Image source: The Motley Fool.Thursday, Apr 17, 2025CALL PARTICIPANTSTy Silberhorn: Chief Executive OfficerMatt Osberg: Chief Financial OfficerJeff Huebschen: Investor RelationsRISKSNonresidential construction forecasts now point to a slight decline, with interest rate-sensitive sectors like office, commercial, lodging, and multifamily projected to decline again in 2025. New tariffs on aluminum products are expected to negatively impact adjusted EPS by $0.45-$0.55 in fiscal 2026, with 60% affecting the Serv ...

Sales and Revenue - In fiscal 2025, the Architectural Metals Segment accounted for approximately 39% of net sales, while the Architectural Services Segment contributed about 31%[20] - The Architectural Glass Segment provides customized solutions and accounted for approximately 21% of net sales in fiscal 2025[20] - The Performance Surfaces Segment, which develops high-performance coated materials, represented approximately 9% of net sales in fiscal 2025[20] - Consolidated net sales for fiscal 2025 were $1.36 billion, a decrease of 3.9% compared to $1.42 billion in fiscal 2024, primarily due to lower volume in Architectural Metals and Architectural Glass, partially offset by a $32.0 million contribution from the acquisition of UW Solutions[131] - Net sales decreased to $524.7 million in fiscal 2025 from $601.7 million in fiscal 2024, primarily due to reduced volume and lower end market demand[136] - The company experienced a decline in net sales in the Architectural Glass segment to $322.2 million in fiscal 2025 from $378.4 million in fiscal 2024, driven by lower volume[137] - Architectural Metals segment net sales decreased by 12.8% to $524.7 million, while Architectural Services saw an increase of 11.0% to $419.9 million[132] Financial Performance - Gross profit for fiscal 2025 was $359.9 million, with a gross margin of 26.4%, an improvement from 25.9% in fiscal 2024, driven by a favorable mix of projects and lower quality-related costs[131] - Operating income decreased to $118.1 million in fiscal 2025, with an operating margin of 8.7%, down from 9.4% in fiscal 2024, primarily due to lower sales volume and acquisition-related expenses[131] - Net earnings for fiscal 2025 were $85.1 million, a decline of 14.6% from $99.6 million in fiscal 2024, with diluted earnings per share (EPS) of $3.89 compared to $4.51 in the previous year[128] - Adjusted operating income grew 2.4% to $149.8 million, with an adjusted operating margin improving to 11.0%[131] - The effective income tax rate increased to 24.4% in fiscal 2025 from 22.9% in fiscal 2024, primarily due to an increase in tax expense for discrete items[131] - Acquisition-related costs totaled $10.3 million in fiscal 2025, impacting net earnings and adjusted earnings per share[149] Employee and Workplace Safety - The company had approximately 4,500 employees as of March 1, 2025, reflecting an increase from 4,400 employees the previous year[44] - The company aims to achieve an incident rate of zero in workplace safety through its enterprise-wide health and safety program[46] - The company conducts annual safety culture assessments and compliance audits to enhance safety programs and employee engagement[47] - The company offers comprehensive health and wellness programs, including medical insurance and preventive care, to support employee well-being[48] - The company emphasizes diversity and inclusion, conducting annual training to reduce bias and promote equal opportunity[49] - The talent management program focuses on employee development, offering training, coaching, and education assistance for career growth[50] Strategic Initiatives and Growth - The company invested in organic and inorganic growth initiatives, including the acquisition of UW Interco, LLC and capacity expansion in the Performance Surfaces segment[21] - The company aims to shift its business mix toward higher operating margin offerings to improve return on invested capital performance[19] - The company is exploring strategic opportunities, including acquisitions and divestitures, to drive long-term growth and efficiency[63] - The company’s strategy includes strengthening core capabilities through a center-led functional expertise model and the Apogee Management System[19] Risks and Challenges - The company is influenced by North American economic conditions, particularly in the non-residential construction industry, which affects sales and operations[56] - The company faces risks from global instability, which could adversely affect operations and project timelines[59] - Supply chain disruptions, particularly in aluminum and raw glass, could negatively impact the company's operating results[70] - Rising interest rates and inflation could reduce demand for the company's products and services, negatively impacting profitability[86] - The company is vulnerable to fluctuations in economic cycles, which may affect supplier performance and contract terms[72] - Difficulties in maintaining