UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________________ 

FORM 10-Q

 _________________________________

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

For the quarterly period ended November 26, 2022

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

For the transition period from             to             

Commission File Number: 0-6365

_________________________________ 

APOGEE ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

 _________________________________

Minnesota			41-0919654
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
4400 West 78th Street, Suite 520	Minneapolis	Minnesota	55435
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (952) 835-1874

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

_________________________________ 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.33 1/3 per share	APOG	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    o  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     x  Yes    o  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	o	Smaller reporting company	☐
Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    x  No

As of December 26, 2022, 22,213,890 shares of the registrant’s common stock, par value $0.33 1/3 per share, were outstanding.

APOGEE ENTERPRISES, INC. AND SUBSIDIARIES

		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	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	27
PART II	Other Information
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 6.	Exhibits	28
Signatures		29

3

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except stock data)	November 26, 2022		February 26, 2022
Assets
Current assets
Cash and cash equivalents	$	21,746	$	37,583
Restricted cash	3,718		—
Receivables, net	222,554		168,592
Inventories	86,032		80,494
Costs and earnings on contracts in excess of billings	32,964		30,403
Other current assets	29,676		20,820
Total current assets	396,690		337,892
Property, plant and equipment, net	231,173		249,995
Operating lease right-of-use assets	44,198		47,912
Goodwill	129,268		130,102
Intangible assets	68,825		72,481
Other non-current assets	48,292		49,481
Total assets	$	918,446	$	887,863
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	70,137	$	92,104
Accrued payroll and related benefits	55,528		50,977
Billings in excess of costs and earnings on uncompleted contracts	29,121		8,659
Operating lease liabilities	11,077		12,744
Current portion long-term debt	—		1,000
Other current liabilities	66,174		67,462
Total current liabilities	232,037		232,946
Long-term debt	203,735		162,000
Non-current operating lease liabilities	36,778		39,591
Non-current self-insurance reserves	21,062		22,544
Other non-current liabilities	47,196		44,583
Commitments and contingent liabilities (Note 8)
Shareholders’ equity
Common stock of $0.33-1/3 par value; authorized 50,000,000 shares; issued and outstanding 22,213,635 and 23,701,491 respectively	7,405		7,901
Additional paid-in capital	144,358		149,713
Retained earnings	258,836		254,825
Accumulated other comprehensive loss	(32,961)		(26,240)
Total shareholders’ equity	377,638		386,199
Total liabilities and shareholders’ equity	$	918,446	$	887,863

See accompanying notes to consolidated financial statements.

4

CONSOLIDATED RESULTS OF OPERATIONS

(Unaudited)

	Three Months Ended				Nine Months Ended
(In thousands, except per share data)	November 26, 2022		November 27, 2021		November 26, 2022		November 27, 2021
Net sales	$	367,847	$	334,217	$	1,096,591	$	986,020
Cost of sales	281,239		269,537		839,430		805,627
Gross profit	86,608		64,680		257,161		180,393
Selling, general and administrative expenses	51,847		46,970		157,112		149,709
Operating income	34,761		17,710		100,049		30,684
Interest expense, net	2,590		528		5,494		2,838
Other expense, net	552		3,057		2,035		3,266
Earnings before income taxes	31,619		14,125		92,520		24,580
Income tax expense	7,854		3,068		8,635		4,821
Net earnings	$	23,765	$	11,057	$	83,885	$	19,759
Earnings per share - basic	$	1.09	$	0.44	$	3.81	$	0.79
Earnings per share - diluted	$	1.07	$	0.44	$	3.74	$	0.78
Weighted average basic shares outstanding	21,870		24,957		22,043		25,166
Weighted average diluted shares outstanding	22,278		25,309		22,456		25,459

See accompanying notes to consolidated financial statements.

