apog-20230826

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 26, 2023


☐			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

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 September 29, 2023, 22,072,357 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	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	25

PART II	Other Information

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 5.	Other Information	26

Item 6.	Exhibits	26

Signatures		27

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands, except stock data)	August 26, 2023		February 25, 2023
Assets
Current assets
Cash and cash equivalents	$	18,423	$	19,924
Restricted cash	—		1,549
Receivables, net	205,720		197,267
Inventories	72,775		78,441
Contract assets	50,360		59,403
Other current assets	29,036		26,517
Total current assets	376,314		383,101
Property, plant and equipment, net of accumulated depreciation of $449,110 and $431,710	245,541		248,867
Operating lease right-of-use assets	41,049		41,354
Goodwill	129,143		129,026
Intangible assets, net	65,303		67,375
Other non-current assets	51,229		45,642
Total assets	$	908,579	$	915,365
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	78,323	$	86,549
Accrued compensation and benefits	34,156		51,651

Contract liabilities	32,498		28,011
Operating lease liabilities	12,168		11,806

Other current liabilities	67,141		64,532
Total current liabilities	224,286		242,549
Long-term debt	145,675		169,837
Non-current operating lease liabilities	31,962		33,072
Non-current self-insurance reserves	32,933		29,316
Other non-current liabilities	41,405		44,183
Commitments and contingent liabilities (Note 7)
Shareholders’ equity
Common stock of $0.33-1/3 par value; authorized 50,000,000 shares; issued and outstanding 22,072,123 and 22,224,299, respectively	7,357		7,408
Additional paid-in capital	147,413		146,816
Retained earnings	308,248		273,740


Accumulated other comprehensive loss	(30,700)		(31,556)
Total shareholders’ equity	432,318		396,408
Total liabilities and shareholders’ equity	$	908,579	$	915,365

See accompanying notes to consolidated financial statements.

Table of Contents

CONSOLIDATED RESULTS OF OPERATIONS

(Unaudited)


	Three Months Ended				Six Months Ended
(In thousands, except per share data)	August 26, 2023		August 27, 2022		August 26, 2023		August 27, 2022
Net sales	$	353,675	$	372,109	$	715,388	$	728,744
Cost of sales	258,304		287,173		527,031		558,191
Gross profit	95,371		84,936		188,357		170,553
Selling, general and administrative expenses	54,818		52,864		114,037		105,265
Operating income	40,553		32,072		74,320		65,288

Interest expense, net	2,230		1,698		4,266		2,904
Other (income) expense, net	(4,900)		173		(4,612)		1,483
Earnings before income taxes	43,223		30,201		74,666		60,901
Income tax expense (benefit)	9,896		(7,188)		17,763		781
Net earnings	$	33,327	$	37,389	$	56,903	$	60,120
Basic earnings per share	$	1.54	$	1.71	$	2.61	$	2.72
Diluted earnings per share	$	1.52	$	1.68	$	2.57	$	2.66
Weighted average basic shares outstanding	21,708		21,860		21,813		22,129
Weighted average diluted shares outstanding	21,962		22,245		22,105		22,563

See accompanying notes to consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Unaudited)


	Three Months Ended				Six Months Ended
(In thousands)	August 26, 2023		August 27, 2022		August 26, 2023		August 27, 2022
Net earnings	$	33,327	$	37,389	$	56,903	$	60,120
Other comprehensive earnings (loss):
Unrealized (loss) gain on marketable securities, net of $(8), $(28), $25 and $(102) of tax (benefit) expense, respectively	(28)		(106)		93		(382)
Unrealized gain (loss) on derivative instruments, net of $66, $(152), $(55) and $(1,469) of tax expense (benefit), respectively	217		(500)		(180)		(4,816)
Foreign currency translation adjustments	508		(2,777)		943		(1,045)
Other comprehensive earnings (loss)	697		(3,383)		856		(6,243)
Total comprehensive earnings	$	34,024	$	34,006	$	57,759	$	53,877

See accompanying notes to consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended
(In thousands)	August 26, 2023		August 27, 2022
Operating Activities
Net earnings	$	56,903	$	60,120
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	20,661		21,448
Share-based compensation	4,483		3,394
Deferred income taxes	(4,281)		6,858

Gain on disposal of assets	(62)		(695)

Proceeds from New Markets Tax Credit transaction, net of deferred costs	—		18,390
Settlement of New Markets Tax Credit transaction	(4,687)		(19,523)
Noncash lease expense	6,153		6,160
Other, net	(1,121)		3,836
Changes in operating assets and liabilities:
Receivables	(8,238)		(71,720)
Inventories	5,841		(17,636)
Contract assets	8,992		6,754
Accounts payable and accrued expenses	(21,096)		(11,793)
Contract liabilities	4,244		20,927
Refundable and accrued income taxes	4,292		(20,486)
Operating lease liability	(6,608)		(6,684)
Prepaid expenses and other current assets	(2,912)		(1,993)
Net cash provided (used) by operating activities	62,564		(2,643)
Investing Activities
Capital expenditures	(15,018)		(9,255)
Proceeds from sales of property, plant and equipment	143		4,122
Purchases of marketable securities	(969)		—
Sales/maturities of marketable securities	775		450

Net cash used by investing activities	(15,069)		(4,683)
Financing Activities
Borrowings on line of credit	174,853		409,880
Repayment on debt	—		(151,000)
Payments on line of credit	(199,000)		(171,000)
Payments on debt issue costs	—		(687)

Repurchase and retirement of common stock	(11,821)		(74,312)
Dividends paid	(10,467)		(9,602)
Other, net	(3,705)		(2,815)
Net cash (used) provided by financing activities	(50,140)		464
Decrease in cash, cash equivalents and restricted cash	(2,645)		(6,862)
Effect of exchange rates on cash	(405)		28
Cash, cash equivalents and restricted cash at beginning of year	21,473		37,583
Cash and cash equivalents at end of period	$	18,423	$	30,749
Noncash Activity
Capital expenditures in accounts payable	$	2,493	$	2,019

See accompanying notes to consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)


(In thousands)	Common Shares Outstanding	Common Stock at Par Value		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total Shareholders' Equity
Balance at February 25, 2023	22,224	$	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 cancellations	155	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, 2023	22,219	$	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 options	25	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, 2023	22,072	$	7,357	$	147,413	$	308,248	$	(30,700)	$	432,318


(In thousands)	Common Shares Outstanding	Common Stock at Par Value		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total Shareholders' Equity
Balance at February 26, 2022	23,701	7,901		149,713		254,825		(26,240)		386,199
Net earnings	—	—		—		22,731		—		22,731
Other comprehensive loss, net of tax	—	—		—		—		(2,860)		(2,860)
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
Other comprehensive loss, net of tax	—	—		—		—		(3,383)		(3,383)
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	—	—		—		(

SEC Form 10-Q filed by Apogee Enterprises Inc.