information technology systems and potential cybersecurity threats could disrupt business operations and increase expenses[74] - The company may face increased costs due to changes in trade policies and tariffs, which could adversely affect operating results and profitability[79] - The company has experienced product liability and warranty claims, which could lead to additional expenses and negatively impact operating results[83] - The company’s liquidity may be adversely affected by changes in capital and credit markets, impacting its ability to fund operations and pursue business opportunities[91] - The company’s internal controls over financial reporting may not always prevent misstatements, potentially leading to restatements and regulatory investigations[90] - The number of data security incidents has increased regulatory focus on security requirements, which may lead to additional compliance costs[78] Project and Restructuring Updates - The Company incurred a total of $16.7 million in pre-tax charges related to "Project Fortify," delivering estimated annualized cost savings of approximately $14 million[123] - An extension of "Project Fortify Phase 2" is expected to incur approximately $24 million to $26 million in pre-tax charges, with annualized pre-tax cost savings projected at $13 million to $15 million[124] - The company recognized restructuring charges related to Project Fortify totaling $6.2 million in asset impairment, $5.9 million in employee termination costs, and $0.3 million in other costs for fiscal 2024[156] Shareholder Returns and Stock Performance - Cash dividends paid per share for fiscal 2025 totaled $1.0100, an increase from $0.9700 in fiscal 2024[111] - The Company repurchased a total of 548,337 shares at an average price of $58.70 during the fourth quarter of fiscal 2025[112] - The company returned $67.1 million to shareholders through share repurchases and dividends, compared to $33 million in the prior year[165] Backlog and Contract Management - The company had $394.1 million of backlog bonded by performance bonds with a face value of $1.2 billion as of March 1, 2025[179] - Approximately 36% of total revenue in fiscal 2025 was derived from longer-term, fixed-price contracts, primarily in the Architectural Services Segment[186] - The company measures progress on long-term contracts using an input method, comparing total costs incurred to-date to estimated total costs, recording that proportion of the total contract price as revenue[186] - Architectural Services Segment backlog was $720.3 million at the end of fiscal 2025, down from $807.8 million in the prior year[140] Market and Economic Conditions - The Performance Surfaces Segment relies heavily on the U.S. retail custom picture framing industry, which is sensitive to consumer confidence[57] - The company is exposed to market risks related to changes in interest rates, foreign currency exchange rates, and raw material pricing[206] - A 200 basis point change in interest rates could impact net earnings by approximately $0.6 million[208] - The company manages foreign currency risk through local operations and forward purchase foreign currency contracts[211] - The company cannot accurately calculate the pre-tax impact of a 1% change in commodity costs of aluminum and lumber on fiscal 2025 operating results due to various influencing factors[214] Cybersecurity and Legal Matters - The company reported no material adverse effects from cybersecurity incidents, maintaining a robust cybersecurity risk management program[97] - The Board oversees the cybersecurity risk management program, receiving updates on the Company's cyber risk profile at least twice a year[101] - The Company has not identified any legal proceedings that would have a material adverse effect on its financial condition[106] Impairment and Valuation - The company incurred $7.6 million in pre-tax impairment charges related to indefinite-lived intangibles in the Architectural Metals Segment due to strategic branding changes[88] - A 100 basis point increase in the weighted average cost of capital could decrease estimated fair values of reporting units by $13 million to $60 million[194] - The company has intangible assets with indefinite useful lives, and for fiscal 2025, recognized an impairment expense of $7.6 million due to carrying amounts exceeding fair value[198] - For fiscal 2025, the company bypassed qualitative assessments for goodwill impairment and directly compared fair value to carrying value, with fair value exceeding carrying value across all reporting units[194] - Management is responsible for maintaining adequate internal control over financial reporting to ensure reliability and compliance with accounting principles[215]

