What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-04 compared with 2024-07-09 · 156 added, 74 removed, 186 unchanged (55% of the section changed)

33 unchanged sentences

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.

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 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.

In fiscal 2024 and through the second quarter of fiscal 2025, 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.

8 unchanged sentences

(in thousands, except percentages)

June 1, 2024 May 27, 2023 % Change

June 1, 2024 May 27, 2023

August 31, 2024 August 26, 2023 August 31, 2024 August 26, 2023

Net sales $ 342,440 $ 353,675 100.0 % 100.0 %

5 unchanged sentences

Other expense, net

(143) 288 N/M — 0.1

290 4,900 0.1 1.4

Earnings before income taxes 41,115 43,223 12.0 12.2

3 unchanged sentences

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.

Six Months Ended % of Net Sales

(in thousands, except percentages)

August 31, 2024 August 26, 2023 August 31, 2024 August 26, 2023

Net sales $ 673,956 $ 715,388 100.0 % 100.0 %

Cost of sales 477,780 527,031 70.9 73.7

Gross profit 196,176 188,357 29.1 26.3

Selling, general and administrative expenses 112,830 114,037 16.7 15.9

Operating income 83,346 74,320 12.4 10.4

Interest expense, net 1,590 4,266 0.2 0.6

Other expense, net

433 4,612 0.1 0.6

Earnings before income taxes 82,189 74,666 12.2 10.4

Income tax expense 20,612 17,763 3.1 2.5

Net earnings $ 61,577 $ 56,903 9.1 % 8.0 %

Effective tax rate 25.1 % 23.8 %

N/M Indicates calculation not meaningful.

Comparison of Second Quarter Fiscal 2025 to Second Quarter Fiscal 2024

• Consolidated net sales decreased 3.2%, to $342.4 million, primarily driven by lower volume, partially offset by improved pricing and mix.

• Gross margin increased to 28.4%, compared to 27.0%, primarily driven by improved pricing, a more favorable mix of projects in Architectural Services, favorable material costs, and lower insurance-related costs, partially offset by the unfavorable sales leverage impact of lower volume, higher compensation and benefits expense, and $0.9 million of restructuring costs associated with Project Fortify.

• Selling, general and administrative (SG&A) expenses increased $0.5 million to 16.2% of net sales, compared to 15.5% of net sales.

The increase in SG&A as a percentage of sales was primarily due to higher incentive compensation expense and the unfavorable sales leverage impact of lower volume.

• Operating income increased to $42.0 million from $40.6 million, and operating margin increased 80 basis points to 12.3%.

The improvement in operating margin was primarily driven by improved pricing, a more favorable mix of projects in Architectural Services, favorable material costs, and lower insurance-related costs, partially offset by the impact of higher incentive compensation expense, $1.2 million of restructuring costs related to Project Fortify, and the unfavorable sales leverage impact of lower volume.

Adjusted operating income grew 6.4% t o $43.1 million, and adjusted operating margin improved to 12.6%.

• Interest expense, net was $1.1 million, compared to $2.2 million, primarily driven by lower average debt levels, partially offset by the impact of the write-off of unamortized financing fees related to the previous credit facility.

• Income tax expense as a percentage of earnings before income tax was 25.7%, compared to 22.9% for the same period last year.

The increase in the effective tax rate was primarily due to an increase in tax expense for discrete items.

Comparison of First Six Months of Fiscal 2025 to First Six Months of Fiscal 2024

• Consolidated net sales decreased 5.8%, to $674.0 million, primarily driven by lower volume, partially offset by improved pricing and mix.

• Gross margin increased to 29.1%, compared to 26.3%, primarily driven by improved pricing and a more favorable mix of projects in Architectural Services, favorable material costs, and lower insurance-related costs, partially offset by the unfavorable sales leverage impact of lower volume, higher compensation and benefits expense, and $1.5 million of restructuring costs associated with Project Fortify.

• SG&A expenses decreased $1.2 million to 16.7% of net sales, compared to 15.9% of net sales.

