PART I Financial Information Item 1. Financial Statements Q1 FY23 financial statements show 9.4% net sales growth and doubled net earnings to $22.7 million, with negative operating cash flow and increased long-term debt Consolidated Financial Statements Net sales reached $356.6 million, operating income doubled to $33.2 million, and diluted EPS rose to $1.00, with negative operating cash flow Consolidated Results of Operations (Q1 FY23 vs Q1 FY22) | Financial Metric | Three Months Ended May 28, 2022 (in thousands) | Three Months Ended May 29, 2021 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Net Sales | $356,635 | $326,006 | +9.4% | | Gross Profit | $85,617 | $67,710 | +26.4% | | Operating Income | $33,216 | $16,042 | +107.0% | | Net Earnings | $22,731 | $10,817 | +110.1% | | Diluted EPS | $1.00 | $0.42 | +138.1% | Key Balance Sheet Items (As of May 28, 2022) | Account | May 28, 2022 (in thousands) | February 26, 2022 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $15,186 | $37,583 | | Receivables, net | $193,741 | $168,592 | | Inventories | $98,517 | $80,494 | | Total current assets | $371,161 | $337,892 | | Long-term debt | $261,000 | $162,000 | | Total shareholders' equity | $327,290 | $386,199 | | Total assets | $906,950 | $887,863 | - Net cash used by operating activities was $(30.5) million, a significant shift from $6.9 million provided in the prior-year period, mainly due to increases in receivables and inventories. Net cash provided by financing activities was $17.6 million, driven by $99.0 million in net borrowings, which was partially offset by $74.3 million in share repurchases15 Notes to Consolidated Financial Statements Segment reporting changed, reallocating Sotawall and goodwill; remaining performance obligations total $810.6 million, and share repurchase authorization increased - Effective at the start of Q1 fiscal 2023, the Sotawall business was moved from the Architectural Framing Systems segment to the Architectural Services segment, with comparative fiscal 2022 segment results recast to reflect this change2283 - As of May 28, 2022, the transaction price associated with unsatisfied performance obligations was approximately $810.6 million, with $505.1 million expected to be recognized as revenue within one year2829 - Goodwill was reallocated between the Architectural Framing Systems and Architectural Services segments due to the transition of the Sotawall business, with no impairment identified during the quarter4849 - Subsequent to the end of the quarter, the Board of Directors increased the share repurchase authorization by an additional 1,000,000 shares88 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 9.4% net sales growth to strong segments, with gross margin improving to 24.0% from pricing actions, and raised full-year adjusted EPS guidance - The company has established a new enterprise strategy with three key elements: becoming the economic leader in target markets, actively managing the portfolio to drive higher margins and returns, and strengthening core capabilities through a center-led functional model95 - Consolidated net sales increased 9.4% year-over-year, driven by growth in Architectural Framing Systems and Architectural Services. Gross margin expanded by 320 basis points to 24.0%, primarily due to inflation-related pricing actions98101 - The company raised its full-year adjusted earnings guidance to a range of $3.50 to $3.90 per diluted share, up from the previous range of $2.90 to $3.30, citing strong first-quarter results and the impact of share repurchases121 Segment Analysis Architectural Framing Systems led with 182.7% operating income growth, while Architectural Services' income fell 30.7% due to write-downs, and Architectural Glass income surged 142.9% Segment Performance (Q1 FY23) | Segment | Net Sales (in thousands) | Operating Income (in thousands) | Operating Margin | YoY Sales Change | YoY Op. Income Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Architectural Framing Systems | $163,292 | $23,665 | 14.5% | +19.4% | +182.7% | | Architectural Services | $103,388 | $2,927 | 2.8% | +13.9% | -30.7% | | Architectural Glass | $76,265 | $5,169 | 6.8% | -8.1% | +142.9% | | Large-Scale Optical (LSO) | $25,162 | $6,498 | 25.8% | +3.9% | +11.1% | - Architectural Framing Systems' operating margin increased by 840 basis points, benefiting from improved pricing and the timing of inventory flows, which offset cost inflation104 - Architectural Services' operating margin decreased by 190 basis points, reflecting performance write-downs on a discrete number of projects and increased costs for investments107 Liquidity and Capital Resources Operating activities used $30.5 million cash due to working capital, while financing provided $17.6 million from $99.0 million net debt borrowings, funding $74.3 million in share repurchases - Net cash used by operating activities was $30.5 million, compared to $6.8 million provided in the prior year, reflecting increased working capital to support revenue growth113 - During the first three months of fiscal 2023, the company repurchased 1,571,139 shares for a total cost of $74.3 million115 - As of May 28, 2022, outstanding borrowings under the revolving credit facility were $99.0 million, and the company also has a $150 million term loan116 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk have occurred since the fiscal year ended February 26, 2022 - There have been no material changes in market risk since February 26, 2022127 Item 4. Controls and Procedures Disclosure controls and procedures were effective as of May 28, 2022, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of May 28, 2022, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective128 - There were no changes in the company's internal control over financial reporting during the fiscal quarter that materially affected, or are reasonably likely to materially affect, these controls128 PART II Other Information Item 1. Legal Proceedings The company is involved in routine legal proceedings, none of which are expected to have a material adverse effect on financial condition or operations - The Company is party to various legal proceedings incidental to its normal operating activities, including disputes from construction projects, product liability, and employment matters, with no matters currently expected to result in material adverse losses129 Item 1A. Risk Factors No material changes or additions to risk factors have occurred since the fiscal year ended February 26, 2022 - There have been no material changes or additions to the risk factors discussed in the Annual Report on Form 10-K for the fiscal year ended February 26, 2022130 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1,571,139 shares for $74.3 million in Q1 FY23, with 253,399 shares remaining authorized for repurchase Share Repurchases in Q1 FY2023 | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | Feb 27 - Mar 26, 2022 | 553,539 | $47.27 | 553,539 | | Mar 27 - Apr 23, 2022 | 1,019,451 | $47.19 | 1,017,600 | | Apr 24 - May 28, 2022 | 28,233 | $44.00 | — | | Total | 1,601,223 | $47.13 | 1,571,139 | - As of the end of the quarter, the company had authorization to repurchase an additional 253,399 shares under its plans132 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and officer certifications
Apogee(APOG) - 2023 Q1 - Quarterly Report