Financial Performance Highlights - Full Year FY25 net sales reached $1.36 billion, a decrease of 3.9% year-over-year[20] - Adjusted operating income for FY25 was $149.8 million, an increase of 2.4% year-over-year[20] - Adjusted operating margin for FY25 improved to 11.0%, up 70 basis points year-over-year[20] - Adjusted diluted EPS for FY25 was $4.97, an increase of 4.2% year-over-year[20] - Q4 FY25 net sales were $345.7 million, a decrease of 4.5% compared to $361.8 million in Q4 FY24[76] - Q4 FY25 adjusted diluted EPS was $0.89, a decrease of 21.9% compared to $1.14 in Q4 FY24[76] Segment Performance (Full Year FY25) - Architectural Metals segment net sales were $524.7 million, a decrease of 12.8% year-over-year, with an adjusted operating margin of 10.3%[87] - Architectural Services segment net sales were $419.9 million, an increase of 11.0% year-over-year, with an adjusted operating margin of 7.0%[87] - Architectural Glass segment net sales were $322.2 million, a decrease of 14.9% year-over-year, with an adjusted operating margin of 18.4%[87] - Performance Surfaces segment net sales were $122.1 million, an increase of 23.1% year-over-year, with an adjusted operating margin of 19.8%[87] FY26 Outlook - The company estimates net sales of $1.37 billion to $1.43 billion for FY26[116] - Adjusted diluted EPS is projected to be between $3.55 and $4.10[116] - UW Solutions is expected to contribute approximately $100 million in net sales with an adjusted EBITDA margin of approximately 20%[118] - Tariffs are estimated to reduce full-year adjusted diluted EPS by approximately $0.45 to $0.55[118]

Financial Data and Key Metrics Changes - Net sales for Q4 decreased by 4.5% to $346 million, impacted by a 7.9% negative effect from an extra week in the previous year and lower volume primarily in metals and glass [29][30] - Adjusted operating margin declined by 120 basis points to 8.3%, driven by unfavorable sales leverage from lower volume and a less favorable product mix [30] - Adjusted diluted EPS decreased by 22% to $0.89 per share, primarily due to lower adjusted operating income and higher interest expense [30] Business Line Data and Key Metrics Changes - Metals segment net sales fell by 19% to $112 million, with a 7.8% decline attributed to the extra week last year and lower volume due to operational disruptions [32] - Services segment achieved a 10.9% increase in net sales, marking the fourth consecutive quarter of double-digit growth, benefiting from increased volume and a favorable mix of projects [33] - Performance Surfaces segment saw a 77% growth in net sales to $47.9 million, primarily due to inorganic sales from UW Solutions, although organic sales declined by 0.5% [35] Market Data and Key Metrics Changes - The non-residential construction market is expected to face continued headwinds, with leading indicators suggesting a cautious outlook for market growth [18][19] - Interest rate-sensitive sectors like office and commercial are projected to decline, while growth is anticipated in education, healthcare, and transportation [19] - Tariffs are expected to impact several aspects of operations, particularly in aluminum costs, which is the largest input cost for the company [21][22] Company Strategy and Development Direction - The company is focused on sustaining progress from its strategic execution while navigating market uncertainties, with an emphasis on productivity and cost management [24][25] - A second phase of Project Fortify is being implemented to drive further efficiencies and align operations with current market conditions [43] - The acquisition of UW Solutions is seen as a significant growth driver, with expectations of double-digit organic growth in the Performance Surfaces business [16][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the impact of tariffs on adjusted EPS, estimating a $0.45 to $0.55 impact, primarily in the first half of fiscal 2026 [40][54] - The company remains confident in its ability to manage through current uncertainties and is focused on long-term growth opportunities [45][46] - Despite challenges, management believes the company is well-positioned to mitigate tariff impacts and improve productivity [42][45] Other Important Information - The company generated $30 million in cash from operations in Q4, with a total of $125 million for the year, while investing $36 million in CapEx [38] - The balance sheet remains strong with a consolidated leverage ratio of 1.3 and no near-term debt maturities [39] - The company plans to share an updated strategy later in the fiscal year to drive a stronger focus on growth [48] Q&A Session Summary Question: Impact of tariffs on EPS - Management discussed the direct and indirect impacts of tariffs, with a significant portion of the EPS impact expected in the first half of the year, and plans to mitigate these effects [51][54] Question: Integration of UW Solutions - The integration of UW Solutions is progressing well, with minimal expected tariff impact, and the business is on track for double-digit growth [59][60] Question: Customer decision-making amid tariff uncertainty - Management noted a general slowdown in customer decisions due to uncertainty around tariffs, affecting the non-residential construction market [65][66] Question: Glass segment margins - Despite volume headwinds, management remains confident that the glass segment can achieve its long-term EBITDA margin targets [68] Question: Expectations for cash flow in fiscal 2026 - Operating cash flow is expected to decline due to arbitration award payments and higher interest expenses, impacting overall cash flow for the year [69][70] Question: Competitive dynamics in the architectural market - Management observed a consistent softness in the market, with competitors focusing on improving operations and margins amid current challenges [74][75]