5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Unaudited)

	Three Months Ended				Nine Months Ended
(In thousands)	November 26, 2022		November 27, 2021		November 26, 2022		November 27, 2021
Net earnings	$	23,765	$	11,057	$	83,885	$	19,759
Other comprehensive (losses) earnings:
Unrealized loss on marketable securities, net of $(24), $(40), $(127) and $(39) of tax benefit, respectively	(88)		(151)		(470)		(147)
Unrealized gain (loss) on derivative instruments, net of $277, $(265), $(1,192) and $(257) of tax expense (benefit), respectively	905		(868)		(3,911)		(842)
Foreign currency translation adjustments	(1,295)		(2,515)		(2,340)		(935)
Other comprehensive losses	(478)		(3,534)		(6,721)		(1,924)
Total comprehensive earnings	$	23,287	$	7,523	$	77,164	$	17,835

See accompanying notes to consolidated financial statements.

6

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
(In thousands)	November 26, 2022		November 27, 2021
Operating Activities
Net earnings	$	83,885	$	19,759
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	31,925		38,353
Share-based compensation	5,961		4,807
Deferred income taxes	2,341		(5,412)
Asset impairment	—		16,638
Gain on disposal of assets	(1,484)		(1,250)
Proceeds from New Markets Tax Credit transaction, net of deferred costs	18,390		—
Settlement of New Markets Tax Credit transaction	(19,523)		—
Noncash lease expense	8,924		9,302
Other, net	4,700		3,009
Changes in operating assets and liabilities:
Receivables	(58,202)		6,443
Inventories	(5,822)		(2,657)
Costs and earnings on contracts in excess of billings	(2,599)		1,168
Accounts payable and accrued expenses	(11,985)		5,440
Billings in excess of costs and earnings on uncompleted contracts	20,884		(4,474)
Refundable and accrued income taxes	(14,391)		5,255
Operating lease liability	(9,168)		(9,387)
Other, net	(2,724)		(703)
Net cash provided by operating activities	51,112		86,291
Investing Activities
Capital expenditures	(18,119)		(13,070)
Proceeds from sales of property, plant and equipment	5,212		1,347
Other, net	923		76
Net cash used by investing activities	(11,984)		(11,647)
Financing Activities
Borrowings on line of credit	430,879		—
Repayment on debt	(151,000)		(2,000)
Payments on line of credit	(239,000)		—
Payments on debt issue costs	(790)		—
Proceeds from exercise of stock options	—		4,115
Repurchase and retirement of common stock	(74,312)		(29,164)
Dividends paid	(14,415)		(15,050)
Other, net	(2,959)		(1,895)
Net cash used by financing activities	(51,597)		(43,994)
(Decrease) increase in cash, cash equivalents and restricted cash	(12,469)		30,650
Effect of exchange rates on cash	350		345
Cash, cash equivalents and restricted cash at beginning of year	37,583		47,277
Cash, cash equivalents and restricted cash at end of period	$	25,464	$	78,272
Noncash Activity
Capital expenditures in accounts payable	$	1,557	$	1,095

See accompanying notes to consolidated financial statements.

