Apogee(APOG) - 2026 Q3 - Quarterly Report

Financial Performance - Consolidated net sales increased by 2.1% to $348.6 million, driven by $18.4 million of inorganic sales from the acquisition of UW Solutions[120] - Gross margin decreased to 23.8% from 26.1%, primarily due to lower volume and price, as well as higher aluminum and restructuring costs[120] - Operating income declined to $24.9 million from $28.6 million, with an operating margin decrease of 130 basis points to 7.1%[120] - Adjusted EBITDA increased to $46.1 million, while adjusted EBITDA margin decreased to 13.2% from 13.4%[120] - Net earnings were $16.5 million compared to $21.0 million, with an effective tax rate of 31.4% compared to 24.1%[120] - For the nine months ended, consolidated net sales increased by 3.8% to $1.1 billion, primarily due to $65.3 million from the acquisition of UW Solutions[125] - Gross margin for the nine months decreased to 22.9% from 28.1%, driven by lower price and volume, and higher costs[125] - Operating income for the nine months declined to $58.7 million from $112.0 million, with a decrease in operating margin of 540 basis points to 5.6%[125] - Adjusted EBITDA for the nine months ended November 29, 2025, was $124.9 million, a 17.6% decrease from $151.5 million in the same period last year[126] - Net earnings for the three months ended November 29, 2025, were $16,549,000, compared to $20,989,000 for the same period in 2024, a decrease of approximately 21.5%[143] - The company’s net earnings for the nine months ended November 29, 2025, were $37,511,000, compared to $82,566,000 for the same period in 2024, reflecting a decrease of approximately 54.6%[143] Segment Performance - Architectural Metals segment net sales decreased by 9.9% to $124.4 million, while adjusted EBITDA margin improved to 13.5%[130] - Performance Surfaces segment saw a significant increase in net sales by 59.6% to $52.9 million, with an adjusted EBITDA margin of 22.5%[130] - Architectural Glass segment net sales decreased by 12.4% to $216.3 million, with adjusted EBITDA margin declining to 16.9%[135] Costs and Expenses - Interest expense increased to $11.1 million, primarily due to a higher average debt balance from the acquisition of UW Solutions[125] - The company incurred restructuring costs of $5,080,000 for the three months ended November 29, 2025, compared to $912,000 for the same period in 2024, indicating a significant increase in restructuring expenses[143] - The company reported acquisition-related costs of $315,000 for the three months ended November 29, 2025, down from $5,873,000 in the prior year, showing a decrease of approximately 94.7%[143] Cash Flow and Liquidity - Net cash provided by operating activities was $66.6 million for the first nine months of fiscal 2026, a decrease from $95.1 million in the prior year period, primarily due to lower net earnings and increased working capital[147] - Net cash used in investing activities was $15.8 million for the first nine months of fiscal 2026, a significant decrease from $257.1 million in the prior-year period, primarily due to capital expenditures[148] - Net cash used in financing activities was $51.9 million for the first nine months of fiscal 2026, compared to $169.0 million provided by financing activities in the prior year, which included $250.0 million in proceeds for the acquisition of UW Solutions[149] - As of November 29, 2025, outstanding borrowings under the delayed draw term loan facility were $215.0 million, and under the revolving credit facility were $40.0 million[159] - The company has a total of $2.6 million of ongoing letters of credit related to the senior credit facility, with $407.4 million available for revolving borrowings as of November 29, 2025[160] - The company believes its sources of liquidity will be adequate to meet both short-term and long-term capital expenditure needs[165] Future Outlook - Project Fortify Phase 2 is expected to incur approximately $28 million to $29 million in pre-tax charges, with anticipated annualized pre-tax cost savings of $25 million to $26 million[116] - The backlog for the Architectural Services segment was approximately $774.7 million, up from $742.2 million at the end of the previous fiscal year[134] - The company is continually reviewing its portfolio for potential acquisitions, geographic expansion, and capacity management[166] - There have been no material changes in market risk since March 1, 2025, as disclosed in the Annual Report[169] Pension and Lease Obligations - The company expects to make contributions of $0.4 million to its defined-benefit pension plans in fiscal 2026, meeting minimum funding requirements[163] - Future lease payments, excluding leases with initial terms of one year or less, were $63.2 million at November 29, 2025, with $3.9 million payable during the remainder of fiscal 2026[161]