Core Viewpoint - Apogee Enterprises reported quarterly earnings of $0.89 per share, missing the Zacks Consensus Estimate of $0.90 per share, and down from $1.14 per share a year ago, indicating a -1.11% earnings surprise [1] Financial Performance - The company posted revenues of $345.69 million for the quarter ended February 2025, surpassing the Zacks Consensus Estimate by 2.82%, but down from $361.84 million year-over-year [2] - Over the last four quarters, Apogee has surpassed consensus EPS estimates three times [2] Stock Performance - Apogee Enterprises shares have declined approximately 35.7% since the beginning of the year, compared to a decline of -8.6% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $1.19 on revenues of $336.82 million, and for the current fiscal year, it is $4.43 on revenues of $1.36 billion [7] Industry Outlook - The Glass Products industry, to which Apogee belongs, is currently ranked in the bottom 13% of over 250 Zacks industries, indicating potential challenges ahead [8] - The performance of Apogee's stock may be influenced by the overall outlook for the industry [8]

Financial Performance - Fourth-quarter net sales decreased 4.5% to $345.7 million, impacted by an extra week of operations in the prior year which negatively affected sales by 7.9%[9] - Full-year net sales totaled $1.36 billion, with a decline of 3.9% compared to the previous year, also affected by an extra week of operations[9] - Fourth-quarter diluted EPS was $0.11, down 84.5% from $0.71 in the prior year, while adjusted diluted EPS decreased to $0.89 from $1.14[9] - Full-year adjusted diluted EPS grew 4% to a record $4.97, compared to $4.79 in the previous year[3] - Operating income for the fourth quarter was $6.1 million, with an operating margin of 1.8%, down from 6.0% in the prior year[9] - Adjusted operating income for the fourth quarter was $28.7 million, with an adjusted operating margin of 8.3%, a decrease of 120 basis points from the previous year[9] - The company reported a net earnings decline of 84.2% for the three months ended March 1, 2025, totaling $2.5 million[30] - Net earnings for the three months ended March 1, 2025, were $2,485,000, a decrease from $15,736,000 for the same period last year[41] - Net earnings for the twelve months ended March 1, 2025, were $85,052,000, a decrease from $99,613,000 in the prior year, representing a decline of about 14.7%[53] Segment Performance - The Architectural Metals segment saw a 19.4% decline in net sales to $112.1 million, while the Performance Surfaces segment experienced a 76.7% increase to $47.9 million[10][13] - Architectural Metals segment net sales fell by 19.4% to $112.148 million, while Architectural Services increased by 10.9% to $117.895 million[32] - The Architectural Glass segment experienced a decline in net sales by 21.9% to $75.157 million for the three months ended March 1, 2025[32] - The Performance Surfaces segment saw a significant increase in net sales by 76.7% to $47.899 million for the three months ended March 1, 2025[32] Cash Flow and Shareholder Returns - Net cash provided by operating activities in the fourth quarter was $30.0 million, down from $74.9 million in the prior year[15] - The company returned $67.1 million to shareholders through share repurchases and dividends, up from $33.0 million in the prior year[16] - The company reported a net cash provided by operating activities of $125.162 million for the twelve months ended March 1, 2025, down from $204.154 million[39] - Cash dividends per common share increased by 4.0% to $0.26 for the three months ended March 1, 2025[30] Debt and Leverage - Long-term debt increased to $285.0 million, resulting in a Consolidated Leverage Ratio of 1.3x at the end of the quarter[18] - Long-term debt increased significantly to $285 million from $62 million, indicating a rise of 359.7%[37] Future Outlook - The Company expects net sales for fiscal 2026 to be in the range of $1.37 billion to $1.43 billion, with diluted EPS projected between $2.54 and $3.19[21] - Adjusted diluted EPS is expected to range from $3.55 to $4.10, including an unfavorable impact from tariffs of $0.45 to $0.55[21] - Future outlook includes continued focus on integration of the UW Solutions acquisition and potential market expansion strategies[42] Project