The increase in SG&A as a percentage of sales was primarily due to the unfavorable sales leverage impact of lower volume and higher incentive compensation expense, partially offset by lower bad debt expense.

• Operating income grew to $83.3 million from $74.3 million, and operating margin increased 200 basis points to 12.4%.

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.

The improvement in operating margin was primarily driven by improved pricing, a more favorable mix of projects in Architectural Services, favorable material costs, lower insurance-related costs, and lower bad debt expense, which more than offset the unfavorable sales leverage impact of lower volume, $2.3 million of restructuring costs related to Project Fortify, and higher incentive compensation expense.

Adjusted operating income grew 15.2% to $85.6 million, and adjusted operating margin improved to 12.7%.

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

• Interest expense, net was $1.6 million, compared to $4.3 million, primarily driven by lower average debt levels, partially offset by the impact of the write-off of unamortized financing fees related to our previous credit facility.

• Income tax expense as a percentage of earnings before income tax was 25.1%, compared to 23.8% 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 increase in the effective tax rate was primarily due to an increase in tax expense for discrete items.

Segment Analysis

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

Three Months Ended

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

Three Months Ended Six Months Ended

(In thousands, except percentages) August 31, 2024 August 26, 2023 % Change August 31, 2024 August 26, 2023 % Change

Segment net sales

8 unchanged sentences

Architectural Glass 21,068 17,434 20.8 38,159 33,955 12.4

Architectural Services 5,623 (596) N/M

Architectural Services 6,130 3,519 74.2 11,753 2,923 302.1

Large-Scale Optical 3,793 4,663 (18.7) 8,639 10,188 (15.2)

7 unchanged sentences

Corporate and Other

N/M N/M N/M N/M

Operating income 12.3 % 11.5 % 12.4 % 10.4 %

5 unchanged sentences

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.

Operating income does not include other income or expense, interest expense or income tax expense.

Architectural Framing Systems

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.

Comparison of Second Quarter Fiscal 2025 to Second Quarter Fiscal 2024

• Net sales were $141.4 million, compared to $158.8 million, primarily reflecting reduced volume due to exiting certain lower-margin product lines as part of Project Fortify and lower end market demand.

• Operating income was $17.1 million, or 12.1% of net sales, compared to $21.1 million, or 13.3% 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.

The 120 basis point reduction in operating margin was primarily driven by the unfavorable sales leverage impact of lower volume, a less favorable mix and $0.9 million of restructuring charges related to Project Fortify, partially offset by favorable material costs.

Adjusted operating income was $18.1 million, or 12.8% of net sales, compared to $21.1 million, or 13.3% of net sales.

Comparison of First Six Months of Fiscal 2025 to First Six Months of Fiscal 2024

• Net sales were $274.5 million, compared to $323.0 million, primarily reflecting reduced volume due to exiting certain lower-margin product lines as part of Project Fortify and lower end market demand.

• Operating income was $35.5 million, or 12.9% of net sales, compared to $41.0 million, or 12.7% of net sales.

The 20 basis point improvement in operating margin was primarily driven by favorable material costs and lower bad debt expense, partially offset by the unfavorable sales leverage impact of lower volume, and $1.9 million of restructuring charges as part of Project Fortify.

Adjusted operating income was $37.4 million, or 13.6% of net sales, compared to $41.0 million, or 12.7% of net sales.

Architectural Glass

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.

Comparison of Second Quarter Fiscal 2025 to Second Quarter Fiscal 2024

• Net sales were $90.1 million, compared to $94.1 million, reflecting reduced volume due to lower end-market demand, partially offset by improved pricing and product mix.

• Operating income increased to $21.1 million, or 23.4% of net sales, compared to $17.4 million, or 18.5% of net sales.

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.

The 490 basis point improvement in operating margin was primarily driven by improved pricing and product mix, and lower wages and benefits expense, partially offset by the unfavorable sales leverage impact of lower volume.