7

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

(In thousands)	Common Shares Outstanding	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total Shareholders' Equity
Balance at February 26, 2022	23,701	$	7,901	$	149,713	$	254,825	$	(26,240)	$	386,199
Net earnings	—	—		—		22,731		—		22,731
Unrealized loss on marketable securities, net of $74 tax benefit	—	—		—		—		(276)		(276)
Unrealized loss on derivative instruments, net of $1,317 tax benefit	—	—		—		—		(4,316)		(4,316)
Foreign currency translation adjustments	—	—		—		—		1,732		1,732
Issuance of stock, net of cancellations	100	33		23		—		—		56
Share-based compensation	—	—		1,597		—		—		1,597
Share repurchases	(1,571)	(524)		(10,350)		(63,438)		—		(74,312)
Other share retirements	(30)	(10)		(198)		(1,120)		—		(1,328)
Cash dividends	—	—		—		(4,793)		—		(4,793)
Balance at May 28, 2022	22,200	$	7,400	$	140,785	$	208,205	$	(29,100)	$	327,290
Net earnings	—	—		—		37,389		—		37,389
Unrealized loss on marketable securities, net of $28 tax benefit	—	—		—		—		(106)		(106)
Unrealized loss on derivative instruments, net of $152 tax benefit	—	—		—		—		(500)		(500)
Foreign currency translation adjustments	—	—		—		—		(2,777)		(2,777)
Issuance of stock, net of cancellations	(14)	(5)		61		—		—		56
Share-based compensation	—	—		1,797		—		—		1,797
Exercise of stock options	36	12		(954)		—		—		(942)
Other share retirements	(13)	(4)		(114)		(540)		—		(658)
Cash dividends	—	—		—		(4,809)		—		(4,809)
Balance at August 27, 2022	22,209	$	7,403	$	141,575	$	240,245	$	(32,483)	$	356,740
Net earnings	—	—		—		23,765		—		23,765
Unrealized loss on marketable securities, net of $24 tax benefit	—	—		—		—		(88)		(88)
Unrealized gain on derivative instruments, net of $277 tax expense	—	—		—		—		905		905
Foreign currency translation adjustments	—	—		—		—		(1,295)		(1,295)
Issuance of stock, net of cancellations	9	3		250		(196)		—		57
Share-based compensation	—	—		2,567		—		—		2,567
Other share retirements	(4)	(1)		(34)		(165)		—		(200)
Cash dividends	—	—		—		(4,813)		—		(4,813)
Balance at November 26, 2022	22,214	$	7,405	$	144,358	$	258,836	$	(32,961)	$	377,638

See accompanying notes to consolidated financial statements.

8

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

(In thousands)	Common Shares Outstanding	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total Shareholders' Equity
Balance at February 27, 2021	25,714	$	8,571	$	154,958	$	357,243	$	(28,027)	$	492,745
Net earnings	—	—		—		10,817		—		10,817
Unrealized gain on marketable securities, net of $0 tax expense	—	—		—		—		—		—
Unrealized gain on derivative instruments, net of $211 tax expense	—	—		—		—		692		692
Foreign currency translation adjustments	—	—		—		—		5,880		5,880
Issuance of stock, net of cancellations	90	30		(7)		—		—		23
Share-based compensation	—	—		1,674		—		—		1,674
Exercise of stock options	179	60		4,055		—		—		4,115
Share repurchases	(357)	(119)		(2,218)		(10,288)		—		(12,625)
Other share retirements	(20)	(7)		(121)		(607)		—		(735)
Cash dividends	—	—		—		(5,035)		—		(5,035)
Balance at May 29, 2021	25,606	$	8,535	$	158,341	$	352,130	$	(21,455)	$	497,551
Net loss	—	—		—		(2,116)		—		(2,116)
Unrealized gain on marketable securities, net of $2 tax expense	—	—		—		—		4		4
Unrealized loss on derivative instruments, net of $203 tax benefit	—	—		—		—		(666)		(666)
Foreign currency translation adjustments	—	—		—		—		(4,300)		(4,300)
Issuance of stock, net of cancellations	67	22		—		—		—		22
Share-based compensation	—	—		1,587		—		—		1,587
Share repurchases	(249)	(83)		(1,616)		(8,095)		—		(9,794)
Other share retirements	(30)	(9)		(197)		(496)		—		(702)
Cash dividends	—	—		—		(5,025)		—		(5,025)
Balance at August 28, 2021	25,394	$	8,465	$	158,115	$	336,398	$	(26,417)	$	476,561
Net earnings	—	—		—		11,057		—		11,057
Unrealized loss on marketable securities, net of $40 tax benefit	—	—		—		—		(151)		(151)
Unrealized loss on derivative instruments, net of $265 tax benefit	—	—		—		—		(868)		(868)
Foreign currency translation adjustments	—	—		—		—		(2,515)		(2,515)
Issuance of stock, net of cancellations	1	—		22		—		—		22
Share-based compensation	—	—		1,546		—		—		1,546
Share repurchases	(166)	(55)		(1,092)		(5,598)		—		(6,745)
Other share retirements	(2)	(1)		(12)		(51)		—		(64)
Cash dividends	—	—		—		(4,990)		—		(4,990)
Balance at November 27, 2021	25,227	$	8,409	$	158,579	$	336,816	$	(29,951)	$	473,853

See accompanying notes to consolidated financial statements.