Fortify - The initial phase of Project Fortify incurred pre-tax charges of $16.7 million, with estimated annualized cost savings of approximately $14 million[19] - The second phase of Project Fortify is expected to incur pre-tax charges of $24 million to $26 million, delivering estimated annualized pre-tax cost savings of $13 million to $15 million[19] - Restructuring charges related to Project Fortify totaled $4,323,000 for the twelve months ended March 1, 2025, down from $12,403,000 in the previous year, reflecting a decrease of approximately 65.2%[59] Acquisition Impact - The acquisition of UW Solutions contributed $23.2 million, or 6.4%, to fourth-quarter net sales and $32.0 million, or 2.3%, to full-year net sales[9] - The UW Solutions business, acquired in November 2024, is expected to contribute approximately $100 million in net sales with an adjusted EBITDA margin of around 20%[21] - Total acquisition-related costs for the three months ended March 1, 2025, amounted to $4,429,000, with integration costs contributing $1,114,000[41] - The total acquisition-related costs amounted to $10,302,000 for the twelve months ended March 1, 2025, compared to no costs reported in the previous year[59] Earnings Adjustments - Adjusted net earnings for the twelve months ended March 1, 2025, were $108,872,000, compared to $105,439,000 for the previous year, reflecting a 2.3% increase[41] - Adjusted operating income for the same period was $149,762,000, compared to $146,236,000 in the prior year, indicating a slight increase of about 1.7%[49] - Adjusted Return on Invested Capital (ROIC) for the twelve months ended March 1, 2025, was 14.9%, down from 16.8% in the previous year[59] - The EBITDA margin for the twelve months ended March 1, 2025, was 12.0%, compared to 12.5% for the previous year, indicating a slight contraction[53] - The operating margin for the twelve months ended March 1, 2025, was 8.7%, compared to 9.4% in the previous year, indicating a decrease of about 7.4%[49] Impairment and Restructuring - The company incurred impairment expenses of $7,634,000 related to intangible assets in the Architectural Metals Segment for the twelve months ended March 1, 2025[50] - Impairment expense for the three months ended March 1, 2025, was $7,634,000, reflecting ongoing challenges in the Architectural Metals Segment[41] - Restructuring charges for the three months ended March 1, 2025, were $1,110,000, compared to $12,403,000 for the same period last year[41] Share Count - The company reported a weighted average diluted shares outstanding of 21,793,000 for the three months ended March 1, 2025[41]

Core Viewpoint - Apogee Enterprises reported a mixed performance in its third-quarter fiscal 2025 earnings, with adjusted EPS exceeding expectations but overall sales and margins declining, leading to a cautious outlook for fiscal 2025 [2][16]. Financial Performance - Adjusted EPS for Q3 fiscal 2025 was $1.19, surpassing the Zacks Consensus Estimate of $1.14, but down 3% from the prior-year quarter [2][3]. - Net sales increased by 0.5% year over year to $341 million, driven by an $8.8 million contribution from the acquisition of UW Solutions [4][12]. - Gross profit declined by 1.3% to $89 million, with gross margin contracting by 50 basis points to 26.1% [5][8]. Cost and Expenses - Cost of sales rose by 1% to $252 million, contributing to the decline in gross profit [5]. - Selling, general and administrative expenses increased by 15% to $60.5 million, influenced by acquisition-related and restructuring expenses [7]. - Operating income fell by 24% to $28.6 million, with the operating margin decreasing to 8.4% from 11.1% in the prior-year quarter [8][9]. Segment Performance - Architectural Framing Systems segment sales decreased by 1% to $138 million, with adjusted operating profit dropping to $13.6 million [10]. - Architectural Glass segment sales plummeted by 23% to $70 million, with adjusted operating income down to $10 million [11]. - Architectural Services segment sales grew by 10.8% to $105 million, with adjusted operating profit surging 70% to $9 million [12]. - Large-Scale Optical Technologies segment sales rose by 27.6% to $33.2 million, including an $8.8 million contribution from UW Solutions [13]. Cash Position and Balance Sheet - Cash and cash equivalents stood at approximately $44 million, up from $37 million at the end of fiscal 2024 [14]. - Long-term debt increased significantly to $272 million, primarily due to borrowings for the acquisition of UW Solutions [15]. - The company returned $31.3 million to shareholders through dividends and share repurchases in the first nine months of fiscal 2025 [15]. Guidance for FY25 - Apogee anticipates a 5% decline in net sales for fiscal 2025, despite expecting a $30 million contribution from UW Solutions [16]. - Adjusted EPS is projected to be near the lower end of the guidance range of $4.90-$5.20, impacted by dilution from the acquisition and lower volumes [17].