Comparison of First Six Months of Fiscal 2025 to First Six Months of Fiscal 2024

• Net sales were $176.8 million, compared to $191.3 million, reflecting lower volume due to lower end-market demand, partially offset by improved pricing and product mix.

• Operating income increased to $38.2 million, or 21.6% of net sales, compared to $34.0 million, or 17.7% of net sales.

The 390 basis point improvement in operating margin was primarily driven by improved pricing and product mix, and lower wages and benefits expense, partially offset by the unfavorable sales leverage impact of lower volume.

Architectural Services

Comparison of First Quarter Fiscal 2025 to First Quarter Fiscal 2024

Comparison of Second Quarter Fiscal 2025 to Second Quarter Fiscal 2024

• Net sales were $98.0 million, compared to $88.1 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.

• Operating income increased to $6.1 million, or 6.3% of net sales, compared to $3.5 million, or 4.0% of net sales, primarily driven by a more favorable mix of projects, partially offset by higher compensation-related expenses, higher leasing costs, and the $0.3 million impact of restructuring costs as part of Project Fortify.

Comparison of First Six Months of Fiscal 2025 to First Six Months of Fiscal 2024

• Net sales were $197.0 million, compared to $177.5 million, primarily due to a more favorable mix of projects and increased volume.

• Operating income increased to $11.8 million, or 6.0% of net sales, compared to $2.9 million, or 1.6% of net sales, primarily driven by a more favorable mix of projects, partially offset by higher compensation-related expenses, higher leasing costs, and the $0.3 million impact of restructuring costs as part of Project Fortify.

Large-Scale Optical (LSO)

Comparison of First Quarter Fiscal 2025 to First Quarter Fiscal 2024

Comparison of Second Quarter Fiscal 2025 to Second Quarter Fiscal 2024

• LSO net sales were $19.8 million, compared to $23.6 million, primarily reflecting lower volume in the retail channel, partially offset by a more favorable mix.

• Operating income was $3.8 million, or 19.1% of net sales, compared to $4.7 million, or 19.7% 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.

The 60 basis point decline in operating margin primarily reflects the unfavorable sales leverage impact of lower volume, partially offset by improved mix and cost savings.

Comparison of First Six Months of Fiscal 2025 to First Six Months of Fiscal 2024

• LSO net sales were $41.0 million, compared to $46.1 million, primarily reflecting lower volume in the retail channel, partially offset by a more favorable mix.

• Operating income was $8.6 million, or 21.1% of net sales, compared to $10.2 million, or 22.1% of net sales.

The 100 basis point decline in operating margin primarily reflects the unfavorable sales leverage impact of lower volume, partially offset by improved mix and cost savings.

Corporate and Other

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.

Comparison of Second Quarter Fiscal 2025 to Second Quarter Fiscal 2024

• Corporate and Other expense was $6.2 million, compared to $6.1 million.

The increase was primarily driven by higher incentive compensation and benefits costs, partially offset by lower insurance-related costs.

Comparison of First Six Months of Fiscal 2025 to First Six Months of Fiscal 2024

• Corporate and Other expense was $10.7 million, compared to $13.8 million, primarily due to lower insurance-related costs, partially offset by incentive compensation and benefits 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.

5 unchanged sentences

Architectural Services

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.

As of August 31, 2024, segment backlog was approximately $792.1 million, compared to approximately $866.9 million at the end of the prior quarter.

The decrease in backlog compared to the prior quarter was primarily driven by executing more project work in the quarter than securing new project awards that were added to backlog.

Our backlog in this segment tends to vary significantly given the variable timing and relatively large size of projects awarded.

Reconciliation of Non-GAAP Financial Measures

7 unchanged sentences

Adjusted Operating Income and Adjusted Operating Margin

Three Months Ended June 1, 2024

Three Months Ended August 31, 2024

(In thousands, except percentages)

10 unchanged sentences

12.8 % 23.4 % 6.5 % 19.1 % N/M 12.6 %

Three Months Ended May 27, 2023

Three Months Ended August 26, 2023

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

3 unchanged sentences

13.3 % 18.5 % 4.0 % 19.7 % N/M 11.5 %

(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.