9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.Summary of Significant Accounting Policies

Basis of presentation

The consolidated financial statements of Apogee Enterprises, Inc. (we, us, our or the Company) have been prepared in accordance with accounting principles generally accepted in the United States. The information included in this Form 10-Q should be read in conjunction with the Company’s Form 10-K for the year ended February 26, 2022. We use the same accounting policies in preparing quarterly and annual financial statements. All adjustments necessary for a fair presentation of quarterly and year to date operating results are reflected herein and are of a normal, recurring nature. The results of operations for the three- and nine-month periods ended November 26, 2022 are not necessarily indicative of the results to be expected for the full year.

At the beginning of the first quarter of fiscal 2023, we began management of the Sotawall and Harmon businesses under the Architectural Services segment in order to create a single, unified offering for larger custom curtainwall projects. The comparative fiscal 2022 segment results for the Architectural Framing Systems and Architectural Services segments have been recast to reflect the move of the Sotawall business into the Architectural Services segment from the Architectural Framing Systems segment, effective at the start of the first quarter of fiscal 2023.

2.Revenue, Receivables and Contract Assets and Liabilities

Revenue

The following table disaggregates total revenue by timing of recognition (see Note 12 for disclosure of revenue by segment):

	Three Months Ended				Nine Months Ended
(In thousands)	November 26, 2022		November 27, 2021		November 26, 2022		November 27, 2021
Recognized at shipment	$	168,593	$	141,826	$	504,450	$	419,893
Recognized over time	199,254		192,391		592,141		566,127
Total	$	367,847	$	334,217	$	1,096,591	$	986,020

Receivables

Receivables reflected in the financial statements represent the net amount expected to be collected. An allowance for credit losses is established based on expected losses. Expected losses are estimated by reviewing individual accounts, considering aging, financial condition of the debtor, recent payment history, current and forecast economic conditions and other relevant factors. Upon billing, aging of receivables is monitored until collection. An account is considered current when it is within agreed upon payment terms. An account is written off when it is determined that the asset is no longer collectible. Retainage on construction contracts represents amounts withheld by our customers on long-term projects until the project reaches a level of completion where amounts are released to us from the customer.

(In thousands)	November 26, 2022		February 26, 2022
Trade accounts	$	142,591	$	129,085
Construction contracts	50,423		12,857
Contract retainage	31,395		28,782
Total receivables	224,409		170,724
Less: allowance for credit losses	1,855		2,132
Receivables, net	$	222,554	$	168,592

The following table summarizes the activity in the allowance for credit losses:

(In thousands)	November 26, 2022		February 26, 2022
Beginning balance	$	2,132	$	1,947
Additions charged to costs and expenses	20		729
Deductions from allowance, net of recoveries	(279)		(514)
Other changes (1)	(18)		(30)
Ending balance	$	1,855	$	2,132
(1) Result of foreign currency effects

10

Contract assets and liabilities

Contract assets consist of retainage, costs and earnings in excess of billings and other unbilled amounts typically generated when revenue recognized exceeds the amount billed to the customer. Contract liabilities consist of billings in excess of costs and earnings and other deferred revenue on contracts. Retainage is classified within receivables and deferred revenue is classified within other current liabilities on our consolidated balance sheets.

The time period between when performance obligations are complete and when payment is due is not significant. In certain of our businesses that recognize revenue over time, progress billings follow an agreed-upon schedule of values, and retainage is withheld by the customer until the project reaches a level of completion at which point amounts are released to us from the customer.