Core Viewpoint - Apogee Enterprises, Inc. reported adjusted EPS of $1.19 for Q3 fiscal 2025, exceeding estimates but reflecting a 3% decline year-over-year [1][2]. Financial Performance - Net sales increased by 0.5% year-over-year to $341 million, driven by an $8.8 million contribution from the acquisition of UW Solutions [3]. - Cost of sales rose by 1% to $252 million, leading to a gross profit decline of 1.3% to $89 million, with a gross margin contraction of 50 basis points to 26.1% [4][5]. - Operating income fell 24% to $28.6 million, with an operating margin of 8.4%, down from 11.1% in the prior year [7]. - Adjusted operating income was $35.4 million, a 6% decrease, with an adjusted operating margin of 10.4% [8]. Segment Performance - Architectural Framing Systems segment sales decreased by 1% to $138 million, with adjusted operating profit dropping to $13.6 million [9]. - Architectural Glass segment sales fell 23% to $70 million, with adjusted operating income down to $10 million [10]. - Architectural Services segment sales grew 10.8% to $105 million, with adjusted operating profit surging 70% to $9 million [11]. - Large-Scale Optical Technologies segment sales rose 27.6% to $33.2 million, including an $8.8 million contribution from UW Solutions, but operating profit decreased to $6.2 million [12]. Cash Position & Balance Sheet - Cash and cash equivalents increased to approximately $44 million from $37 million year-over-year [13]. - Long-term debt rose significantly to $272 million due to borrowings for the UW Solutions acquisition [14]. Acquisition Details - Apogee completed the acquisition of UW Solutions for $242 million, expected to contribute over $100 million to net sales in fiscal 2026 [15]. Guidance - The company anticipates a 5% decline in net sales for fiscal 2025, with adjusted EPS expected near the lower end of the guidance range of $4.90-$5.20 [16][17]. Stock Performance - Apogee's shares have increased by 36.7% over the past 12 months, contrasting with a 9.6% decline in the glass products industry [18].

Financial Performance - Consolidated net sales increased by 0.5% to $341.3 million, driven by an $8.8 million inorganic sales contribution from the acquisition of UW Solutions[103] - Gross margin decreased to 26.1%, compared to 26.6%, primarily due to unfavorable sales leverage from lower volume and a less favorable product mix in the Architectural Framing Systems Segment[103] - Operating income declined to $28.6 million from $37.6 million, with an operating margin decrease of 270 basis points to 8.4%[103] - Consolidated net sales for the nine months ended decreased by 3.8% to $1,015.3 million, primarily driven by lower volume and mix[103] - Architectural Glass segment net sales decreased by 22.8% to $70.2 million, down from $90.9 million, primarily due to reduced volume from lower end-market demand[108] - Operating income for the company was $112.0 million, with an operating margin of 11.0%, reflecting a 40 basis point increase from the previous year[106] - Adjusted operating income grew by 8.1% to $121.1 million, with an adjusted operating margin improving to 11.9%[106] - The Architectural Services segment saw net sales increase by 10.8% to $104.9 million, driven by a more favorable mix of projects[108] - Consolidated operating income for the three months ended November 30, 2024, was $28,629,000, a decrease from $37,647,000 for the same period in 2023, reflecting a decline of approximately 24%[119] - The company reported net earnings of $20,989,000 for the three months ended November 30, 2024, compared to $26,974,000 for the same period in 2023, indicating a decrease of approximately 22%[128] - The company’s total operating income for the nine months ended November 30, 2024, was $111,975,000, compared to $111,967,000 for the same period in 2023, indicating stability in performance[123] - Net earnings for the three months ended November 30, 2024, were $20.989 million, a decrease of 22.0% compared to $26.974 million for the same period in 2023[135] Expenses and Costs - SG&A expenses rose by $7.9 million to 17.7% of net sales, attributed to acquisition-related expenses and restructuring costs related to Project Fortify[103] - SG&A expenses rose by $6.7 million to 17.1% of net sales, attributed to acquisition-related expenses and lower sales volume[106] - Corporate and Other expenses were $8.8 million, an increase from $6.9 million, mainly due to acquisition-related costs[110] - The total acquisition-related costs for the three months ended November 30, 2024, amounted to $5,873,000, which includes transaction costs of $3,748,000 and integration costs of $941,000[128] - Restructuring charges related to Project Fortify totaled $3,213,000 for the nine months ended November 30, 2024, which included $1.3 million of employee termination costs[125] Cash Flow and Financing - Net cash provided by operating activities decreased to $95.1 million for the first nine months of fiscal 2025, down from $129.3 million in the prior year period, primarily due to cash used for working capital[139] - Net cash used by investing activities increased significantly to $257.1 million for the first nine months of fiscal 2025, compared to $26.3 million in the prior year, mainly due to the acquisition of UW Solutions costing $233.1 million[140] - Net cash provided by financing activities was $169.0 million for the first nine months of fiscal 2025, compared to a net cash used of $100.4 million in the prior year, driven by $250.0 million proceeds from a delayed draw term loan for the UW Solutions acquisition[141] - The company entered into a Credit Agreement providing for an unsecured senior credit facility of up to $700.0 million, including a $450.0 million revolving credit facility and a $250.0 million delayed draw term loan[143] - As of November 30, 2024, outstanding borrowings under the term loan facility were $230.0 million, and under the revolving credit facility were $30.0 million[150] Tax and Interest - Interest expense, net decreased to $1.0 million, primarily due to lower weighted-average interest rates and higher interest income[103] - Interest expense decreased to $2.6 million from $5.7 million, primarily due to lower average debt levels[106] - The effective tax rate increased to 24.1% from 23.6% due to an increase in tax expense for discrete items[103] Acquisitions and Strategic Initiatives - The company acquired UW Solutions, a manufacturer of high-performance coated substrates, enhancing its product offerings in attractive end markets[96] - The company is focused on operational execution and productivity improvements to drive value for customers and improve profitability[93] - The backlog for Architectural Services was approximately $742.2 million, down from $792.1 million in the previous quarter[113] - The backlog amortization costs for the three months ended November 30, 2024, were $805,000, reflecting the value attributed to the contracted backlog purchased in the UW Solutions acquisition[128] Performance Metrics - Adjusted operating income for the nine months ended November 30, 2024, was $121,061,000, compared to $111,967,000 for the same period in 2023, representing an increase of about 8%[123] - The adjusted diluted EPS for the three months ended November 30, 2024, was $1.19, consistent with $1.23 for the same period in 2023[128] - The adjusted operating margin for the nine months ended November 30, 2024, was 11.9%, compared to 10.6% for the same period in 2023, showing an improvement[123] - Adjusted EBITDA for the nine months ended November 30, 2024, was $151.547 million, an increase of 6.0% from $142.187 million in the prior year[135] Liquidity and Funding - The company had $1.2 billion of surety or performance bonds outstanding, with $307.2 million in backlog as of November 30, 2024[156] - The company expects to make contributions of $0.4 million to its defined-benefit pension plans in fiscal 2025, meeting or exceeding minimum funding requirements[154] - The company is evaluating its liquidity requirements and believes it has adequate sources to meet short-term and long-term capital expenditure needs[157]

Core Viewpoint - Apogee Enterprises' stock is experiencing a significant decline despite reporting better-than-expected sales and earnings, primarily due to disappointing revenue growth and deteriorating profit margins [1][2][3]. Financial Performance - Apogee reported adjusted earnings of $1.19 per share on sales of $341.3 million, surpassing analyst expectations of $1.11 per share and $332.2 million in sales [1]. - Year-over-year revenue growth was only 0.5%, largely attributed to the acquisition of UW Interco, which contributed additional revenue [2]. - GAAP earnings were reported at $0.96 per share, significantly lower than the adjusted figures, with GAAP net profit down 22% year over year [3]. Operational Challenges - The CEO cited weak demand in end markets as a key factor for the disappointing results, leading to lower volume and an unfavorable product mix, particularly in Architectural Framing Systems [4]. - The acquisition of UW Interco also introduced acquisition-related expenses that negatively impacted profit margins [4]. Future Outlook - Management anticipates a 5% decline in full-year sales for fiscal 2025, with continued weak demand expected to affect sales in fiscal Q4 [5]. - Despite the challenges, Apogee expects to earn at least $4.90 per share on a GAAP basis for the year, suggesting a price-to-earnings ratio of approximately 12x based on a share price around $59 [6].