Apogee Enterprises, Inc 10-Q for FY2025 Q2

Apogee Enterprises, Inc. (APOG)

10-Q 2024-10-04 For: 2024-08-31

Added on April 04, 2026

About this 10-Q

Apogee Enterprises, Inc filed this 10-Q on October 4, 2024, covering the quarter ended August 31, 2024 (FY2025 Q2).

Headline figures

Quarter ended August 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $342.44M; down 3.2% from $353.68M a year earlier
Net income: $30.57M; down 8.3% from net income of $33.33M a year earlier
Diluted EPS: $1.40; down 7.9% from $1.52 a year earlier

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		Page
PART I	Financial Information

Item 1.	Financial Statements (Unaudited):

	Consolidated Balance Sheets	4

	Consolidated Results of Operations	5

	Consolidated Statements of Comprehensive Earnings	6

	Consolidated Statements of Cash Flows	7

	Consolidated Statements of Shareholders' Equity	8

	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	29

PART II	Other Information

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 5.	Other Information	30

Item 6.	Exhibits	30

Signatures		31


	(Unaudited)
(In thousands, except stock data)	August 31, 2024		March 2, 2024
Assets
Current assets
Cash and cash equivalents	$	51,024	$	37,216

Receivables, net	177,146		173,557
Inventories, net	79,591		69,240
Contract assets	49,285		49,502
Other current assets	36,742		29,124
Total current assets	393,788		358,639
Property, plant and equipment, net of accumulated depreciation of $460,167 and $445,017	240,627		244,216
Operating lease right-of-use assets	41,886		40,221
Goodwill	129,119		129,182
Intangible assets, net	64,547		66,114
Other non-current assets	47,125		45,692
Total assets	$	917,092	$	884,064
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	86,035	$	84,755
Accrued compensation and benefits	40,901		53,801

Contract liabilities	41,655		34,755
Operating lease liabilities	12,661		12,286

Other current liabilities	57,597		59,108
Total current liabilities	238,849		244,705
Long-term debt	62,000		62,000
Non-current operating lease liabilities	33,323		31,907
Non-current self-insurance reserves	32,055		30,552
Other non-current liabilities	44,443		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 21,945,986 and 22,089,265, respectively	7,315		7,363
Additional paid-in capital	155,883		152,818
Retained earnings	373,458		340,375


Accumulated other comprehensive loss	(30,234)		(29,531)
Total shareholders’ equity	506,422		471,025
Total liabilities and shareholders’ equity	$	917,092	$	884,064


	Three Months Ended				Six Months Ended
(In thousands, except per share data)	August 31, 2024		August 26, 2023		August 31, 2024		August 26, 2023
Net sales	$	342,440	$	353,675	$	673,956	$	715,388
Cost of sales	245,119		258,304		477,780		527,031
Gross profit	97,321		95,371		196,176		188,357
Selling, general and administrative expenses	55,356		54,818		112,830		114,037
Operating income	41,965		40,553		83,346		74,320
Interest expense, net	1,140		2,230		1,590		4,266

Other income, net	290		4,900		433		4,612
Earnings before income taxes	41,115		43,223		82,189		74,666
Income tax expense	10,549		9,896		20,612		17,763
Net earnings	$	30,566	$	33,327	$	61,577	$	56,903
Basic earnings per share	$	1.40	$	1.54	$	2.83	$	2.61
Diluted earnings per share	$	1.40	$	1.52	$	2.80	$	2.57
Weighted average basic shares outstanding	21,762		21,708		21,793		21,813
Weighted average diluted shares outstanding	21,875		21,962		21,985		22,105


	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
Other comprehensive earnings (loss):
Unrealized gain (loss) on marketable securities, net of $30, $(8), $29 and $25 of tax expense (benefit), respectively	114		(28)		108		93
Unrealized (loss) gain on derivative instruments, net of $(257), $66, $107 and $(55) of tax (benefit) expense, respectively	(846)		217		350		(180)
Foreign currency translation adjustments	(492)		508		(1,161)		943
Other comprehensive (loss) earnings	(1,224)		697		(703)		856
Total comprehensive earnings	$	29,342	$	34,024	$	60,874	$	57,759


	Six Months Ended
(In thousands)	August 31, 2024		August 26, 2023
Operating Activities
Net earnings	$	61,577	$	56,903
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	19,664		20,661
Share-based compensation	5,642		4,483
Deferred income taxes	2,016		(4,281)

Loss (gain) on disposal of property, plant and equipment	291		(62)


Settlement of New Markets Tax Credit transaction	—		(4,687)
Non-cash lease expense	5,844		6,153
Other, net	1,002		(1,121)
Changes in operating assets and liabilities:
Receivables	(3,698)		(8,238)
Inventories	(10,509)		5,841
Contract assets	238		8,992
Accounts payable	1,335		(3,529)

Accrued compensation and benefits	(12,823)		(17,567)
Contract liabilities	6,987		4,244
Operating lease liability	(5,748)		(6,608)
Accrued income taxes	(224)		4,292
Other current assets and liabilities	(7,462)		(2,912)
Net cash provided by operating activities	64,132		62,564
Investing Activities
Capital expenditures	(15,662)		(15,018)
Proceeds from sales of property, plant and equipment	608		143
Purchases of marketable securities	(2,246)		(969)
Sales/maturities of marketable securities	1,850		775

Net cash used by investing activities	(15,450)		(15,069)
Financing Activities
Proceeds from revolving credit facilities	95,201		174,853

Repayments on revolving credit facilities	(95,201)		(199,000)
Payments of debt issuance costs	(3,485)		—

Repurchase of common stock	(15,061)		(11,821)
Dividends paid	(10,821)		(10,467)

Other, net	(5,266)		(3,705)
Net cash used by financing activities	(34,633)		(50,140)
Effect of exchange rates on cash	(241)		(405)
Increase (decrease) in cash and cash equivalents	13,808		(3,050)
Cash and cash equivalents at beginning of period	37,216		21,473
Cash and cash equivalents at end of period	$	51,024	$	18,423
Non-cash Activity
Capital expenditures in accounts payable	$	1,426	$	2,493


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


(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
Net earnings	—	—		—		30,566		—		30,566
Other comprehensive loss, net of tax	—	—		—		—		(1,224)		(1,224)
Issuance of stock, net of cancellations	16	5		(5)		—		—		—
Share-based compensation	—	—		2,938		—		—		2,938


Other share retirements	(7)	(2)		(52)		(347)		—		(401)
Cash dividends	—	—		—		(5,412)		—		(5,412)
Balance at August 31, 2024	21,946	$	7,315	$	155,883	$	373,458	$	(30,234)	$	506,422


(In thousands)	August 31, 2024
Beginning balance	$	3,383
Credits charged to costs and expenses	(1,414)
Deductions from allowance, net of recoveries	13
Other adjustments	(7)
Ending balance	$	1,975


Other contract-related disclosures	Three Months Ended				Six Months Ended
(In thousands)	August 31, 2024		August 26, 2023		August 31, 2024		August 26, 2023
Revenue recognized related to contract liabilities from prior year-end	$	3,451	$	2,249	$	30,361	$	24,956
Revenue recognized related to prior satisfaction of performance obligations	4,867		4,477		8,166		4,904


(In thousands)	August 31, 2024
Within one year	$	535,538
Between one and two years	305,493
Beyond two years	111,600
Total	$	952,631


(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
August 31, 2024	$	11,708	$	37	$	323	$	11,422
March 2, 2024	11,327		15		437		10,905


(In thousands)	Amortized Cost		Estimated Fair Value
Due within one year	$	3,119	$	3,092
Due after one year through five years	8,589		8,330



Total	$	11,708	$	11,422


(In thousands)	Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Total Fair Value
August 31, 2024
Assets:
Money market funds	$	42,400	$	—	$	42,400

Municipal and corporate bonds	—		11,422		11,422
Foreign currency option contract	—		28		28

Interest rate swap contract	—		781		781

Liabilities:

Aluminum hedging contract	—		20		20


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


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


(In thousands)	August 31, 2024		March 2, 2024
Raw materials	$	31,952	$	31,363
Work-in-process	16,656		12,291
Finished goods	30,983		25,586
Total inventories, net	$	79,591	$	69,240


Awards	Number of Awards	Weighted Average Grant Date Fair Value
Restricted stock awards and restricted stock units(1)	118,092	$	62.54
Performance share units (2)	37,151	$	62.78

(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.


	Three Months Ended				Six Months Ended
(In thousands)	August 31, 2024		August 26, 2023		August 31, 2024		August 26, 2023
Segment net sales
Architectural Framing Systems	$	141,350	$	158,801	$	274,522	$	322,963
Architectural Glass	90,101		94,096		176,804		191,298
Architectural Services	98,018		88,064		197,045		177,482
Large-Scale Optical	19,832		23,645		41,036		46,101
Intersegment eliminations	(6,861)		(10,931)		(15,451)		(22,456)
Net sales	$	342,440	$	353,675	$	673,956	$	715,388
Segment operating income (loss)
Architectural Framing Systems	$	17,141	$	21,060	$	35,477	$	41,005
Architectural Glass	21,068		17,434		38,159		33,955
Architectural Services	6,130		3,519		11,753		2,923
Large-Scale Optical	3,793		4,663		8,639		10,188
Corporate and Other	(6,167)		(6,123)		(10,682)		(13,751)
Operating income	$	41,965	$	40,553	$	83,346	$	74,320


(In thousands)	Architectural Framing		Architectural Services		Corporate & Other		Total






Balance at March 2, 2024	$	2,814	$	2,067	$	56	$	4,937
Restructuring expense	736		—		124		860
Payments	(3,195)		(348)		(117)		(3,660)
Other adjustments	778		—		—		778
Balance at August 31, 2024	$	1,133	$	1,719	$	63	$	2,915


(In thousands)	August 31, 2024
Balance at beginning of period	$	6,527
Obligations added to the program	22,411
Obligations settled	(20,503)
Balance at end of period	$	8,435


	Three Months Ended August 31, 2024
(In thousands)	Architectural Framing		Architectural Services		Corporate & Other		Total

Termination benefits	$	271	$	172	$	5	$	448
Contract termination costs	108		—		—		108
Other restructuring charges	537		86		—		623
Total restructuring charges	$	916	$	258	$	5	$	1,179


	Six Months Ended August 31, 2024
(In thousands)	Architectural Framing		Architectural Services		Corporate & Other		Total

Termination benefits	$	573	$	172	$	129	$	874
Contract termination costs	108		—		—		108
Other restructuring charges	1,233		86		—		1,319
Total restructuring charges	$	1,914	$	258	$	129	$	2,301


	Three Months Ended				% of Net Sales
(in thousands, except percentages)	August 31, 2024		August 26, 2023		August 31, 2024		August 26, 2023
Net sales	$	342,440	$	353,675	100.0	%	100.0	%
Cost of sales	245,119		258,304		71.6		73.0
Gross profit	97,321		95,371		28.4		27.0
Selling, general and administrative expenses	55,356		54,818		16.2		15.5
Operating income	41,965		40,553		12.3		11.5
Interest expense, net	1,140		2,230		0.3		0.6

Other expense, net	290		4,900		0.1		1.4
Earnings before income taxes	41,115		43,223		12.0		12.2
Income tax expense	10,549		9,896		3.1		2.8
Net earnings	$	30,566	$	33,327	8.9	%	9.4	%
Effective tax rate					25.7	%	22.9	%
N/M Indicates calculation not meaningful.


Reconciliation of Non-GAAP Financial Measures
Adjusted Operating Income and Adjusted Operating Margin
(Unaudited)
	Three Months Ended August 31, 2024
(In thousands, except percentages)	Architectural Framing Systems			Architectural Glass			Architectural Services			LSO			Corporate and Other		Consolidated
Operating income	$	17,141		$	21,068		$	6,130		$	3,793		$	(6,167)	$	41,965
Restructuring costs (1)	916			—			258			—			5		1,179
Adjusted operating income	$	18,057		$	21,068		$	6,388		$	3,793		$	(6,162)	$	43,144

Operating margin	12.1		%	23.4		%	6.3		%	19.1		%	N/M		12.3		%
Restructuring costs (1)	0.6		%	—		%	0.3		%	—		%	N/M		0.3		%
Adjusted operating margin	12.8		%	23.4		%	6.5		%	19.1		%	N/M		12.6		%

	Three Months Ended August 26, 2023
	Architectural Framing Systems			Architectural Glass			Architectural Services			LSO			Corporate and Other		Consolidated
Operating income	$	21,060		$	17,434		$	3,519		$	4,663		$	(6,123)	$	40,553

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


	Reconciliation of Non-GAAP Financial Measures
	Adjusted Net Earnings and Adjusted Diluted Earnings Per Share
	(Unaudited)

		Three Months Ended				Six Months Ended
(In thousands, except per share amounts)		August 31, 2024		August 26, 2023		August 31, 2024		August 26, 2023

Net earnings		$	30,566	$	33,327	$	61,577	$	56,903
Restructuring costs (1)		1,179		—		2,301		—
NMTC Settlement Gain(2)		—		(4,687)		—		(4,687)
Income tax impact on above adjustments (3)		(289)		1,148		(564)		1,148
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 $0.5 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.


Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted EBITDA Margin (Earnings before interest, taxes, depreciation and amortization)
(Unaudited)

	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
Income tax expense	10,549			9,896			20,612			17,763
Interest expense, net	1,140			2,230			1,590			4,266
Depreciation and amortization	9,688			10,379			19,664			20,661
EBITDA	$	51,943		$	55,832		$	103,443		$	99,593
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

EBITDA Margin	15.2		%	15.8		%	15.3		%	13.9		%
Adjusted EBITDA Margin	15.5		%	14.5		%	15.7		%	13.3		%


Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)	Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (b)
June 2, 2024 to June 29, 2024	1,679	$	60.76	—	2,731,910
June 30, 2024 to July 27, 2024	4,845	61.19		—	2,731,910
July 28, 2024 to August 31, 2024	—	—		—	2,731,910
Total	6,524	$	60.89	—	2,731,910


3.1			Restated Articles of Incorporation. (Incorporated by reference to Exhibit 3.1 to Registrant's Annual Report on Form 10-K for the year-ended February 28, 2004.)
3.2			Articles of Amendment to Restated Articles of Incorporation. Incorporated by reference to Exhibit 3.1 to Registrant's Current Report on Form 8-K filed on January 16, 2020.
3.3			Amended and Restated Bylaws of Apogee Enterprises, Inc. Incorporated by reference to Exhibit 3.3 to the Registrant’s Quarterly Report on Form 10-Q filed on July 1, 2021.
10.1			Apogee Enterprises, Inc. 2019 Non-Employee Director Stock Plan as Amended and Restated (2024). Incorporated by reference to Exhibit 4.5 to Apogee’s Registration Statement on Form S-8 filed on June 20, 2024.
10.2			Credit Agreement dated July 19, 2024 between Apogee Enterprises, Inc., certain material domestic subsidiaries of the Company as guarantors, Bank of America, N.A., as administrative agent, swingline lender and L/C issuer and the syndicate of lenders which are party thereto from time to time. Incorporated by reference to Exhibit 10.1 to R egistrant's Current Report on Form 8-K filed on July 25, 2024.
10.3			Membership Interest Purchase Agreement, dated as of September 23, 2024, by and among UW Holdings, LLC, UW Interco, LLC and Apogee Enterprises, Inc. Incorporate by reference to Exhibit 2.1 to Registrant 's Current Report on Form 8-K filed on Sep tember 25, 2024.
31.1#			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2#			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1#			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2#			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101#			The following materials from Apogee Enterprises, Inc.’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Balance Sheets as of August 31, 2024 and March 2, 2024, (ii) the Consolidated Results of Operations for the three- and six-months ended August 31, 2024 and August 26, 2023, (iii) the Consolidated Statements of Comprehensive Earnings for the three- and six-months ended August 31, 2024 and August 26, 2023, (iv) the Consolidated Statements of Cash Flows for the six-months ended August 31, 2024 and August 26, 2023, (v) the Consolidated Statements of Shareholders' Equity for the three- and six-months ended August 31, 2024 and August 26, 2023, and (vi) Notes to Consolidated Financial Statements.
104#			Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101)
			Exhibits marked with a (#) sign are filed herewith.


	APOGEE ENTERPRISES, INC.

Date: October 4, 2024	By: /s/ Ty R. Silberhorn
		Ty R. Silberhorn President and Chief Executive Officer (Principal Executive Officer)


Date: October 4, 2024	By: /s/ Matthew J. Osberg
		Matthew J. Osberg Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)


			/s/ Ty R. Silberhorn
			Ty R. Silberhorn President and Chief Executive Officer


			/s/ Matthew J. Osberg
			Matthew J. Osberg Executive Vice President and Chief Financial Officer


/s/ Ty R. Silberhorn
Ty R. Silberhorn President and Chief Executive Officer
October 4, 2024