(In thousands)	November 26, 2022		February 26, 2022
Contract assets	$	64,359	$	59,185
Contract liabilities	31,657		11,373

The changes in contract assets and contract liabilities were mainly due to timing of project activity within our businesses that operate under long-term contracts.

Other contract-related disclosures	Three Months Ended				Nine Months Ended
(In thousands)	November 26, 2022		November 27, 2021		November 26, 2022		November 27, 2021
Revenue recognized related to contract liabilities from prior year-end	$	3,473	$	1,687	$	36,630	$	18,266
Revenue recognized related to prior satisfaction of performance obligations	4,640		5,051		9,586		12,568

Some of our contracts have an expected duration of longer than a year, with performance obligations extending over that time frame. Generally, these contracts are found in our businesses that typically operate with long-term contracts, which recognize revenue over time. The transaction prices associated with unsatisfied performance obligations at November 26, 2022 are expected to be satisfied, and the corresponding revenue to be recognized, over the following estimated time periods:

(In thousands)	November 26, 2022
Within one year	$	493,289
Within two years	280,427
Beyond two years	87,660
Total	$	861,376

3.Supplemental Balance Sheet Information

Inventories

(In thousands)	November 26, 2022		February 26, 2022
Raw materials	$	43,722	$	42,541
Work-in-process	17,081		18,144
Finished goods	25,229		19,809
Total inventories	$	86,032	$	80,494

11

Other current liabilities

(In thousands)	November 26, 2022		February 26, 2022
Warranties	$	14,137	$	11,786
Income and other taxes	5,832		15,770
Accrued self-insurance reserves	15,888		8,796
Accrued freight	1,917		2,078
Deferred revenue	2,536		2,714
Other	25,864		26,318
Total other current liabilities	$	66,174	$	67,462

Other non-current liabilities

(In thousands)	November 26, 2022		February 26, 2022
Deferred benefit from New Markets Tax Credit transactions	$	9,250	$	9,165
Retirement plan obligations	6,269		7,041
Deferred compensation plan	6,851		9,483
Deferred tax liabilities	3,793		2,296
Other	21,033		16,598
Total other non-current liabilities	$	47,196	$	44,583

4.Financial Instruments

Marketable securities

Through our wholly-owned insurance subsidiary, Prism Assurance, Ltd. (Prism), we hold the following available-for-sale marketable securities, made up of municipal and corporate bonds: 

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
November 26, 2022	$	10,835	$	—	$	675	$	10,160
February 26, 2022	11,862		45		123		11,784

Prism insures a portion of our general liability, workers’ compensation and automobile liability risks using reinsurance agreements to meet statutory requirements. The reinsurance carrier requires Prism to maintain fixed-maturity investments for the purpose of providing collateral for Prism’s obligations under the reinsurance agreements.

The amortized cost and estimated fair values of these bonds at November 26, 2022, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities, as borrowers may have the right to call or prepay obligations with or without penalty.

(In thousands)	Amortized Cost		Estimated Fair Value
Due within one year	$	1,739	$	1,720
Due after one year through five years	9,096		8,440
Total	$	10,835	$	10,160

Derivative instruments

We use interest rate swaps, foreign exchange forward contracts, commodity swaps and forward purchase contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity price fluctuations. The information that follows explains the various types of derivatives and financial instruments we use, how such instruments are accounted for, and how such instruments impact our financial position and performance.

In fiscal 2020, we entered into an interest rate swap to hedge exposure to variability in cash flows from interest payments on our floating-rate revolving credit facility and term loan. As of November 26, 2022, the interest rate swap contract had a notional value of $30.0 million.

12

We periodically enter into forward purchase contracts and/or fixed/floating swaps to manage the risk associated with fluctuations in aluminum prices and fluctuations in foreign exchange rates (primarily related to the Canadian dollar). These contracts generally have an original maturity date of less than one year. As of November 26, 2022, we held foreign exchange forward contracts and aluminum fixed/floating swaps with U.S. dollar notional values of $3.0 million and $8.1 million, respectively.

These derivative instruments are recorded within our consolidated balance sheets within other current assets and liabilities. Gains or losses associated with these instruments are recorded as a component of accumulated other comprehensive income.

Fair value measurements

Financial assets and liabilities are classified in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement: Level 1 (unadjusted quoted prices in active markets for identical assets or liabilities); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data). We do not have any Level 3 financial assets or liabilities.

(In thousands)	Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Total Fair Value
November 26, 2022
Assets:
Money market funds	$	6,629	$	—	$	6,629
Municipal and corporate bonds	—		10,160		10,160
Cash surrender value of life insurance	—		16,247		16,247
Interest rate swap contract	—		1,917		1,917
Liabilities:
Deferred compensation	—		9,277		9,277
Foreign currency forward/option contract	—		192		192
Aluminum hedging contract	—		2,382		2,382
February 26, 2022
Assets:
Money market funds	$	19,288	$	—	$	19,288
Municipal and corporate bonds	—		11,784		11,784
Cash surrender value of life insurance	—		17,831		17,831
Aluminum hedging contract	—		2,133		2,133
Interest rate swap contract	—		718		718
Liabilities:
Deferred compensation	—		12,491		12,491
Foreign currency forward/option contract	—		161		161

Money market funds and commercial paper

Fair value of money market funds was determined based on quoted prices for identical assets in active markets. Commercial paper was measured at fair value using inputs based on quoted prices for similar securities in active markets. These assets are included within cash and cash equivalents on our consolidated balance sheets.

Municipal and corporate bonds

Municipal and corporate bonds were measured at fair value based on market prices from recent trades of similar securities and are classified within our consolidated balance sheets as other current or other non-current assets based on maturity date.

Cash surrender value of life insurance and deferred compensation

Contracts insuring the lives of certain employees who are eligible to participate in certain non-qualified pension and deferred compensation plans are held in trust. Cash surrender value of the contracts is based on performance measurement funds that shadow the deferral investment allocations made by participants in certain deferred compensation plans. Changes in cash surrender value are recorded in other expense. The deferred compensation liability balances are valued based on amounts allocated by participants to the underlying performance measurement funds.

Derivative instruments

The interest rate swap is measured at fair value using other observable market inputs, based off of benchmark interest rates.

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Forward foreign exchange and fixed/floating aluminum contracts are measured at fair value using other observable market inputs, such as quotations on forward foreign exchange points, foreign currency exchange rates, and forward purchase aluminum prices. Derivative positions are primarily valued using standard calculations and models that use as their basis readily observable market parameters. Industry standard data providers are our primary source for forward and spot rate information for both interest and currency rates and aluminum prices.

Nonrecurring fair value measurements

We measure certain financial instruments at fair value on a nonrecurring basis including goodwill, intangible assets, property and equipment and right-of-use lease assets. These assets were initially measured and recognized at amounts equal to the fair value determined as of the date of acquisition or purchase subject to changes in value only for foreign currency translation. Periodically, these assets are tested for impairment, by comparing their respective carrying values to the estimated fair value of the reporting unit or asset group in which they reside. In the event any of these assets were to become impaired, we would recognize an impairment expense equal to the amount by which the carrying value of the reporting unit, impaired asset or asset group exceeds its estimated fair value. Fair value measurements of reporting units are estimated using an income approach involving discounted cash flow models that contain certain Level 3 inputs requiring significant management judgment, including projections of economic conditions, customer demand and changes in competition, revenue growth rates, gross profit margins, operating margins, capital expenditures, working capital requirements, terminal growth rates and discount rates. Fair value measurements of the reporting units associated with our goodwill balances and our indefinite-lived intangible assets are estimated at least annually in the fourth quarter of each fiscal year for purposes of impairment testing if a quantitative analysis is performed.

5.Goodwill and Other Intangible Assets

Goodwill

Goodwill represents the excess of the cost over the value of net tangible and identified intangible assets of acquired businesses. We evaluate goodwill for impairment annually as of the first day of our fiscal fourth quarter, or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

At the beginning of the first quarter of fiscal 2023, we began management of the Sotawall and Harmon businesses under the Architectural Services segment in order to create a single, unified offering for larger custom curtainwall projects, which resulted in the combination of the Sotawall and Harmon reporting units into a single reporting unit. We evaluated goodwill on a qualitative basis prior to and subsequent to this change for these reporting units and concluded that no adjustment to the carrying value of goodwill was necessary. Concurrent with the move of Sotawall from the Architectural Framing Systems segment to the Architectural Services segment effective at the start of our first quarter of fiscal 2023, goodwill was reallocated to the affected reporting units within each segment, using a relative fair value approach as outlined in ASC 350, Intangibles - Goodwill and Other. In addition, for all reporting units, no qualitative indicators of impairment were identified during the first quarter of fiscal 2023, and therefore, no interim quantitative goodwill impairment evaluation was performed.

The following table presents the carrying amount of goodwill attributable to each reporting segment including the amount of goodwill that was reallocated from the Architectural Framing Systems segment to the Architectural Services segment using the relative fair value approach during the first quarter of fiscal 2023:

(In thousands)	Architectural Framing Systems		Architectural Services		Architectural Glass		Large-Scale Optical		Total
Balance at February 27, 2021	$	93,099	$	1,120	$	25,322	$	10,557	$	130,098
Foreign currency translation	82		—		(78)		—		4
Balance at February 26, 2022	93,181		1,120		25,244		10,557		130,102
Reallocation among reporting units (1)	(2,048)		2,048		—		—		—
Foreign currency translation	(763)		(105)		34		—		(834)
Balance at November 26, 2022	$	90,370	$	3,063	$	25,278	$	10,557	$	129,268
(1) Represents the reallocation of goodwill as a result of transitioning Sotawall from the Architectural Framing Systems segment to the Architectural Services segment as of the start of the first quarter of fiscal 2023.

Other intangible assets

Indefinite-lived intangible assets

We have intangible assets for certain acquired trade names and trademarks which are determined to have indefinite useful lives. We test indefinite-lived intangible assets for impairment annually at the same measurement date as goodwill, the first day of our fiscal fourth quarter, or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. Based on the impairment analysis performed in the fourth quarter of fiscal 2022, the fair value of each of our

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trade names and trademarks exceeded the carrying amount. However, due to triggering events identified in the fourth quarter of fiscal 2022, resulting from the finalization of our plans for integrating the Sotawall business into the Architectural Services segment, beginning in fiscal 2023, we determined that the carrying value of the Sotawall trade name exceeded fair value by $12.7 million. We determined that Sotawall had an immaterial fair value, resulting in the trade name being fully impaired as of fiscal 2022 year-end. We recognized this amount as impairment expense in the fourth quarter ended February 26, 2022.

Finite-lived intangible assets

Long-lived assets or asset groups, including intangible assets subject to amortization and property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of those assets may not be recoverable. We use undiscounted cash flows to determine whether impairment exists and measure any impairment loss using discounted cash flows to determine the fair value of long-lived assets. Due to triggering events identified during the fourth quarter of fiscal 2022, as a result of finalization of our plans for integrating the Sotawall business into the Architectural Services segment, beginning in fiscal 2023, we determined that the finite-lived intangible assets of Sotawall were impaired as of February 26, 2022. As such, we recognized a long-lived asset impairment charge of $36.7 million in finite-lived intangible assets in the fourth quarter of fiscal year 2022, within the Architectural Framing Systems segment.

The gross carrying amount of other intangible assets and related accumulated amortization was:

(In thousands)	Gross Carrying Amount		Accumulated Amortization		Impairment Expense		Foreign Currency Translation		Net
November 26, 2022
Definite-lived intangible assets:
Customer relationships	$	89,495	$	(48,843)	$	—	$	(2,077)	$