Six Months Ended August 31, 2024

(In thousands, except percentages)

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

Operating income $ 35,477 $ 38,159 $ 11,753 $ 8,639 $ (10,682) $ 83,346

Restructuring costs (1)

1,914 — 258 — 129 2,301

Adjusted operating income $ 37,391 $ 38,159 $ 12,011 $ 8,639 $ (10,553) $ 85,647

Operating margin

12.9 % 21.6 % 6.0 % 21.1 % N/M 12.4 %

Restructuring costs (1)

0.7 % — % 0.1 % — % N/M 0.3 %

Adjusted operating margin

13.6 % 21.6 % 6.1 % 21.1 % N/M 12.7 %

Six Months Ended August 26, 2023

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

Operating income

$ 41,005 $ 33,955 $ 2,923 $ 10,188 $ (13,751) $ 74,320

Operating margin

12.7 % 17.7 % 1.6 % 22.1 % N/M 10.4 %

(1) Restructuring charges related to Project Fortify, including $0.9 million of employee termination costs, $0.1 million of contract termination costs and $1.3 million of other costs incurred in the first six months of fiscal 2025.

Reconciliation of Non-GAAP Financial Measures

Adjusted Net Earnings and Adjusted Diluted Earnings Per Share

Diluted per share amounts

Three Months Ended

Three Months Ended Six Months Ended

(In thousands, except per share amounts)

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

August 31, 2024 August 26, 2023 August 31, 2024 August 26, 2023

Net earnings $ 30,566 $ 33,327 $ 61,577 $ 56,903

1 unchanged sentence

1,179 — 2,301 —

NMTC Settlement Gain (2)

— (4,687) — (4,687)

Income tax impact on above adjustments (3)

1 unchanged sentence

Adjusted net earnings $ 31,456 $ 29,788 $ 63,314 $ 53,364

Three Months Ended Six Months Ended

August 31, 2024 August 26, 2023 August 31, 2024 August 26, 2023

Diluted EPS $ 1.40 $ 1.52 $ 2.80 $ 2.57

Restructuring costs (1)

0.05 — 0.10 —

NMTC Settlement Gain (2)

— (0.21) — (0.21)

Income tax impact on above adjustments (3)

(0.01) 0.05 (0.03) 0.05

Adjusted diluted EPS $ 1.44 $ 1.36 $ 2.88 $ 2.41

Shares outstanding for EPS 21,875 21,962 21,985 22,105

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

(1) Restructuring charges related to Project Fortify, including $0.5 million of employee termination costs, $0.1 million of contract termination costs and $0.6 million of other costs incurred in the second quarter of fiscal 2025, and $0.9 million of employee termination costs, $0.1 million of contract termination costs and $1.3 million of other costs incurred in the first six months of fiscal 2025.

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

(3) 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.

2 unchanged sentences

(Earnings before interest, taxes, depreciation and amortization)

Three Months Ended

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

Three Months Ended Six Months Ended

(In thousands) August 31, 2024 August 26, 2023 August 31, 2024 August 26, 2023

Net earnings $ 30,566 $ 33,327 $ 61,577 $ 56,903

4 unchanged sentences

Restructuring costs (1)

1,179 — 2,301 —

NMTC Settlement Gain (2)

— (4,687) — (4,687)

Adjusted EBITDA $ 53,122 $ 51,145 $ 105,744 $ 94,906

2 unchanged sentences

Adjusted EBITDA Margin 15.5 % 14.5 % 15.7 % 13.3 %

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

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

Liquidity and Capital Resources

1 unchanged sentence

Operating Activities.

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.

Net cash provided by operating activities was $64.1 million for the first six months of fiscal 2025, compared to $62.6 million in the prior year period.

The increase was primarily driven by increased net earnings and decreased cash payments for incentive compensation, partially offset by increased cash used for working capital.

Investing Activities.

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.

Net cash used by investing activities was $15.5 million for the first six months of fiscal 2025, compared to $15.1 million in the prior year, primarily related to capital expenditures in both periods.

Financing Activities.

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.

Net cash used by financing activities was $34.6 million for the first six months of fiscal 2025, compared to $50.1 million in the prior year period.

The decrease in cash used for financing activities was primarily driven by lower net debt repayments, partially offset by debt issuance costs related to our new credit agreement and 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 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.

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 (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 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).

On July 19, 2024, we entered into a Credit Agreement (the Credit Agreement) with Bank of America, N.A., as administrative agent, and other lenders.

The Credit Agreement provides for an unsecured senior credit facility in an aggregate principal amount of up to $700.0 million, in which commitments are available through a $450.0 million, five-year revolving credit facility and a committed $250.0 million delayed draw term loan facility.

Borrowings under the revolving credit facility can be in Canadian dollars (CAD) limited to $25.0 million USD.

The term loan facility may be borrowed in up to two drawdowns, which are available to be made within one year after the closing date.

The senior credit facility has a term of five years with a maturity date of July 19, 2029.

Outstanding borrowings under the revolving credit facility were $50.0 million as of August 31, 2024.

As of August 31, 2024, the term loan facility had not been drawn.

The Credit Agreement replaces the previous revolving credit facility with Wells Fargo Bank, N.A., as administrative agent, and other lenders, with maximum borrowings up to $385.0 million, and the two Canadian credit facilities with Bank of Montreal totaling $25.0 million USD.

Outstanding borrowings under the previous revolving credit facility were $50.0 million as of March 2, 2024.

We had no outstanding borrowings under the Canadian facilities as of March 2, 2024.

As a result of the transaction, in the second quarter of fiscal 2025, we recognized a loss on extinguishment of debt within interest expense of $0.5 million for the write-off of unamortized financing fees related to the previous revolving credit facility.

Additionally, we capitalized $3.0 million of lender fees and $0.6 million of third-party fees incurred in connection with the Credit Agreement, which were recorded as other non-current assets and will be amortized over the term of the credit facility as interest expense.

The Credit Agreement contains two maintenance financial covenants that require our Consolidated Leverage Ratio (as defined in the Credit Agreement) to be less than 3.50 and our Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) to exceed 3.00.

At August 31, 2024, we were in compliance with all covenants as defined under the terms of the Credit Agreement.

The Credit Agreement also contains an acquisition “holiday.” In the event we make an acquisition for which the purchase price is greater than $75 million, we can elect to increase the maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) to 4.00 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 Credit Agreement, and at least two fiscal quarters must separate qualifying acquisitions.

Borrowings under the Credit Agreement bear floating interest at either the Base Rate or Term Secured Overnight Financing Rate (SOFR), or for CAD borrowings, Canadian Overnight Repo Rate Average (CORRA) plus, in each a margin based on the Consolidated Leverage Ratio (as defined in the Credit Agreement).

For Base Rate borrowings, the margin ranges from 0.25% to 0.75%.

For Term SOFR and CORRA borrowings, the margin ranges from 1.25% 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.

The Credit Agreement also contains an “accordion” provision.

Under this provision, we can request that the senior credit facility be increased by unlimited additional amounts.

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.

At August 31, 2024, we had a total of $42.5 million of ongoing letters of credit related to the senior credit facility and 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 August 31, 2024, the amount available for revolving borrowings was $357.5 million.

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

Future payments for such leases, excluding leases with initial terms of one year or less, were $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.

Future payments for such leases, excluding leases with initial terms of one year or less, were $48.1 million at August 31, 2024, with $7.1 million payable during the remainder of fiscal 2025.

As of August 31, 2024, we had $14.2 million of open purchase obligations, of which payments totaling $9.3 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 June 1, 2024, we had reserves of $5.6 million for unrecognized tax benefits.

As of August 31, 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 June 1, 2024, $1.3 billion of these types of bonds were outstanding, of which $434.7 million is in our backlog.

At August 31, 2024, $1.2 billion of these types of bonds were outstanding, of which $366.0 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.

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

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

10 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis