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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 August 31, 2024
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)
 _________________________________
Minnesota41-0919654
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
4400 West 78th Street, Suite 520MinneapolisMinnesota55435
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (952835-1874
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 classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.33 1/3 per shareAPOG
The Nasdaq Stock Market
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  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 October 1, 2024, 21,943,016 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
Item 1.
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.
3

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements

CONSOLIDATED BALANCE SHEETS

(Unaudited)
(In thousands, except stock data)August 31, 2024March 2, 2024
Assets
Current assets
Cash and cash equivalents$51,024 $37,216 
Receivables, net
177,146 173,557 
Inventories, net79,591 69,240 
Contract assets49,285 49,502 
Other current assets36,742 29,124 
Total current assets393,788 358,639 
Property, plant and equipment, net of accumulated depreciation of $460,167 and $445,017
240,627 244,216 
Operating lease right-of-use assets41,886 40,221 
Goodwill129,119 129,182 
Intangible assets, net64,547 66,114 
Other non-current assets47,125 45,692 
Total assets$917,092 $884,064 
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable$86,035 $84,755 
Accrued compensation and benefits40,901 53,801 
Contract liabilities41,655 34,755 
Operating lease liabilities12,661 12,286 
Other current liabilities57,597 59,108 
Total current liabilities238,849 244,705 
Long-term debt62,000 62,000 
Non-current operating lease liabilities33,323 31,907 
Non-current self-insurance reserves32,055 30,552 
Other non-current liabilities44,443 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 capital155,883 152,818 
Retained earnings373,458 340,375 
Accumulated other comprehensive loss(30,234)(29,531)
Total shareholders’ equity506,422 471,025 
Total liabilities and shareholders’ equity$917,092 $884,064 
See accompanying notes to consolidated financial statements.

4

Table of Contents
CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)
Three Months EndedSix Months Ended
(In thousands, except per share data)August 31, 2024August 26, 2023August 31, 2024August 26, 2023
Net sales$342,440 $353,675 $673,956 $715,388 
Cost of sales245,119 258,304 477,780 527,031 
Gross profit97,321 95,371 196,176 188,357 
Selling, general and administrative expenses55,356 54,818 112,830 114,037 
Operating income41,965 40,553 83,346 74,320 
Interest expense, net1,140 2,230 1,590 4,266 
Other income, net290 4,900 433 4,612 
Earnings before income taxes41,115 43,223 82,189 74,666 
Income tax expense10,549 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 outstanding21,762 21,708 21,793 21,813 
Weighted average diluted shares outstanding21,875 21,962 21,985 22,105 
See accompanying notes to consolidated financial statements.

5

Table of Contents
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(Unaudited)
Three Months EndedSix Months Ended
(In thousands)August 31, 2024August 26, 2023August 31, 2024August 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 

See accompanying notes to consolidated financial statements.

6

Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
(In thousands)August 31, 2024August 26, 2023
Operating Activities
Net earnings$61,577 $56,903 
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization19,664 20,661 
Share-based compensation5,642 4,483 
Deferred income taxes2,016 (4,281)
Loss (gain) on disposal of property, plant and equipment291 (62)
Settlement of New Markets Tax Credit transaction (4,687)
Non-cash lease expense5,844 6,153 
Other, net1,002 (1,121)
Changes in operating assets and liabilities:
Receivables(3,698)(8,238)
Inventories(10,509)5,841 
Contract assets238 8,992 
Accounts payable1,335 (3,529)
Accrued compensation and benefits(12,823)(17,567)
Contract liabilities6,987 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 activities64,132 62,564 
Investing Activities
Capital expenditures(15,662)(15,018)
Proceeds from sales of property, plant and equipment608 143 
Purchases of marketable securities(2,246)(969)
Sales/maturities of marketable securities1,850 775 
Net cash used by investing activities(15,450)(15,069)
Financing Activities
Proceeds from revolving credit facilities95,201 174,853 
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 equivalents13,808 (3,050)
Cash and cash equivalents at beginning of period37,216 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 
See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(In thousands)Common Shares Outstanding
Common Stock at Par Value
Additional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive (Loss) IncomeTotal Shareholders' Equity
Balance at March 2, 202422,089 $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 cancellations170 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, 202421,937 $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 cancellations16 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, 202421,946 $7,315 $155,883 $373,458 $(30,234)$506,422 

(In thousands)Common Shares Outstanding
Common Stock at Par Value
Additional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive (Loss) IncomeTotal Shareholders' Equity
Balance at February 25, 202322,224 $7,408 $146,816 $273,740 $(31,556)$396,408 
Net earnings— — — 23,576 — 23,576 
Other comprehensive income, net of tax— — — — 159 159 
Issuance of stock, net of cancellations155 52 13 (9)— 56 
Share-based compensation— — 2,178 — — 2,178 
Share repurchases(120)(40)(829)(4,324)— (5,193)
Other share retirements(40)(14)(281)(1,438)— (1,733)
Cash dividends— — — (5,245)— (5,245)
Balance at May 27, 202322,219 $7,406 $147,897 $286,300 $(31,397)$410,206 
Net earnings— — — 33,327 — 33,327 
Other comprehensive income, net of tax— — — — 697 697 
Issuance of stock, net of cancellations(3)(1)7 (195)— (189)
Share-based compensation— — 2,305 — — 2,305 
Exercise of stock options25 8 (1,192)— — (1,184)
Share repurchases(160)(53)(1,160)(5,415)— (6,628)
Other share retirements(9)(3)(444)(547)— (994)
Cash dividends— — — (5,222)— (5,222)
Balance at August 26, 202322,072 $7,357 $147,413 $308,248 $(30,700)$432,318 

See accompanying notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Summary of Significant Accounting Policies

Basis of presentation
The consolidated financial statements of Apogee Enterprises, Inc. (we, us, our or the Company) have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The information included in this Form 10-Q should be read in conjunction with the Company’s Form 10-K for the year ended March 2, 2024. We use the same accounting policies in preparing quarterly and annual financial statements. All adjustments necessary for a fair presentation of quarterly and year to date operating results are reflected herein and are of a normal, recurring nature. The results of operations for the three- and six-month periods ended August 31, 2024 are not necessarily indicative of the results to be expected for the full year.

