Fortify, including $0.4 million of employee termination costs and $0.7 million of other costs.

For the first quarter of fiscal 2024, we did not make any adjustments to operating income or operating margin as calculated in accordance with U.S.

Reconciliation of Non-GAAP Financial Measures

Adjusted Net Earnings and Adjusted Diluted Earnings Per Share

Diluted per share amounts

Three Months Ended

(In thousands, except per share amounts)

June 1, 2024 May 27, 2023 June 1, 2024 May 27, 2023

Net earnings $ 31,011 $ 23,576 $ 1.41 $ 1.05

Restructuring costs (1)

1,122 — 0.05 —

NMTC settlement gain (1)

Worthless stock deduction and related discrete tax benefits (2)

Income tax impact on above adjustments (2)

Adjusted diluted EPS

(275) — (0.01) —

Weighted average diluted shares outstanding 22,013 22,278 22,093 22,456

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

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

Comparison of Third Quarter Fiscal 2024 to Third Quarter Fiscal 2023

• Net earnings were $27.0 million, compared to $23.8 million, driven by higher operating income, lower interest expense and a lower effective tax rate.

• Diluted EPS was $1.23, compared to $1.07, due to higher net earnings and lower weighted average diluted shares outstanding.

• Adjusted net earnings increased 13.5% to $27.0 million, compared to $23.8 million.

Adjusted diluted EPS increased 15.0% to $1.23, compared to $1.07.

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

• Net earnings were essentially flat at $83.9 million for both periods driven by higher earnings before taxes, offset by a higher effective tax rate.

• Diluted EPS was $3.80, compared to $3.74, due to lower weighted average diluted shares outstanding.

• Adjusted net earnings increased 14.5% to $80.3 million, compared to $70.2 million.

Adjusted diluted EPS increased 16.3% to $3.64, compared to $3.13.

Adjusted net earnings $ 31,858 $ 23,576 $ 1.44 $ 1.05

Shares outstanding for EPS 22,061 22,386

(1) Restructuring charges related to Project Fortify, including $0.4 million of employee termination costs and $0.7 million of other costs.

(2) Income tax impact calculated using an estimated statutory tax rate of 24.5%, which reflects the estimated blended statutory tax rate for the jurisdictions in which the charge or income occurred.

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA and Adjusted EBITDA Margin

(Earnings before interest, taxes, depreciation and amortization)

Three Months Ended

(In thousands) June 1, 2024 May 27, 2023

Net earnings $ 31,011 $ 23,576

Income tax expense 10,063 7,867

Interest expense, net 450 2,036

Depreciation and amortization 9,976 10,282

EBITDA $ 51,500 $ 43,761

Restructuring costs (1)

Adjusted EBITDA $ 52,622 $ 43,761

EBITDA Margin

15.5 % 12.1 %

Adjusted EBITDA Margin 15.9 % 12.1 %

(1) Restructuring charges related to Project Fortify, including $0.4 million of employee termination costs and $0.7 million of other costs.

Liquidity and Capital Resources

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Operating Activities.

Net cash provided by operating activities was $129.3 million for the first nine months of fiscal 2024, compared to $51.1 million of net cash used by operating activities in the prior year period, primarily driven by favorable working capital changes compared to the prior year.

Net cash provided by operating activities was $5.5 million for the first three months of fiscal 2025, compared to $21.3 million in the prior year period.

The decrease was primarily driven by increased cash used for working capital requirements and increased cash paid for incentive compensation payments, partially offset by higher earnings.

Investing Activities.

Net cash used by investing activities was $26.3 million for the first nine months of fiscal 2024, compared to $12.0 million in the prior year, driven primarily by increased capital expenditures primarily to fund strategic investments.

Net cash used by investing activities was $7.3 million for the first three months of fiscal 2025, compared to $6.9 million in the prior year.

Financing Activities.

Net cash used by financing activities was $100.4 million for the first nine months of fiscal 2024, compared to net cash used by financing activities of $51.6 million in the prior year period.

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

We paid dividends totaling $15.7 million ($0.72 per share) in the first nine months of fiscal 2024, compared to $14.4 million ($0.66 per share) in the comparable prior year period.

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

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

The repurchase program does not have an expiration date.

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

As of November 25, 2023, we had remaining authority to repurchase 2,973,483 shares under this program.

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

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

Net cash used by financing activities was $4.9 million for the first three months of fiscal 2025, compared to $11.3 million in the prior year period.

The decrease in cash used for financing activities was primarily driven by higher net debt borrowings in the current year period, partially offset by increased share repurchases.

Additional Liquidity Considerations.

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

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

with maximum borrowings of up to $385 million, with a maturity date of August 5, 2027, and two Canadian committed, revolving credit facilities totaling $25 million (USD).

At November 25, 2023, we had outstanding borrowings under our committed, revolving credit facility of $85.0 million, and $3.7 million outstanding under the Canadian committed, revolving credit facilities.

As of the end of the first quarter of fiscal 2025, we had a committed revolving U.S.

credit facility with maximum borrowings of up to $385 million, with a maturity date of August 5, 2027, and two Canadian credit facilities totaling $25 million (USD).

At June 1, 2024, we had outstanding borrowings under our U.S.

credit facility of $65.0 million, and no outstanding borrowings under the Canadian credit facilities.

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

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

At November 25, 2023, we were in compliance with both financial covenants (which are identical in all three of our revolving credit facilities).

The revolving credit facilities also contain an acquisition holiday.

At June 1, 2024, we were in compliance with both financial covenants (which are identical in all three of our revolving credit facilities).

Our 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 facility, and at least two fiscal quarters must separate qualifying acquisitions.

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

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 credit 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 borrowings, the margin ranges from 1.125% to 1.75% and an incremental Term SOFR adjustment of 0.10%.

facility also contains an "accordion" provision.

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

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

Additionally, at November 25, 2023, 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 U.S.

revolving credit facility.

As of November 25, 2023, the amount available for revolving borrowings under the U.S credit facility was $285.0 million.

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%, respectively.

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 their sole discretion.

Additionally, at June 1, 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 years 2026 through 2032 and reduce borrowing capacity under the U.S.

credit facility.

As of June 1, 2024, the amount available for revolving borrowings was $305.0 million and $25.0 million under the U.S.

credit facility and Canadian credit facilities, respectively.

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

Future payments for such leases, excluding leases with initial terms of one year or less, were $42.7 million at November 25, 2023, with $3.5 million payable during the remainder of fiscal 2024.

As of November 25, 2023, we had $45.0 million of open purchase obligations, of which payments totaling $12.2 million are expected to become due during the remainder of fiscal 2024.

Future payments for such leases, excluding leases with initial terms of one year or less, were $43.0 million at June 1, 2024, with $9.5 million payable during the remainder of fiscal 2025.

As of June 1, 2024, we had $17.9 million of open purchase obligations, of which payments totaling $13.4 million are expected to become due during the remainder of fiscal 2025.

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

We expect to make contributions of $0.4 million to our defined-benefit pension plans in fiscal 2025, which will equal or exceed our minimum funding requirements.

As of November 25, 2023, we had reserves of $5.3 million for unrecognized tax benefits.

As of June 1, 2024, we had reserves of $5.6 million for unrecognized tax benefits.

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

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

At November 25, 2023, $1.3 billion of these types of bonds were outstanding, of which $398.4 million is in our backlog.

These bonds do not have stated expiration dates.

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

We continue to evaluate acquisition opportunities on a regular basis.

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

At June 1, 2024, $1.3 billion of these types of bonds were outstanding, of which $434.7 million is in our backlog.

These bonds have expiration dates that align with completion of the purchase order or contract.

We have not been required to make any payments under these bonds with respect to our existing businesses.

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

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

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

In addition, we believe we have the ability to obtain both short-term and long-term debt to meet our financing needs, including additional sources of debt to finance potential acquisitions, for the foreseeable future.

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

We continually review our portfolio of businesses and their assets and how they support our business strategy and performance objectives.

As part of this review, we may acquire other businesses, pursue geographic expansion, take actions to manage capacity and further invest in, divest and/or sell parts of our current businesses.

Related Party Transactions

No material changes have occurred in the disclosure with respect to our related party transactions set forth in our Annual Report on Form 10-K for the fiscal year ended February 25, 2023.

No material changes have occurred in the disclosure with respect to our related party transactions set forth in our Annual Report on Form 10-K for the fiscal year ended March 2, 2024.

Critical Accounting Policies

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

There have been no material changes to our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the fiscal year ended March 2, 2024.

Quantitative and Qualitative Disclosures About Market Risk

Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended February 25, 2023 for a discussion of the Company’s market risk.

There have been no material changes in market risk since February 25, 2023.

Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended March 2, 2024 for a discussion of the Company’s market risk.

There have been no material changes in market risk since March 2, 2024.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis