What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-01-07 compared with 2024-10-04 · 186 added, 103 removed, 239 unchanged (55% of the section changed)

21 unchanged sentences

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.

We are a leading provider of architectural products and services for enclosing buildings, and high-performance coating 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).

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

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

12 unchanged sentences

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

In fiscal 2024 and through the second quarter of fiscal 2025, we drove further progress toward our strategic goals and financial targets.

In fiscal 2024 and through the third 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.

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

We have invested in inorganic and organic growth initiatives, including the acquisition of UW Interco, LLC (UW Solutions), 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.

Recent Developments

In the third quarter of fiscal 2025, we acquired UW Solutions.

UW Solutions is a U.S.

based, vertically integrated manufacturer of high-performance coated substrates, differentiated by its proprietary formulations and coating application processes.

The Company serves a broad range of customers in attractive end markets, including building products for distribution centers and manufacturing facilities, as well as premium products for the graphic arts market.

See Note 13 for additional information on the terms and conditions of this transaction.

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.

4 unchanged sentences

(in thousands, except percentages)

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

November 30, 2024 November 25, 2023 November 30, 2024 November 25, 2023

Net sales $ 341,344 $ 339,714 100.0 % 100.0 %

4 unchanged sentences

Interest expense, net 1,044 1,454 0.3 0.4

Other expense, net

290 4,900 0.1 1.4

Other (income) expense, net (60) 890 — 0.3

Earnings before income taxes 27,645 35,303 8.1 10.4

2 unchanged sentences

Effective tax rate 24.1 % 23.6 %

N/M Indicates calculation not meaningful.

Six Months Ended % of Net Sales

Nine Months Ended % of Net Sales

(in thousands, except percentages)

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

November 30, 2024 November 25, 2023 November 30, 2024 November 25, 2023

Net sales $ 1,015,300 $ 1,055,102 100.0 % 100.0 %

4 unchanged sentences

Interest expense, net 2,634 5,720 0.3 0.5

Other expense, net

433 4,612 0.1 0.6

Other (income) expense, net (493) (3,722) — (0.4)

Earnings before income taxes 109,834 109,969 10.8 10.4

2 unchanged sentences

Effective tax rate 24.8 % 23.7 %

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.

Comparison of Third Quarter Fiscal 2025 to Third Quarter Fiscal 2024

• Consolidated net sales increased 0.5%, to $341.3 million, driven by $8.8 million of inorganic sales contribution from the acquisition of UW Solutions and a more favorable mix of projects in Architectural Services, partially offset by less favorable mix in Architectural Framing Systems and lower volume in Architectural Glass.

• Gross margin decreased to 26.1%, compared to 26.6%, primarily driven by the unfavorable sales leverage impact of lower volume, a less favorable product mix in the Architectural Framing Systems Segment, and higher incentive compensation and lease expenses, partially offset by a more favorable mix of projects in Architectural Services Segment, and lower quality and insurance-related costs.

• SG&A expenses increased $7.9 million to 17.7% of net sales, compared to 15.5% of net sales.

The increase in SG&A as a percentage of net sales was primarily due to acquisition-related expenses associated with the UW Solutions acquisition, restructuring expense related to Project Fortify, and the unfavorable sales leverage impact of lower volume.

• Operating income declined to $28.6 million from $37.6 million, and operating margin decreased 270 basis points to 8.4%.

The lower operating margin was primarily driven by acquisition-related expenses associated with the UW Solutions transaction, unfavorable sales leverage impact on lower volume, less favorable product mix, higher incentive compensation, higher lease expense, and $0.9 million of restructuring costs related to Project Fortify, partially offset by a more favorable mix of projects in Architectural Services and lower insurance-related costs.

Adjusted operating income was lower by 5.9% t o $35.4 million, and adjusted operating margin was reduced to 10.4%.

• Interest expense, net declined to $1.0 million, primarily driven by lower weighted-average interest rates and higher interest income.

• Other income was $0.1 million compared to expense of $0.9 million.

The change was driven by an increase in value of company-owned life insurance assets.

• Income tax expense as a percentage of earnings before income tax was 24.1%, compared to 23.6% 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 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.

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

• Consolidated net sales decreased 3.8%, to $1,015.3 million, primarily driven by lower volume and mix, partially offset by a more favorable mix of projects in Architectural Services, improved pricing, and the $8.8 million inorganic sales contribution from the acquisition of UW Solutions.

• Gross margin increased to 28.1%, compared to 26.4%, primarily driven by improved pricing and a more favorable mix of projects in Architectural Services, favorable material costs, and lower quality and insurance-related costs, partially

offset by the unfavorable sales leverage impact of lower volume, higher incentive compensation expense, higher lease costs, and $1.3 million of restructuring costs associated with Project Fortify.

• SG&A expenses increased $6.7 million to 17.1% of net sales, compared to 15.8% of net sales.

The increase in SG&A as a percentage of net sales was primarily due to the impact of acquisition-related expenses, and the unfavorable sales leverage impact of lower volume, partially offset by lower bad debt expense.

• Operating income was $112.0 million and operating margin increased 40 basis points to 11.0%.

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, partially offset by the unfavorable sales leverage impact of lower volume, acquisition-related expenses, and $3.2 million of restructuring costs related to Project Fortify.

Adjusted operating income grew 8.1% to $121.1 million, and adjusted operating margin improved to 11.9%.

• 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.

• Interest expense, net was $2.6 million, compared to $5.7 million, primarily driven by lower average debt levels and increased interest income from higher invested cash over the periods, partially offset by the impact of the write-off of unamortized financing fees related to our previous credit facility.

• Other income was $0.5 million compared to $3.7 million.

The higher amount of income in the prior year period was primarily due to $4.7 million of New Market Tax Credit income recognized in the prior year period.

• Income tax expense as a percentage of earnings before income tax was 24.8%, compared to 23.7% for the same period last year.

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(In thousands, except percentages) November 30, 2024 November 25, 2023 % Change November 30, 2024 November 25, 2023 % Change

Segment net sales

28 unchanged sentences

Architectural Framing Systems

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.

Comparison of Third Quarter Fiscal 2025 to Third Quarter Fiscal 2024

• Net sales were $138.0 million, compared to $139.6 million, primarily reflecting a less favorable product mix, partially offset by increased volume.

• Operating income was $12.7 million, or 9.2% of net sales, compared to $17.0 million, or 12.2% of net sales.

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.

The decline in operating margin was primarily driven by the less favorable product mix as well as higher freight and compensation expenses and $0.8 million of restructuring charges related to Project Fortify.

Adjusted operating income was $13.6 million, or 9.8% of net sales, compared to $17.0 million, or 12.2% 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.

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

• Net sales were $412.6 million, compared to $462.5 million, primarily reflecting reduced volume due to exiting certain lower-margin product lines as part of Project Fortify and lower end market demand as well as a less favorable product mix.

• Operating income was $48.2 million, or 11.7% of net sales, compared to $58.0 million, or 12.5% 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.

The decline in operating margin was primarily driven by the unfavorable sales leverage impact of lower volume, higher compensation costs, and $2.8 million of restructuring charges as part of Project Fortify, partially offset by favorable material costs and lower bad debt expense.

Adjusted operating income was $50.9 million, or 12.3% of net sales, compared to $58.0 million, or 12.5% of net sales.

Architectural Glass

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 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.

Comparison of Third Quarter Fiscal 2025 to Third Quarter Fiscal 2024

• Net sales were $70.2 million, compared to $91.0 million, primarily reflecting reduced volume due to lower end-market demand.

• Operating income decreased to $10.1 million, or 14.4% of net sales, compared to $15.2 million, or 16.7% of net sales.

The lower operating margin was primarily driven by unfavorable sales leverage impact of lower volume partially offset by improved productivity, favorable freight costs, and lower quality-related expense.

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

• Net sales were $247.0 million, compared to $282.3 million, reflecting lower volume due to lower end-market demand, partially offset by improved pricing.

• Operating income decreased to $48.3 million, or 19.5% of net sales, compared to $49.1 million, or 17.4% of net sales.

The improvement in operating margin was primarily driven by improved pricing, improved productivity, and lower quality-related costs, partially offset by the unfavorable sales leverage impact of lower volume.

Architectural Services

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 $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

Comparison of Third Quarter Fiscal 2025 to Third Quarter Fiscal 2024

• Net sales were $104.9 million, compared to $94.7 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.

• Operating income increased to $9.7 million, or 9.3% of net sales, compared to $5.3 million, or 5.6% of net sales.

The improvement in operating margin was primarily driven by a more favorable mix of projects partially offset by higher incentive compensation expense and higher lease costs.

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

• Net sales were $302.0 million, compared to $272.1 million, primarily due increased volume and a more favorable mix of projects.

• Operating income increased to $21.5 million, or 7.1% of net sales, compared to $8.2 million, or 3.0% of net sales.

The improvement in operating margin was primarily driven by a more favorable mix of projects, partially offset by higher incentive compensation expense and higher lease costs.

Large-Scale Optical (LSO)

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.

Comparison of Third Quarter Fiscal 2025 to Third Quarter Fiscal 2024

• LSO net sales were $33.2 million, compared to $26.0 million, which included $8.8 million of inorganic sales contribution from the acquisition of UW Solutions, partially offset by lower volume in the retail channel.

• Operating income was $4.8 million, or 14.6% of net sales, compared to $7.1 million, or 27.3% of net sales.

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.

The decline in operating margin was primarily driven by acquisition-related costs, the unfavorable sales leverage impact of lower volume, and the dilutive effect of lower operating margin from acquiring UW Solutions.

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

• LSO net sales were $74.2 million, compared to $72.1 million, which included $8.8 million of sales from UW Solutions, partially offset by lower volume in the retail channel.

• Operating income was $13.5 million, or 18.2% of net sales, compared to $17.3 million, or 24.0% 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.

The decline in operating margin was primarily driven by acquisition-related costs and the sales leverage impact of lower volume.

Corporate and Other

Comparison of Second Quarter Fiscal 2025 to Second Quarter Fiscal 2024

Comparison of Third Quarter Fiscal 2025 to Third Quarter Fiscal 2024

• Corporate and Other expense was $8.8 million, compared to $6.9 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.

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

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

• Corporate and Other expense was $19.5 million, compared to $20.6 million.

The decrease was primarily due to lower insurance-related and incentive compensation costs, partially offset by acquisition-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.

5 unchanged sentences

Architectural Services

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.

As of November 30, 2024, segment backlog was approximately $742.2 million, compared to approximately $792.1 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.

9 unchanged sentences

Adjusted Operating Income and Adjusted Operating Margin

Three Months Ended August 31, 2024

Three Months Ended November 30, 2024

(In thousands, except percentages)

1 unchanged sentence

Operating income $ 12,710 $ 10,118 $ 9,730 $ 4,842 $ (8,771) $ 28,629

Restructuring costs (1)

Acquisition-related costs (1)

Transaction — — — — 3,748 3,748

Integration — — — 147 794 941

Backlog amortization — — — 805 — 805

Inventory step-up — — — 379 — 379

Total Acquisition-related costs

— — — 1,331 4,542 5,873

Restructuring charges (2)

842 — (717) — 787 912

Adjusted operating income $ 13,552 $ 10,118 $ 9,013 $ 6,173 $ (3,442) $ 35,414

1 unchanged sentence

9.2 % 14.4 % 9.3 % 14.6 % N/M 8.4 %

Restructuring costs (1)

Acquisition-related costs (1)

Transaction — % — % — % — % N/M 1.1 %

Integration — % — % — % 0.4 % N/M 0.3 %

Backlog amortization — % — % — % 2.4 % N/M 0.2 %

Inventory step-up — % — % — % 1.1 % N/M 0.1 %

Total Acquisition-related costs

— % — % — % 4.0 % N/M 1.7 %

Restructuring charges (2)

0.6 % — % (0.7) % — % N/M 0.3 %

Adjusted operating margin

9.8 % 14.4 % 8.6 % 18.6 % N/M 10.4 %

Three Months Ended August 26, 2023

Three Months Ended November 25, 2023

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

3 unchanged sentences

12.2 % 16.7 % 5.6 % 27.3 % N/M 11.1 %

Six Months Ended August 31, 2024

Acquisition-related costs include:

• Transaction costs related to the UW Solutions acquisition.

• Integration costs related to one-time expenses incurred to integrate the UW Solutions acquisition.

• Backlog amortization is related to the value attributed to contracting the backlog purchased in the UW Solutions acquisition.

These costs will be amortized in SG&A over the period that the contracted backlog is shipped.

• Inventory step-up is related to the incremental cost to value inventory acquired as part of the UW Solutions acquisition at fair value.

These costs will be expensed to cost of goods sold over the period the inventory is sold.

Restructuring charges related to Project Fortify, including $0.4 million of employee termination costs and $0.5 million of other costs incurred in the third quarter of fiscal 2025.

Nine Months Ended November 30, 2024

(In thousands, except percentages)

1 unchanged sentence

Operating income $ 48,187 $ 48,277 $ 21,483 $ 13,481 $ (19,453) $ 111,975

Restructuring costs (1)

Acquisition-related costs (1)

Transaction — — — — 3,748 $ 3,748

Integration — — — 147 794 $ 941

Backlog amortization — — — 805 — $ 805

Inventory step-up — — — 379 — $ 379

Total Acquisition-related costs

— — — 1,331 4.542 $ 5,873

Restructuring charges (2)

2,755 — (459) — 917 3,213

Adjusted operating income $ 50,942 $ 48,277 $ 21,024 $ 14,812 $ (13,994) $ 121,061

1 unchanged sentence

11.7 % 19.5 % 7.1 % 18.2 % N/M 11.0 %

Restructuring costs (1)

Acquisition-related costs (1)

Transaction — % — % — % — % N/M 0.4 %

Integration — % — % — % 0.2 % N/M 0.1 %

Backlog amortization — % — % — % 1.1 % N/M 0.1 %

Inventory step-up — % — % — % 0.5 % N/M — %

Total Acquisition-related costs — % — % — % 1.8 % N/M 0.6 %

Restructuring charges (2)

0.7 % — % (0.2) % — % N/M 0.3 %

1 unchanged sentence

12.3 % 19.5 % 7.0 % 20.0 % N/M 11.9 %

Six Months Ended August 26, 2023

Nine Months Ended November 25, 2023

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

3 unchanged sentences

12.5 % 17.4 % 3.0 % 24.0 % N/M 10.6 %

(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.

Acquisition-related costs include:

• Transaction costs related to the UW Solutions acquisition.

• Integration costs related to one-time expenses incurred to integrate the UW Solutions acquisition.

• Backlog amortization is related to the value attributed to contracting the backlog purchased in the UW Solutions acquisition.

These costs will be amortized in SG&A over the period that the contracted backlog is shipped.

• Inventory step-up is related to the incremental cost to value inventory acquired as part of the UW Solutions acquisition at fair value.

These costs will be expensed to cost of goods sold over the period the inventory is sold.

Restructuring charges related to Project Fortify, including $1.3 million of employee termination costs, $0.1 million of contract termination costs and $1.8 million of other costs incurred in the first nine months of fiscal 2025.

Reconciliation of Non-GAAP Financial Measures

Adjusted Net Earnings and Adjusted Diluted Earnings Per Share

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

(In thousands, except per share amounts)

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

November 30, 2024 November 25, 2023 November 30, 2024 November 25, 2023

Net earnings $ 20,989 $ 26,974 $ 82,566 $ 83,877

Restructuring costs (1)

Acquisition-related costs (1)

Transaction 3,748 — 3,748 —

Integration 941 — 941 —

Backlog amortization 805 — 805 —

Inventory step-up 379 — 379 —

Total Acquisition-related costs

5,873 — 5,873 —

Restructuring charges (2)

912 — 3,213 —

NMTC settlement gain (3)

3 unchanged sentences

Adjusted net earnings $ 26,112 $ 26,974 $ 89,426 $ 80,338

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

November 30, 2024 November 25, 2023 November 30, 2024 November 25, 2023

Diluted EPS $ 0.96 $ 1.23 $ 3.76 $ 3.80

Restructuring costs (1)

Acquisition-related costs (1)

Transaction 0.17 — 0.17 —

Integration 0.04 — 0.04 —

Backlog amortization 0.04 — 0.04 —

Inventory step-up 0.02 — 0.02 —

Total Acquisition-related costs 0.27 — 0.27 —

Restructuring charges (2)

0.04 — 0.15 —

NMTC settlement gain (3)

— (0.21) — (0.21)

Income tax impact on above adjustments (4)

2 unchanged sentences

Shares outstanding for EPS 21,917 22,013 21,937 22,093

(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.

Acquisition-related costs include:

• Transaction costs related to the UW Solutions acquisition.

• Integration costs related to one-time expenses incurred to integrate the UW Solutions acquisition.

• Backlog amortization is related to the value attributed to contracting the backlog purchased in the UW Solutions acquisition.

These costs will be amortized in SG&A over the period that the contracted backlog is shipped.

• Inventory step-up is related to the incremental cost to value inventory acquired as part of the UW Solutions acquisition at fair value.

These costs will be expensed to cost of goods sold over the period the inventory is sold.

Restructuring charges related to Project Fortify, including $0.4 million of employee termination costs and $0.5 million of other costs incurred in the third quarter of fiscal 2025, and $1.3 million of employee termination costs, $0.1 million of contract termination costs and $1.8 million of other costs incurred in the first nine months of fiscal 2025.

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

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 Six Months Ended

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

Three Months Ended Nine Months Ended

(In thousands) November 30, 2024 November 25, 2023 November 30, 2024 November 25, 2023

Net earnings $ 20,989 $ 26,974 $ 82,566 $ 83,877

3 unchanged sentences

EBITDA $ 39,823 $ 47,281 $ 143,266 $ 146,874

Restructuring costs (1)

Acquisition-related costs (1)

Transaction 3,748 — 3,748 —

Integration 941 — 941 —

Inventory step-up 379 — 379 —

Total Acquisition-related costs

5,068 — 5,068 —

Restructuring charges (2)

912 — 3,213 —

NMTC settlement gain (3)

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Adjusted EBITDA Margin 13.4 % 13.9 % 14.9 % 13.5 %

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

(1) Acquisition-related costs include:

• Transaction costs related to the UW Solutions acquisition.

• Integration costs related to one-time expenses incurred to integrate the UW Solutions acquisition.

• Inventory step-up is related to the incremental cost to value inventory acquired as part of the UW Solutions acquisition at fair value.

These costs will be expensed to cost of goods sold over the period the inventory is sold.

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

Liquidity and Capital Resources

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Operating Activities.

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.

Net cash provided by operating activities was $95.1 million for the first nine months of fiscal 2025, compared to $129.3 million in the prior year period.

The decrease in net cash provided by operating activities was primarily driven by cash used for working capital.

Investing Activities.

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.

Net cash used by investing activities was $257.1 million for the first nine months of fiscal 2025, compared to $26.3 million in the prior year period.

The increase in net cash used by investing activities was primarily related to $233.1 million of cash used for the acquisition of UW Solutions.

Financing Activities.

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.

Net cash provided by financing activities was $169.0 million for the first nine months of fiscal 2025, compared to $100.4 million of net cash used by financing activities in the prior year period.

The increase in net cash provided by financing activities was primarily driven by the proceeds of $250.0 million from the delayed draw term loan utilized to finance the UW Solutions acquisition.

Additional Liquidity Considerations.

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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.

The Credit Agreement provides for an unsecured senior credit facility in an aggregate principal amount of up to $700.0 million, in which commitments were made 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 term loan facility may be utilized 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.

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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.

As a result of the execution of the Credit Agreement, 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 $0.8 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.

At November 30, 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.

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Any lender may elect or decline to participate in the requested increase at their sole discretion.

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.

On November 4, 2024, as part of the acquisition of UW Solutions, and for working capital and general corporate purposes, we executed a drawdown against the delayed draw term loan facility for $250.0 million.

Outstanding borrowings under the term loan facility were $230.0 million as of November 30, 2024.

Outstanding borrowings under the revolving credit facility were $30.0 million as of November 30, 2024.

At November 30, 2024, we had a total of $27.3 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 November 30, 2024, the amount available for revolving borrowings was $405.0 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 $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.

Future payments for such leases, excluding leases with initial terms of one year or less, were $73.9 million at November 30, 2024, with $4.3 million payable during the remainder of fiscal 2025.

As of November 30, 2024, we had $20.0 million of open purchase obligations, of which payments totaling $14.5 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 August 31, 2024, we had reserves of $5.6 million for unrecognized tax benefits.

As of November 30, 2024, we had reserves of $5.7 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 August 31, 2024, $1.2 billion of these types of bonds were outstanding, of which $366.0 million is in our backlog.

At November 30, 2024, $1.2 billion of these types of bonds were outstanding, of which $307.2 million is in our backlog.

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

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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