New accounting standards
In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, Improvements to Reportable Segment Disclosures, which expands the required disclosure for reportable segments. This guidance requires entities to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all segment disclosures which are currently required annually. This ASU additionally requires entities to disclose the title and position of the individual or the name of the group or committee identified as its chief operating decision-maker. Such guidance, which is required to be applied retrospectively, is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, although early adoption is permitted. While the adoption of this ASU will not have an impact on our financial position and/or results of operations, we are currently evaluating the impact to our segment disclosures for the year ended March 1, 2025 and future interim periods.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, intended to enhance the transparency and decision-usefulness of income tax disclosures. Such guidance requires entities to provide additional information within their income tax rate reconciliation, including further disclosure of federal, state, and foreign income taxes and to provide more details about these reconciling items if a quantitative threshold is met. This guidance additionally requires expanded disclosure of income taxes paid, including amounts paid for federal, state, and foreign taxes. This ASU, which is required to be applied prospectively, is effective for fiscal years beginning after December 15, 2024, although early adoption and retrospective application is permitted. While the adoption of this ASU will not have an impact on our financial position and/or results of operations, we are currently evaluating the impact on our income tax disclosures, including the processes and controls around the collection of this information.

2.Revenue, Receivables and Contract Assets and Liabilities

Revenue
The following table disaggregates total revenue by timing of recognition (see Note 12 for disclosure of revenue by segment):
Three Months EndedSix Months Ended
(In thousands)August 31, 2024August 26, 2023August 31, 2024August 26, 2023
Recognized at shipment$140,518 $152,241 $277,240 $304,895 
Recognized over time (input method)118,683 118,270 235,364 241,651 
Recognized over time (output method)83,239 83,164 161,352 168,842 
Total$342,440 $353,675 $673,956 $715,388 

Receivables
Receivables reflected in the financial statements represent the net amount expected to be collected. An allowance for credit losses is established based on expected losses. Expected losses are estimated by reviewing individual accounts, considering aging, financial condition of the debtor, recent payment history, current and forecasted economic conditions and other relevant factors. Upon billing, aging of receivables is monitored until collection. An account is considered current when it is within agreed upon payment terms. An account is written off when it is determined that the asset is no longer collectible.
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(In thousands)August 31, 2024March 2, 2024
Trade accounts$108,449 $115,061 
Construction contracts70,672 61,879 
Total receivables179,121 176,940 
Less: allowance for credit losses1,975 3,383 
Receivables, net$177,146 $173,557 

The following table summarizes the activity in the allowance for credit losses for the six-month period ended:
(In thousands)August 31, 2024
Beginning balance$3,383 
Credits charged to costs and expenses(1,414)
Deductions from allowance, net of recoveries13 
Other adjustments(7)
Ending balance$1,975 

Contract assets and liabilities
Contract assets consist of retainage, costs and earnings in excess of billings and other unbilled amounts typically generated when revenue recognized exceeds the amount billed to the customer. Retainage on construction contracts represents amounts withheld by our customers on long-term projects until the project reaches a level of completion where amounts are released to us from the customer. Contract liabilities consist of billings in excess of costs and earnings and other deferred revenue on contracts.

The time period between when performance obligations are complete and payment is due is not significant. In certain parts of our business that recognize revenue over time, progress billings follow an agreed-upon schedule of values.

The changes in contract assets and contract liabilities were mainly due to timing of project activity within our businesses that operate under long-term contracts.
Other contract-related disclosuresThree Months EndedSix Months Ended
(In thousands)August 31, 2024August 26, 2023August 31, 2024August 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 obligations4,867 4,477 8,166 4,904 

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 August 31, 2024 are expected to be satisfied, and the corresponding revenue to be recognized, over the following estimated time periods:
(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 

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3.Inventories

Inventories
(In thousands)August 31, 2024March 2, 2024
Raw materials$31,952 $31,363 
Work-in-process16,656 12,291 
Finished goods30,983 25,586 
Total inventories, net$79,591 $69,240 

4.Financial Instruments

Marketable securities
Through our wholly-owned insurance subsidiary, Prism Assurance, Ltd. (Prism), we hold the following available-for-sale marketable securities, made up of fixed-maturity investments: 
(In thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated
Fair Value
August 31, 2024$11,708 $37 $323 $11,422 
March 2, 202411,327 15 437 10,905 

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

The amortized cost and estimated fair values of these investments at August 31, 2024, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities, as borrowers may have the right to call or prepay obligations with or without penalty.
(In thousands)Amortized CostEstimated Fair Value
Due within one year$3,119 $3,092 
Due after one year through five years8,589 8,330 
Total$11,708 $11,422 

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

In fiscal 2020, we entered into an interest rate swap to hedge exposure to variability in cash flows from interest payments on floating-rate borrowings under our credit facility. As of August 31, 2024, the interest rate swap contract had a notional value of $30.0 million and has a maturity date of February 5, 2026.

We periodically enter into forward purchase contracts and/or fixed/floating swaps to manage the risk associated with fluctuations in aluminum prices and fluctuations in foreign exchange rates. These contracts generally have an original maturity date of less than one year. As of August 31, 2024, we held aluminum purchase contracts and foreign exchange option contracts with U.S. dollar notional values of $2.0 million and $1.5 million, respectively.

The mark to market adjustments on these derivative instruments are recorded within our consolidated balance sheets within other current assets and other current liabilities. Gains or losses associated with these instruments are recorded as a component of accumulated other comprehensive loss until which time the hedged transaction is settled and gains or losses are reclassified to net earnings.


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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
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 

5.Debt

On July 19, 2024, we entered into a Credit Agreement (the Credit Agreement) with Bank of America, N.A., as administrative agent, and other lenders. The Credit Agreement provides for an unsecured senior credit facility in an aggregate principal amount of up to $700.0 million, in which commitments are available through a $450.0 million, five-year revolving credit facility and a committed $250.0 million delayed draw term loan facility. Borrowings under the revolving credit facility can be in Canadian dollars (CAD) limited to $25.0 million USD. The term loan facility may be borrowed in up to two drawdowns, which are available to be made within one year after the closing date. The senior credit facility has a term of five years with a maturity date of July 19, 2029. Outstanding borrowings under the revolving credit facility were $50.0 million as of August 31, 2024. As of August 31, 2024, the term loan facility had not been drawn.

The Credit Agreement replaces the previous revolving credit facility with Wells Fargo Bank, N.A., as administrative agent, and other lenders, with maximum borrowings up to $385.0 million, and the two Canadian credit facilities with Bank of Montreal totaling $25.0 million USD. Outstanding borrowings under the previous revolving credit facility were $50.0 million as of March 2, 2024. We had no outstanding borrowings under the Canadian facilities as of March 2, 2024.

As a result of the transaction, in the second quarter of fiscal 2025, we recognized a loss on extinguishment of debt within interest expense of $0.5 million for the write-off of unamortized financing fees related to the previous revolving credit facility. Additionally, we capitalized $3.0 million of lender fees and $0.6 million of third-party fees incurred in connection with the Credit Agreement, which were recorded as other non-current assets and will be amortized over the term of the credit facility as interest expense.

The Credit Agreement contains two maintenance financial covenants that require our Consolidated Leverage Ratio (as defined in the Credit Agreement) to be less than 3.50 and our Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) to exceed 3.00. At August 31, 2024, we were in compliance with all covenants as defined under the terms of the Credit Agreement.

The Credit Agreement also contains an acquisition “holiday.” In the event we make an acquisition for which the purchase price is greater than $75 million, we can elect to increase the maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) to 4.00 for a period of four consecutive fiscal quarters, commencing with the fiscal quarter in which a qualifying acquisition occurs. No more than two acquisition holidays can occur during the term of the Credit Agreement, and at least two fiscal quarters must separate qualifying acquisitions.

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Borrowings under the Credit Agreement bear floating interest at either the Base Rate or Term Secured Overnight Financing Rate (SOFR), or, for CAD borrowings, Canadian Overnight Repo Rate Average (CORRA) plus, in each a margin based on the Consolidated Leverage Ratio (as defined in the Credit Agreement). For Base Rate borrowings, the margin ranges from 0.25% to 0.75%. For Term SOFR and CORRA borrowings, the margin ranges from 1.25% to 1.75%, with an incremental Term SOFR and CORRA adjustment of 0.10% and 0.29547% respectively.

The Credit Agreement also contains an “accordion” provision. Under this provision, we can request that the senior credit facility be increased by unlimited additional amounts. Any lender may elect or decline to participate in the requested increase at their sole discretion.

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.

At August 31, 2024, debt included $12.0 million of industrial revenue bonds that mature in fiscal years 2036 through 2043.

The fair value of our senior credit facility and industrial revenue bonds approximated carrying values at August 31, 2024, and would be classified as Level 2 within the fair value hierarchy described in Note 4, due to the variable interest rates on these instruments.

Three Months EndedSix Months Ended
(In thousands)August 31, 2024August 26, 2023August 31, 2024August 26, 2023
Interest on debt$1,339 $2,661 $2,513 $5,171 
Interest rate swap gain(236)(153)(472)(420)
Other interest expense594 50 615 78 
Interest income$(557)$(328)$(1,066)$(563)
Interest expense, net
$1,140 $2,230 $1,590 $4,266 

Interest payments under the credit facilities were $2.6 million and $5.4 million for the six months ended August 31, 2024 and August 26, 2023, respectively.

6.Commitments and Contingent Liabilities

Bond commitments
In the ordinary course of business, predominantly in our Architectural Services and Architectural Framing Systems Segments, we are required to provide surety or performance bonds that commit payments to our customers for any non-performance. At August 31, 2024, $1.2 billion of these types of bonds were outstanding, of which $366.0 million is in our backlog. These bonds have expiration dates that align with completion of the sales order or contract. We have never been required to make payments under surety or performance bonds with respect to our existing businesses.

Warranty and project-related contingencies
We reserve estimated exposures on known claims, as well as on a portion of anticipated claims, for product warranty and rework cost, based on historical product liability claims as a ratio of sales. Claim costs are deducted from the accrual when paid. Factors that could have an impact on these accruals in any given period include changes in manufacturing quality, changes in product mix, and any significant changes in sales volume.
 Six Months Ended
(In thousands)August 31, 2024
Balance at beginning of period$21,362 
Additions charged to costs and expenses5,967 
Deductions from reserve, net of recoveries(6,585)
Balance at end of period$20,744 


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Additionally, we are subject to project management and installation-related contingencies as a result of our fixed-price material supply and installation service contracts, primarily in our Architectural Services Segment and in certain parts of our Architectural Framing Systems Segment. We manage the risk of these exposures through contract negotiations, proactive project management and insurance coverages.

Letters of credit
At August 31, 2024, we had $42.5 million of ongoing letters of credit as discussed in Note 5.

Purchase obligations
Purchase obligations for raw material commitments and capital expenditures totaled $14.2 million as of August 31, 2024.

New Markets Tax Credit (NMTC) transactions
We have two outstanding NMTC arrangements which help to support operational expansion. Proceeds received from investors on these transactions are included within other non-current liabilities in our consolidated balance sheets. The NMTC arrangements are subject to 100 percent tax credit recapture for a period of seven years from the date of each respective transaction. Upon the termination of each arrangement, these proceeds will be recognized in earnings in exchange for the transfer of tax credits. The direct and incremental costs incurred in structuring these arrangements have been deferred and are included in other non-current assets in our consolidated balance sheets. These costs will be recognized in conjunction with the recognition of the related proceeds on each arrangement. During the construction phase or for working capital purposes for each project, we are required to hold cash dedicated to fund each project, which is classified as restricted cash in our consolidated balance sheets. As a result of the structure of these transactions, variable-interest entities were created. As the other investors in these programs do not have a material interest in the entities' underlying economics, we include 100% of the results of the variable-interest entities in our consolidated financial statements.

The table below provides a summary of estimated benefits related to our outstanding NMTC transactions (in thousands):
Inception dateTermination dateDeferred BenefitDeferred costsNet benefit
May 2022(1)
August 2025$6,052 $1,604 $4,448 
September 2018September 2025$3,198 $1,031 $2,167 
Total$9,250 $2,635 $6,615 
(1) Continuation of the August 2018 NMTC financing transaction

Litigation
The Company is a party to various legal proceedings incidental to its normal operating activities. In particular, like others in the construction supply and services industry, the Company is routinely involved in various disputes and claims arising out of construction projects, sometimes involving significant monetary damages or product replacement. We have in the past and are currently subject to product liability and warranty claims, including certain legal claims related to a commercial sealant product formerly incorporated into our products. In December 2022, the claimant in an arbitration of one such claim was awarded $20 million. The Company has appealed the award and believes, after taking into account all currently available information, including the advice of counsel and the likelihood of available insurance coverage, that this award will not have a material adverse effect on the Company's business, financial condition, results of operations or cash flows. The Company is also subject to litigation arising out of areas such as employment practices, workers compensation and general liability matters. Although it is very difficult to accurately predict the outcome of any such proceedings, facts currently available indicate that no matters will result in losses that would have a material adverse effect on the results of operations, cash flows or financial condition of the Company.

7.Supplier Finance Program Obligations

In the first quarter of fiscal 2024, we implemented a supplier financing arrangement that enables select suppliers, at their sole discretion, to sell our receivables (i.e., our payment obligations to the suppliers) on a non-recourse basis in order to be paid earlier than our payment terms provide. These suppliers’ voluntary inclusion of invoices in the supplier financing arrangement has no bearing on our payment terms, the amounts we pay, or our liquidity. We have no economic interest in the supplier’s decision to participate in the supplier financing program, and we do not provide any guarantees in connection with it. The balances owed are reflected in accounts payable in the consolidated balance sheets and are reflected in net cash provided by operating activities in our consolidated statements of cash flows when settled.


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The following table summarizes the obligation activity and outstanding balance as of August 31, 2024 that we have confirmed as valid to the administrators of our program:

(In thousands)August 31, 2024
Balance at beginning of period$6,527 
Obligations added to the program22,411 
Obligations settled(20,503)
Balance at end of period$8,435 

8.Shareholders' Equity

We paid dividends totaling $10.8 million ($0.50 per share) in the first six months of fiscal 2025, compared to dividends paid of $10.5 million ($0.48 per share) in the comparable prior year period.

During fiscal 2004, the Board of Directors authorized a share repurchase program allowing us to repurchase shares of our outstanding common stock, with subsequent increases in authorization. During the six-months ended August 31, 2024, we repurchased 241,573 shares under the program, for a total cost of $15.1 million, inclusive of the applicable excise tax. During the six-months ended August 26, 2023, we repurchased 279,916 shares under the program, for a total cost of $11.8 million. We have repurchased a total of 11,518,090 shares, at a total cost of $408.5 million, since the inception of this program in fiscal 2004. We have remaining authority to repurchase 2,731,910 shares under this program, which has no expiration date. We may also elect to repurchase additional shares of common stock under our authorization, subject to limitations contained in our debt agreements and based upon our assessment of a number of factors, including share price, trading volume and general market conditions, working capital requirements, general business conditions, financial conditions, any applicable contractual limitations, and other factors, including alternative investment opportunities. We may finance share repurchases with available cash, additional debt or other sources of financing.

Additionally, shares withheld from the vesting of restricted awards, or the settlement of performance-based awards, are treated as purchases and retirements, and are included within other, net in the financing activities section in the consolidated statement of cash flows.

9.Share-Based Compensation

As part of our compensation structure, we grant stock-based compensation awards to certain employees and non-employee directors during the fiscal year. These awards may be in the form of incentive stock options (to employees only), nonstatutory options, or nonvested share awards and units, all of which are granted at a price or with an exercise price equal to the fair market value of the Company’s stock at the date of award, unless the date of the award is on a day the Nasdaq Stock Market is not open for trading, then the exercise price shall equal the fair market value on the most recent preceding date when such market is open.

The table below sets forth the number of stock-based compensation awards granted during the six-months ended August 31, 2024, along with the weighted average grant date fair value:

AwardsNumber of AwardsWeighted 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.

Total share-based compensation expense included in the results of operations was $2.9 million and $2.3 million for the three-month periods ended August 31, 2024 and August 26, 2023, respectively and $5.6 million and $4.5 million for the six-month periods ended August 31, 2024 and August 26, 2023, respectively.

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At August 31, 2024, there was $17.3 million of total unrecognized compensation cost related to nonvested share and nonvested share unit awards, which is expected to be recognized over a weighted average period of approximately 24 months. The total fair value of shares vested during the six-months ended August 31, 2024 was $8.6 million.

10.Income Taxes

We file income tax returns in the U.S. federal jurisdiction, various U.S. state and local jurisdictions, Canada, Brazil and other international jurisdictions. We are not subject to U.S. federal tax examinations for years prior to fiscal 2021, or state and local income tax examinations for years prior to fiscal 2015. We are not currently under U.S. federal examination for years subsequent to fiscal 2020, and there is very limited audit activity of our income tax returns in U.S. state jurisdictions or international jurisdictions.

For interim periods, our income tax expense and resulting effective tax rate are based upon an estimated annual effective tax rate adjusted for the effects of items required to be treated as discrete to the period, including changes in tax laws, changes in estimated exposures for uncertain tax positions and other items. For the three-months ended August 31, 2024, income tax expense as a percentage of earnings before income tax was 25.7%, compared to 22.9% for the same period last year. For the six-months ended August 31, 2024, income tax expense as a percentage of earnings before income tax was 25.1%, compared to 23.8% for the same period last year. The change in the effective tax rate for both the three- and six-month periods was primarily due to an increase in tax expense on discrete items.

The total liability for unrecognized tax benefits was $5.6 million at August 31, 2024 compared to $5.1 million at March 2, 2024, respectively. Penalties and interest related to unrecognized tax benefits are recorded in income tax expense.

11.Earnings per Share

The following table presents a reconciliation of the share amounts used in the computation of basic and diluted earnings per share (diluted EPS):
Three Months EndedSix Months Ended
(In thousands)August 31, 2024August 26, 2023August 31, 2024August 26, 2023
Basic earnings per share – weighted average common shares outstanding
21,762 21,708 21,793 21,813 
Weighted average effect of nonvested share grants and assumed exercise of stock options
113 254 192 292 
Diluted earnings per share – weighted average common shares and potential common shares outstanding
21,875 21,962 21,985 22,105 
Stock awards excluded from the calculation of earnings per share because the effect was anti-dilutive (award price greater than average market price of the shares)
11 51 65 73 

12.Business Segment Data

We have four reporting segments:
The Architectural Framing Systems Segment designs, engineers, fabricates and finishes aluminum window, curtainwall, storefront and entrance systems for the exterior of buildings.
The Architectural Glass Segment coats and fabricates, high-performance glass used in custom window and wall systems on non-residential buildings.
The Architectural Services Segment integrates technical services, project management, and field installation services to design, engineer, fabricate, and install building glass and curtainwall systems.
The Large-Scale Optical (LSO) Segment manufactures high-performance glass and acrylic products for the custom framing, fine art, and engineered optics markets.

Segment net sales is defined as net sales for a certain segment and includes revenue related to intersegment transactions. We report net sales intersegment eliminations separately to exclude these sales from our consolidated total. Segment operating income is equal to net sales, less cost of goods sold, selling, general and administrative expenses, and any asset impairment charges associated with the segment. Segment operating income includes operating income related to intersegment sales transactions and excludes certain corporate costs that are not allocated at a segment level. We report these unallocated corporate costs in Corporate and Other. Operating income does not include other income or expense, interest expense or income tax expense.
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Three Months EndedSix Months Ended
(In thousands)August 31, 2024August 26, 2023August 31, 2024August 26, 2023
Segment net sales
Architectural Framing Systems$141,350 $158,801 $274,522 $322,963 
Architectural Glass90,101 94,096 176,804 191,298 
Architectural Services98,018 88,064 197,045 177,482 
Large-Scale Optical19,832 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 Glass21,068 17,434 38,159 33,955 
Architectural Services6,130 3,519 11,753 2,923 
Large-Scale Optical3,793 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 

Due to the varying combinations and integration of individual window, storefront and curtainwall systems, it is impractical to report product revenues generated by class of product, beyond the segment revenues currently reported.

13.Restructuring

During the fourth quarter of fiscal 2024, we announced strategic actions to further streamline our business operations, enable a more efficient cost model, and better position the Company for profitable growth (referred to as “Project Fortify”). Project Fortify primarily impacts the Architectural Framing Systems Segment and includes:
Eliminating certain lower-margin product and service offerings, enabling consolidation into a single operating entity.
Transferring production operations from the Company’s facility in Walker, Michigan, to the Company’s facilities in Monett, Missouri and Wausau, Wisconsin.
Simplifying the segment’s brand portfolio and commercial model to improve flexibility, better leverage the Company’s capabilities, and enhance customer service.
Additionally, the Company has implemented actions to optimize processes and streamline resources in its Architectural Services Segment and Corporate.

During the second quarter of fiscal 2025, we incurred $1.2 million of pre-tax costs associated with Project Fortify, of which $0.9 million was included within cost of sales and $0.3 million was included within selling, general and administrative expenses. During the first six-months of fiscal 2025, we incurred $2.3 million of pre-tax costs associated with Project Fortify, of which $1.5 million was included within cost of sales and $0.8 million was included within selling, general and administrative expenses. Since announcing Project Fortify, we have incurred $14.7 million of pre-tax costs. The Company expects these restructuring actions to be substantially complete by the end of the third quarter of fiscal 2025 and expects to incur total pre-tax charges of approximately $15.0 million to $16.0 million. Total Project Fortify restructuring charges are expected to include:
$6.5 million to $7.0 million of severance and employee related costs;
Approximately $1.7 million of contract termination costs; and
$6.5 million to $7.5 million of other expenses.

The Company expects that these actions will lead to annualized cost savings of $13 million to $14 million.

Three Months Ended August 31, 2024
(In thousands)Architectural FramingArchitectural ServicesCorporate & OtherTotal
Termination benefits $271 $172 $5 $448 
Contract termination costs
108   108 
Other restructuring charges537 86  623 
Total restructuring charges$916 $258 $5 $1,179 

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Six Months Ended August 31, 2024
(In thousands)Architectural FramingArchitectural ServicesCorporate & OtherTotal
Termination benefits $573 $172 $129 $874 
Contract termination costs108   108 
Other restructuring charges1,233 86  1,319 
Total restructuring charges$1,914 $258 $129 $2,301 

The following table summarizes our restructuring related accrual balances included within accrued payroll and related benefits and other current liabilities in the consolidated balance sheets. All remaining accrual balances are expected to be paid within fiscal 2025.

(In thousands)Architectural FramingArchitectural ServicesCorporate & OtherTotal
Balance at March 2, 2024$2,814 $2,067 $56 $4,937 
Restructuring expense736  124 860 
Payments(3,195)(348)(117)(3,660)
Other adjustments778   778 
Balance at August 31, 2024$1,133 $1,719 $63 $2,915 

The charges presented in the rollforward of our restructuring accruals do not include items charged directly to expense as incurred, as those items are not reflected in accrued payroll and related benefits and other current liabilities in the consolidated balance sheets.

14.Subsequent Events

On September 23, 2024, we entered into a purchase agreement for the acquisition of UW Interco, LLC (UW Solutions), a leading developer and manufacturer of high-performance coated materials. The total initial purchase price was $240.0 million, which is subject to customary closing adjustments. We intend to fund the acquisition with cash on hand and borrowings under our existing credit facility.
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking statements
This Quarterly Report on Form 10-Q, including the section, Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains certain statements that are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “should,” “will,” “continue” or similar words or expressions. All forecasts and projections in this document are “forward-looking statements,” and are based on management’s current expectations or beliefs of the Company's near-term results, based on current information available pertaining to the Company. From time to time, we may also provide oral and written forward-looking statements in other materials we release to the public, such as press releases, presentations to securities analysts or investors, or other communications by the Company. Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results.

Accordingly, we wish to caution investors that any forward-looking statements made by or on behalf of the Company are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other risk factors include, but are not limited to, the risks and uncertainties set forth under “Risk Factors” section of our Annual Report on Form 10-K for the year ended March 2, 2024 and in subsequent filings with the U.S. Securities and Exchange Commission, including this Quarterly Report on Form 10-Q.

We also wish to caution investors that other factors might in the future prove to be important in affecting the Company’s results of operations. New factors emerge from time to time; it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Measures
We have included in this report measures of financial performance that are not defined by U.S. GAAP. We believe that these measures provide useful information and include these measures in other communications to investors. For each of these non-GAAP financial measures, we provide a reconciliation of the differences between the non-GAAP measure and the most directly comparable U.S. GAAP measure (see “Reconciliation of Non-GAAP Financial Measures” in this Item 2 below), and an explanation of why we believe the non-GAAP measure provides useful information to management and investors. These non-GAAP measures should be viewed in addition to, and not in lieu of, the comparable U.S. GAAP measure.

Overview
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. Our four reporting segments are: Architectural Framing Systems, Architectural Glass, Architectural Services and Large-Scale Optical (LSO).

Our enterprise strategy is based on the following three key elements:
1.Become the economic leader in our target markets. We are developing a deep understanding of our target markets and aligning our businesses with clear go-to-market strategies to drive value for our customers through differentiated product and service offerings. We are focused on operational execution, driving productivity improvements, and maintaining a competitive cost structure, so that we may bring more value to our customers and improve our own profitability.
2.Actively manage our portfolio to drive higher margins and returns. We are shifting our business mix toward higher operating margin offerings in order to improve our return on invested capital performance. We expect to accomplish this by allocating resources to grow our top performing businesses, actively addressing underperforming businesses, and investing to add new differentiated product and service offerings to accelerate our growth and increase margins.
3.Strengthen our core capabilities. We are shifting from our historical, decentralized operating model to one with center-led functional expertise that enables us to leverage the scale of the enterprise to better support the needs of the business. In fiscal 2022, we established a Company-wide operating system with common tools and processes based on the foundation of Lean and Continuous Improvement, which we call the “Apogee Management System.” Our strategy is supported by a robust talent management program and a commitment to strong governance to ensure compliance and drive sustainable performance.


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We set this strategy by developing a deep knowledge of the markets we serve and by gaining extensive input from customers and industry influencers, along with detailed competitive benchmarking. We continually analyze our portfolio of products, services, and capabilities to identify the best areas for future profitable growth. We also evaluate our operating model to ensure we have the organizational structure and capabilities needed to deliver consistent profitable growth. Through this work, we validate strengths that we can leverage and identify opportunities to improve our performance.

In fiscal 2024 and through the second quarter of fiscal 2025, we drove further progress toward our strategic goals and financial targets. We continued the deployment of the Apogee Management System across our business, supporting sustainable cost and productivity improvements. We invested in organic growth initiatives, including 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.

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.

Results of Operations
The following tables provide various components of operations as year over year U.S. dollar and percentage change, as well as a percentage of net sales.
Three Months Ended
% of Net Sales
(in thousands, except percentages)
August 31, 2024August 26, 2023August 31, 2024August 26, 2023
Net sales$342,440 $353,675 100.0 %100.0 %
Cost of sales245,119 258,304 71.6 73.0 
Gross profit97,321 95,371 28.4 27.0 
Selling, general and administrative expenses55,356 54,818 16.2 15.5 
Operating income41,965 40,553 12.3 11.5 
Interest expense, net1,140 2,230 0.3 0.6 
Other expense, net
290 4,900 0.1 1.4 
Earnings before income taxes41,115 43,223 12.0 12.2 
Income tax expense10,549 9,896 3.1 2.8 
Net earnings$30,566 $33,327 8.9 %9.4 %
Effective tax rate25.7 %22.9 %
N/M Indicates calculation not meaningful.

Six Months Ended
% of Net Sales
(in thousands, except percentages)
August 31, 2024August 26, 2023August 31, 2024August 26, 2023
Net sales$673,956 $715,388 100.0 %100.0 %
Cost of sales477,780 527,031 70.9 73.7 
Gross profit196,176 188,357 29.1 26.3 
Selling, general and administrative expenses112,830 114,037 16.7 15.9 
Operating income83,346 74,320 12.4 10.4 
Interest expense, net1,590 4,266 0.2 0.6 
Other expense, net
433 4,612 0.1 0.6 
Earnings before income taxes82,189 74,666 12.2 10.4 
Income tax expense20,612 17,763 3.1 2.5 
Net earnings$61,577 $56,903 9.1 %8.0 %
Effective tax rate25.1 %23.8 %
N/M Indicates calculation not meaningful.


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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% to $43.1 million, and adjusted operating margin improved to 12.6%.

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

Income tax expense as a percentage of earnings before income tax was 25.7%, compared to 22.9% for the same period last year. The increase in the effective tax rate was primarily due to an increase in tax expense for discrete items.

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

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

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

SG&A expenses decreased $1.2 million to 16.7% of net sales, compared to 15.9% of net sales. The increase in SG&A as a percentage of sales was primarily due to the unfavorable sales leverage impact of lower volume and higher incentive compensation expense, partially offset by lower bad debt expense.

Operating income grew to $83.3 million from $74.3 million, and operating margin increased 200 basis points to 12.4%. The improvement in operating margin was primarily driven by improved pricing, a more favorable mix of projects in Architectural Services, favorable material costs, lower insurance-related costs, and lower bad debt expense, which more than offset the unfavorable sales leverage impact of lower volume, $2.3 million of restructuring costs related to Project Fortify, and higher incentive compensation expense. Adjusted operating income grew 15.2% to $85.6 million, and adjusted operating margin improved to 12.7%.

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

Income tax expense as a percentage of earnings before income tax was 25.1%, compared to 23.8% for the same period last year. The increase in the effective tax rate was primarily due to an increase in tax expense for discrete items.
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Segment Analysis
The following table presents net sales, operating income (loss) and operating margin by segment and consolidated total.
Three Months EndedSix Months Ended
(In thousands, except percentages)August 31, 2024August 26, 2023% ChangeAugust 31, 2024August 26, 2023% Change
Segment net sales
Architectural Framing Systems$141,350 $158,801 (11.0)%$274,522 $322,963 (15.0)%
Architectural Glass90,101 94,096 (4.2)176,804 191,298 (7.6)
Architectural Services98,018 88,064 11.3 197,045 177,482 11.0 
Large-Scale Optical19,832 23,645 (16.1)41,036 46,101 (11.0)
Intersegment eliminations(6,861)(10,931)(37.2)(15,451)(22,456)(31.2)
Net sales$342,440 $353,675 (3.2)%$673,956 $715,388 (5.8)%
Segment operating income (loss)
Architectural Framing Systems$17,141 $21,060 (18.6)%$35,477 $41,005 (13.5)%
Architectural Glass21,068 17,434 20.8 38,159 33,955 12.4 
Architectural Services6,130 3,519 74.2 11,753 2,923 302.1 
Large-Scale Optical3,793 4,663 (18.7)8,639 10,188 (15.2)
Corporate and Other(6,167)(6,123)0.7 (10,682)(13,751)(22.3)
Operating income$41,965 $40,553 3.5 %$83,346 $74,320 12.1 %
Segment operating margin
Architectural Framing Systems12.1 %13.3 %12.9 %12.7 %
Architectural Glass23.4 18.5 21.6 17.7 
Architectural Services6.3 4.0 6.0 1.6 
Large-Scale Optical19.1 19.7 21.1 22.1 
Corporate and Other
N/MN/MN/MN/M
Operating income12.3 %11.5 %12.4 %10.4 %
N/M Indicates calculation not meaningful.

Segment net sales is defined as net sales for a certain segment and includes revenue related to intersegment transactions. We report net sales intersegment eliminations separately to exclude these sales from our consolidated total. Segment operating income is equal to net sales, less cost of goods sold, SG&A, and any asset impairment charges associated with the segment. Segment operating income includes operating income related to intersegment sales transactions and excludes certain corporate costs that are not allocated at a segment level. We report these unallocated corporate costs in Corporate and Other. Operating income does not include other income or expense, interest expense or income tax expense.

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.

Operating income was $17.1 million, or 12.1% of net sales, compared to $21.1 million, or 13.3% 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. Adjusted operating income was $18.1 million, or 12.8% of net sales, compared to $21.1 million, or 13.3% of net sales.

Comparison of First Six Months of Fiscal 2025 to First Six Months of Fiscal 2024
Net sales were $274.5 million, compared to $323.0 million, primarily reflecting reduced volume due to exiting certain lower-margin product lines as part of Project Fortify and lower end market demand.

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Operating income was $35.5 million, or 12.9% of net sales, compared to $41.0 million, or 12.7% of net sales. The 20 basis point improvement in operating margin was primarily driven by favorable material costs and lower bad debt expense, partially offset by the unfavorable sales leverage impact of lower volume, and $1.9 million of restructuring charges as part of Project Fortify. Adjusted operating income was $37.4 million, or 13.6% of net sales, compared to $41.0 million, or 12.7% of net sales.

Architectural Glass
Comparison of 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.

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

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

Large-Scale Optical (LSO)
Comparison of Second Quarter Fiscal 2025 to Second Quarter Fiscal 2024
LSO net sales were $19.8 million, compared to $23.6 million, primarily reflecting lower volume in the retail channel, partially offset by a more favorable mix.

Operating income was $3.8 million, or 19.1% of net sales, compared to $4.7 million, or 19.7% of net sales. The 60 basis point decline in operating margin primarily reflects the unfavorable sales leverage impact of lower volume, partially offset by improved mix and cost savings.

Comparison of First Six Months of Fiscal 2025 to First Six Months of Fiscal 2024
LSO net sales were $41.0 million, compared to $46.1 million, primarily reflecting lower volume in the retail channel, partially offset by a more favorable mix.

Operating income was $8.6 million, or 21.1% of net sales, compared to $10.2 million, or 22.1% of net sales. The 100 basis point decline in operating margin primarily reflects the unfavorable sales leverage impact of lower volume, partially offset by improved mix and cost savings.


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Corporate and Other
Comparison of Second Quarter Fiscal 2025 to Second Quarter Fiscal 2024
Corporate and Other expense was $6.2 million, compared to $6.1 million. The increase was primarily driven by higher incentive compensation and benefits costs, partially offset by lower insurance-related costs.

Comparison of First Six Months of Fiscal 2025 to First Six Months of Fiscal 2024
Corporate and Other expense was $10.7 million, compared to $13.8 million, primarily due to lower insurance-related costs, partially offset by incentive compensation and benefits costs.

Backlog
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. Backlog is most meaningful for Architectural Services due to the longer-term nature of their projects. Backlog is not a term defined under U.S. GAAP and is not a measure of contract profitability. We view backlog as one indicator of future revenues, particularly in our longer-lead time businesses. In addition to backlog, we have a substantial amount of projects with short lead times that book-and-bill within the same reporting period and are not included in backlog.

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. The decrease in backlog compared to the prior quarter was primarily driven by executing more project work in the quarter than securing new project awards that were added to backlog. Our backlog in this segment tends to vary significantly given the variable timing and relatively large size of projects awarded.

Reconciliation of Non-GAAP Financial Measures

Adjusted operating income, adjusted operating margin, adjusted net earnings, adjusted diluted earnings per share (adjusted diluted EPS), adjusted net earnings before interest, taxes, depreciation and amortization (adjusted EBITDA), and adjusted EBITDA margin are supplemental non-GAAP financial measures provided by the Company to assess performance on a more comparable basis from period-to-period by excluding amounts that management does not consider part of core operating results. Management uses these non-GAAP measures as noted below:

We use adjusted operating income, adjusted operating margin, adjusted net earnings, and adjusted diluted EPS to provide meaningful supplemental information about our operating performance by excluding amounts that are not considered part of core operating results to enhance comparability of results from period to period.
We believe adjusted EBITDA and adjusted EBITDA margin metrics provide useful information to investors and analysts about our core operating performance.

These non-GAAP measures should be viewed in addition to, and not as an alternative to, the reported financial results of the Company prepared in accordance with U.S. GAAP. Other companies may calculate these measures differently, thereby limiting the usefulness of the measures for comparison with other companies.

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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 SystemsArchitectural GlassArchitectural ServicesLSOCorporate and OtherConsolidated
Operating income$17,141 $21,068 $6,130 $3,793 $(6,167)$41,965 
Restructuring costs (1)
916 — 258 — 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/M12.3 %
Restructuring costs (1)
0.6 %— %0.3 %— %N/M0.3 %
Adjusted operating margin
12.8 %23.4 %6.5 %19.1 %N/M12.6 %
Three Months Ended August 26, 2023
Architectural Framing SystemsArchitectural GlassArchitectural ServicesLSOCorporate and OtherConsolidated
Operating income
$21,060 $17,434 $3,519 $4,663 $(6,123)$40,553 
Operating margin
13.3 %18.5 %4.0