APOGEE ENTERPRISES, INC. 10-Q

Item 1. Financial Statements CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except stock data) June 1, 2024 March 2, 2024 Assets Current assets Cash and cash equivalents $ 30,363 $ 37,216 Receivables, net 183,270 173,557 Inventories, net 80,495 69,240 Contract assets 43,957 49,502 Other current assets 34,417 29,124 Total current assets 372,502 358,639 Property, plant and equipment, net of accumulated depreciation of $ 452,711 and $ 445,017 242,292 244,216 Operating lease right-of-use assets 38,726 40,221 Goodwill 129,042 129,182 Intangible assets, net 64,981 66,114 Other non-current assets 41,436 45,692 Total assets $ 888,979 $ 884,064 Liabilities and Shareholders’ Equity Current liabilities Accounts payable $ 82,841 $ 84,755 Accrued compensation and benefits 28,900 53,801 Contract liabilities 36,377 34,755 Operating lease liabilities 12,090 12,286 Other current liabilities 66,895 59,108 Total current liabilities 227,103 244,705 Long-term debt 77,000 62,000 Non-current operating lease liabilities 30,462 31,907 Non-current self-insurance reserves 30,859 30,552 Other non-current liabilities 43,600 43,875 Commitments and contingent liabilities (Note 6) 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 21,936,674 and 22,089,265 , respectively 7,312 7,363 Additional paid-in capital 153,002 152,818 Retained earnings 348,651 340,375 Accumulated other comprehensive loss ( 29,010 ) ( 29,531 ) Total shareholders’ equity 479,955 471,025 Total liabilities and shareholders’ equity $ 888,979 $ 884,064 See accompanying notes to consolidated financial statements. 4 Table of Contents CONSOLIDATED RESULTS OF OPERATIONS (Unaudited) Three Months Ended (In thousands, except per share data) June 1, 2024 May 27, 2023 Net sales $ 331,516 $ 361,713 Cost of sales 232,661 268,727 Gross profit 98,855 92,986 Selling, general and administrative expenses 57,474 59,219 Operating income 41,381 33,767 Interest expense, net 450 2,036 Other (income) expense, net ( 143 ) 288 Earnings before income taxes 41,074 31,443 Income tax expense 10,063 7,867 Net earnings $ 31,011 $ 23,576 Basic earnings per share $ 1.42 $ 1.08 Diluted earnings per share $ 1.41 $ 1.05 Weighted average basic shares outstanding 21,823 21,883 Weighted average diluted shares outstanding 22,061 22,386 See accompanying notes to consolidated financial statements. 5 Table of Contents CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Unaudited) Three Months Ended (In thousands) June 1, 2024 May 27, 2023 Net earnings $ 31,011 $ 23,576 Other comprehensive earnings: Unrealized (loss) gain on marketable securities, net of $( 1 ) and $ 33 of tax (benefit) expense, respectively ( 6 ) 121 Unrealized gain (loss) on derivative instruments, net of $ 364 and $( 121 ) of tax expense (benefit), respectively 1,196 ( 397 ) Foreign currency translation adjustments ( 669 ) 435 Other comprehensive earnings 521 159 Total comprehensive earnings $ 31,532 $ 23,735 See accompanying notes to consolidated financial statements. 6 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended (In thousands) June 1, 2024 May 27, 2023 Operating Activities Net earnings $ 31,011 $ 23,576 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 9,976 10,282 Share-based compensation 2,704 2,178 Deferred income taxes 3,466 ( 165 ) Loss (gain) on disposal of property, plant and equipment 22 ( 27 ) Non-cash lease expense 2,895 2,714 Other, net ( 925 ) ( 432 ) Changes in operating assets and liabilities: Receivables ( 9,845 ) ( 13,476 ) Inventories ( 11,337 ) ( 2,068 ) Contract assets 5,511 14,368 Accounts payable ( 1,871 ) ( 8,390 ) Accrued compensation and benefits ( 24,850 ) ( 13,312 ) Contract liabilities 1,648 8,158 Operating lease liability ( 3,007 ) ( 3,101 ) Accrued income taxes 6,535 7,590 Other current assets and liabilities ( 6,480 ) ( 6,608 ) Net cash provided by operating activities 5,453 21,287 Investing Activities Capital expenditures ( 7,229 ) ( 7,398 ) Proceeds from sales of property, plant and equipment 40 66 Purchases of marketable securities ( 740 ) — Sales/maturities of marketable securities 600 400 Net cash used by investing activities ( 7,329 ) ( 6,932 ) Financing Activities Proceeds from revolving credit facilities 30,000 105,852 Repayments on revolving credit facilities ( 15,000 ) ( 105,000 ) Repurchase of common stock ( 15,061 ) ( 5,193 ) Dividends paid — ( 5,245 ) Other, net ( 4,865 ) ( 1,677 ) Net cash used by financing activities ( 4,926 ) ( 11,263 ) Effect of exchange rates on cash ( 51 ) 77 (Decrease) increase in cash and cash equivalents ( 6,853 ) 3,169 Cash and cash equivalents at beginning of period 37,216 21,473 Cash and cash equivalents at end of period $ 30,363 $ 24,642 Non-cash Activity Capital expenditures in accounts payable $ 472 $ 2,115 Dividends declared but not yet paid $ 5,409 $ — See accompanying notes to consolidated financial statements. 7 Table of Contents CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (In thousands) Common Shares Outstanding Common Stock at Par Value Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Total Shareholders' Equity Balance at March 2, 2024 22,089 $ 7,363 $ 152,818 $ 340,375 $ ( 29,531 ) $ 471,025 Net earnings — — — 31,011 — 31,011 Other comprehensive income, net of tax — — — — 521 521 Issuance of stock, net of cancellations 170 57 ( 57 ) — — — Share-based compensation — — 2,704 — — 2,704 Share repurchases ( 242 ) ( 81 ) ( 1,860 ) ( 13,120 ) — ( 15,061 ) Other share retirements ( 80 ) ( 27 ) ( 603 ) ( 4,206 ) — ( 4,836 ) Declared dividends — — — ( 5,409 ) — ( 5,409 ) Balance at June 1, 2024 21,937 $ 7,312 $ 153,002 $ 348,651 $ ( 29,010 ) $ 479,955 (In thousands) 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 25, 2023 22,224 $ 7,408 $ 146,816 $ 273,740 $ ( 31,556 ) $ 396,408 Net earnings — — — 23,576 — 23,576 Other comprehensive income, net of tax — — — — 159 159 Issuance of stock, net of cancellations 155 52 13 ( 9 ) — 56 Share-based compensation — — 2,178 — — 2,178 Share repurchases ( 120 ) ( 40 ) ( 829 ) ( 4,324 ) — ( 5,193 ) Other share retirements ( 40 ) ( 14 ) ( 281 ) ( 1,438 ) — ( 1,733 ) Cash dividends — — — ( 5,245 ) — ( 5,245 ) Balance at May 27, 2023 22,219 $ 7,406 $ 147,897 $ 286,300 $ ( 31,397 ) $ 410,206 See accompanying notes to consolidated financial statements. 8 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Summary of Significant Accounting Policies Basis of presentation The consolidated financial statements of Apogee Enterprises, Inc. (we, us, our or the Company) have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The information included in this Form 10-Q should be read in conjunction with the Company’s Form 10-K for the year ended March 2, 2024. We use the same accounting policies in preparing quarterly and annual financial statements. All adjustments necessary for a fair presentation of quarterly and year to date operating results are reflected herein and are of a normal, recurring nature. The results of operations for the three-month period ended June 1, 2024 are not necessarily indicative of the results to be expected for the full year. New accounting standards In November 2023, the Financial Accounting Standards Board (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 for the year ended March 1, 2025 and future interim periods. 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 12 for disclosure of revenue by segment): Three Months Ended (In thousands) June 1, 2024 May 27, 2023 Recognized at shipment $ 136,722 $ 152,655 Recognized over time (input method) 116,681 123,381 Recognized over time (output method) 78,113 85,677 Total $ 331,516 $ 361,713 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 forecasted 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. 9 Table of Contents (In thousands) June 1, 2024 March 2, 2024 Trade accounts $ 112,266 $ 115,061 Construction contracts 73,720 61,879 Total receivables 185,986 176,940 Less: allowance for credit losses 2,716 3,383 Receivables, net $ 183,270 $ 173,557 The following table summarizes the activity in the allowance for credit losses for the three-month period ended: (In thousands) June 1, 2024 Beginning balance $ 3,383 Reductions to allowance of credit losses ( 659 ) Foreign currency effects ( 8 ) Ending balance $ 2,716 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 deferred revenue on contracts. The time period between when performance obligations are complete and payment is due is not significant. In certain parts of our business that recognize revenue over time, progress billings follow an agreed-upon schedule of values. The changes in contract assets and contract liabilities were mainly due to timing of project activity within our businesses that operate under long-term contracts. Other contract-related disclosures Three Months Ended (In thousands) June 1, 2024 May 27, 2023 Revenue recognized related to contract liabilities from prior year-end $ 26,530 $ 22,745 Revenue recognized related to prior satisfaction of performance obligations 3,298 427 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 prices associated with unsatisfied performance obligations at June 1, 2024 are expected to be satisfied, and the corresponding revenue to be recognized, over the following estimated time periods: (In thousands) June 1, 2024 Within one year $ 608,606 Between one and two years 352,707 Beyond two years 109,831 Total $ 1,071,144 3. Inventories Inventories (In thousands) June 1, 2024 March 2, 2024 Raw materials $ 33,970 $ 31,363 Work-in-process 16,605 12,291 Finished goods 29,920 25,586 Total inventories, net $ 80,495 $ 69,240 10 Table of Contents 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 fixed-maturity investments: (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value June 1, 2024 $ 11,455 $ 19 $ 448 $ 11,026 March 2, 2024 11,327 15 437 10,905 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 these investments at June 1, 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. (In thousands) Amortized Cost Estimated Fair Value Due within one year $ 3,625 $ 3,608 Due after one year through five years 7,830 7,418 Total $ 11,455 $ 11,026 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 to hedge exposure to variability in cash flows from interest payments on our floating-rate revolving credit facility. As of June 1, 2024, the interest rate swap contract had a notional value of $ 30.0 million and has a maturity date of February 5, 2026. We periodically enter into forward purchase contracts and/or fixed/floating swaps to manage the risk associated with fluctuations in aluminum prices and fluctuations in foreign exchange rates. These contracts generally have an original maturity date of less than one year. As of June 1, 2024, we held aluminum purchase contracts and foreign exchange option contracts with U.S. dollar notional values of $ 4.7 million and $ 0.7 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 net earnings. 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 financial assets or liabilities. 11 Table of Contents (In thousands) Quoted Prices in Active Markets (Level 1) Other Observable Inputs (Level 2) Total Fair Value June 1, 2024 Assets: Money market funds $ 23,874 $ — $ 23,874 Municipal and corporate bonds — 11,026 11,026 Interest rate swap contract — 1,336 1,336 Aluminum hedging contract — 386 386 March 2, 2024 Assets: Money market funds $ 26,529 $ — $ 26,529 Municipal and corporate bonds — 10,905 10,905 Foreign currency forward/option contract — 3 3 Interest rate swap contract — 1,292 1,292 Liabilities: Aluminum hedging contract — 529 529 5. Debt As of June 1, 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 date of August 5, 2027. Outstanding borrowings under the revolving credit facility were $ 65.0 million and $ 50.0 million as of June 1, 2024 and March 2, 2024, respectively. 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 2027. Therefore, we have classified all outstanding amounts under these facilities as long-term debt within our consolidated balance sheets. As of June 1, 2024 and March 2, 2024, we had no outstanding borrowings under these Canadian facilities. 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 June 1, 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 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 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 %, respectively. 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 their sole discretion. 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 revolving 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 facilities, respectively. At June 1, 2024, debt included $ 12.0 million of industrial revenue bonds that mature in fiscal years 2036 through 2043. 12 Table of Contents The fair value of our U.S. credit facility, Canadian credit facilities and industrial revenue bonds approximated carrying values at June 1, 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. (In thousands) June 1, 2024 May 27, 2023 Interest on debt $ 1,174 $ 2,510 Interest rate swap gain ( 236 ) ( 267 ) Other interest expense 21 28 Interest income $ ( 509 ) $ ( 235 ) Interest expense, net $ 450 $ 2,036 Interest payments under the U.S. and Canadian credit facilities were $ 1.1 million and $ 2.4 million for the three months ended June 1, 2024 and May 27, 2023, respectively. 6. Commitments and Contingent Liabilities Bond commitments In the ordinary course of business, predominantly in our 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 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 sales 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 cost, 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 these accruals in any given period include the following: changes in manufacturing quality, changes in product mix, and any significant changes in sales volume. Three Months Ended (In thousands) June 1, 2024 Balance at beginning of period $ 21,362 Additional accruals 2,399 Claims paid ( 3,529 ) Balance at end of period $ 20,232 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 in certain parts of our Architectural Framing Systems Segment. We manage the risk of these exposures through contract negotiations, proactive project management and insurance coverages. Letters of credit At June 1, 2024, we had $ 15.0 million of ongoing letters of credit, all of which have been issued under our committed revolving credit facility, as discussed in Note 5. Purchase obligations Purchase obligations for raw material commitments and capital expenditures totaled $ 17.9 million as of June 1, 2024. 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 in our consolidated balance sheets. The NMTC arrangements are subject to 100 percent 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 in 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 13 Table of Contents project, we are required to hold cash dedicated to fund each project, which is classified as restricted cash in our consolidated balance sheets. As a result of the structure of these transactions, variable-interest entities were created. As the other investors in these programs do not have a material interest in the entities' underlying economics, we include 100% of the results of the variable-interest entities in our consolidated financial statements. The table below provides a summary of estimated benefits related to our outstanding NMTC transactions (in thousands): Inception date Termination date Deferred Benefit 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. 7. Supplier Finance Program Obligations In the first quarter of fiscal 2024, we implemented a supplier financing arrangement that enables our suppliers, at their sole discretion, to sell our receivables (i.e., our payment obligations to the suppliers) 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 balances as of June 1, 2024 and March 2, 2024 that we have confirmed as valid to the administrators of our program: (In thousands) June 1, 2024 March 2, 2024 Balance at beginning of period $ 6,527 $ — Obligations added to the program 10,342 33,133 Obligations settled ( 10,666 ) ( 26,606 ) Balance at end of period $ 6,203 $ 6,527 8. Shareholders' Equity We declared dividends totaling $ 5.4 million ($ 0.25 per share) in the first three months of fiscal 2025, compared to dividends paid of $ 5.2 million ($ 0.24 per share) in the comparable prior year period. During fiscal 2004, the Board of Directors authorized a share repurchase program allowing us to repurchase shares of our outstanding common stock, with subsequent increases in authorization. During the three-months ended June 1, 2024, we repurchased 241,573 shares under the program, for a total cost of $ 15.1 million, inclusive of the applicable excise tax. During the three-months ended May 27, 2023, we repurchased 119,916 shares under the program, for a total cost of $ 5.2 million. We have repurchased a total of 11,518,090 shares, at a total cost of $ 408.5 million, since the inception of this program in fiscal 2004. We have remaining authority to repurchase 2,731,910 shares under this program, which has no expiration date. We may also elect to repurchase additional shares of common stock under our authorization, subject to limitations contained in our debt 14 Table of Contents 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. 9. Share-Based Compensation As part of our compensation structure, we grant stock-based compensation awards to certain employees and non-employee directors during the fiscal year. These awards may be in the form of incentive stock options (to employees only), nonstatutory options, 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, unless the date of the award is on a day the Nasdaq Stock Market is not open for trading, then the exercise price shall equal the fair market value on the most recent preceding date when such market is open. The table below sets forth the number of stock-based compensation awards granted during the three-months ended June 1, 2024, along with the weighted average grant date fair value: Awards Number of Awards Weighted Average Grant Date Fair Value Restricted stock awards and restricted stock units (1) 91,957 $ 62.25 Performance share units (2) 35,332 $ 62.53 (1) Represent service condition awards which generally vest over a two - or three -year period. (2) Represent performance condition awards with the grant equal to the target number of performance shares based on the share price at grant date. These grants allow for the right to receive a variable number of shares, between 0 % and 200 % of target, dependent on being employed at the end of the performance period and achieving defined performance goals for average return on invested capital and cumulative earnings per share. Total share-based compensation expense included in the results of operations was $ 2.7 million for the three-month period ended June 1, 2024, and $ 2.2 million for the three-month period ended May 27, 2023. At June 1, 2024, there was $ 10.6 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 19 months. The total fair value of shares vested during the three-months ended June 1, 2024 was $ 9.0 million. 10. Income Taxes We file income tax returns in the U.S. federal jurisdiction, various U.S. state and local jurisdictions, Canada, Brazil and other international jurisdictions. We are no longer subject to U.S. federal tax examinations for years prior to fiscal 2021, or state and local income tax examinations for years prior to fiscal 2015. We are not currently under U.S. federal examination for years subsequent to fiscal year 2020, and there is very limited audit activity of our income tax returns in U.S. state jurisdictions or international jurisdictions. For interim periods, our income tax expense and resulting effective tax rate are based upon an estimated annual effective tax rate adjusted for the effects of items required to be treated as discrete to the period, including changes in tax laws, changes in estimated exposures for uncertain tax positions and other items. 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. The total liability for unrecognized tax benefits was $ 5.6 million at June 1, 2024 compared to $ 5.1 million at March 2, 2024, respectively. Penalties and interest related to unrecognized tax benefits are recorded in income tax expense. 15 Table of Contents 11. Earnings per Share The following table presents a reconciliation of the share amounts used in the computation of basic and diluted earnings per share (diluted EPS): Three Months Ended (In thousands) June 1, 2024 May 27, 2023 Basic earnings per share – weighted average common shares outstanding 21,823 21,883 Weighted average effect of nonvested share grants and assumed exercise of stock options 238 503 Diluted earnings per share – weighted average common shares and potential common shares outstanding 22,061 22,386 Stock awards excluded from the calculation of earnings per share because the effect was anti-dilutive (award price greater than average market price of the shares) 87 229 12. Business Segment Data We have four reporting segments: • The Architectural Framing Systems Segment designs, engineers, fabricates and finishes 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 glass and acrylic 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, selling, general and administrative expenses, 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. Three Months Ended (In thousands) June 1, 2024 May 27, 2023 Segment net sales Architectural Framing Systems $ 133,172 $ 164,162 Architectural Glass 86,703 97,202 Architectural Services 99,027 89,418 Large-Scale Optical 21,204 22,456 Intersegment eliminations ( 8,590 ) ( 11,525 ) Net sales $ 331,516 $ 361,713 Segment operating income (loss) Architectural Framing Systems $ 18,336 $ 19,945 Architectural Glass 17,091 16,521 Architectural Services 5,623 ( 596 ) Large-Scale Optical 4,846 5,525 Corporate and Other ( 4,515 ) ( 7,628 ) Operating income $ 41,381 $ 33,767 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. 16 Table of Contents 13. 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 primarily impacts the Architectural Framing Systems Segment and includes: • 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 has implemented actions to optimize processes and streamline resources in its Architectural Services Segment and Corporate. The Company expects these actions to be substantially complete by the third quarter of fiscal 2025. The Company now expects to incur approximately $ 15.0 million to $ 16.0 million of pre-tax charges in connection with Project Fortify leading to annualized cost savings of $ 12 million to $ 14 million. Restructuring charges are expected to include: • $ 6.5 million to $ 7.5 million of severance and employee related costs; • $ 1.5 million to $ 2.0 million of contract termination costs: and • $ 6.5 million to $ 7.0 million of other expenses. During the first quarter of fiscal 2025, we incurred $ 1.1 million of pre-tax costs associated with Project Fortify, of which $ 0.6 million was included within cost of sales and $ 0.5 million was included within selling, general and administrative expenses. During the fourth quarter of fiscal 2024, we incurred $ 12.4 million of pre-tax costs associated with Project Fortify, of which $ 5.5 million was included within cost of sales and $ 6.9 million was included within selling, general and administrative expenses. (In thousands) Architectural Framing Architectural Services Corporate & Other Total June 1, 2024 Termination benefits $ 302 $ — $ 124 $ 426 Other restructuring charges 696 — — 696 Total restructuring charges $ 998 $ — $ 124 $ 1,122 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 Services Corporate & Other Total Balance at March 2, 2024 $ 2,814 $ 2,067 $ 56 $ 4,937 Restructuring expense 771 — 124 895 Payments ( 2,053 ) ( 348 ) ( 50 ) ( 2,451 ) Other adjustments 320 — — 320 Balance at June 1, 2024 $ 1,852 $ 1,719 $ 130 $ 3,701 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. 17 Table of Contents