Apogee Enterprises, Inc. — FY2024 Form 10-K
Reporting period: Fiscal year ended March 2, 2024 (53 weeks), compared with the 52-week fiscal year ended February 25, 2023. Apogee supplies architectural framing, glass and installation services, plus glazing products for framing and optical markets.
Financial performance
| Metric | FY2024 | FY2023 |
|---|---|---|
| Net sales | $1,416.9 million | $1,440.7 million |
| Gross profit / margin | $367.1 million / 25.9% | $335.3 million / 23.3% |
| Operating income / margin | $133.8 million / 9.4% | $125.8 million / 8.7% |
| Net earnings | $99.6 million | $104.1 million |
| Diluted EPS | $4.51 | $4.64 |
| Operating cash flow | $204.2 million | $102.7 million |
| Capital expenditures | $43.2 million | $45.2 million |
Sales declined 1.6%, primarily due to lower volumes, partly offset by pricing and mix. Gross margin improved on pricing, mix and savings initiatives, despite lower volume, inflation and restructuring costs. GAAP operating margin increased 70 basis points; adjusted operating margin was 10.3%, up 160 basis points. Adjusted diluted EPS was $4.77, up 19.8%; these are non-GAAP measures. Net earnings and GAAP EPS fell as the effective tax rate rose to 22.9% from 10.7%; FY2023 benefited from $14.8 million of discrete tax benefits.
Segment trends: Architectural Glass sales rose 19.6% to $378.4 million and operating margin improved to 18.0%. Architectural Framing Systems sales declined 7.4% to $601.7 million and margin fell to 10.8%. Architectural Services sales declined 7.8% to $378.4 million and margin fell to 3.1%. Large-Scale Optical sales declined 4.8% to $99.2 million; margin was broadly stable at 24.4%.
Cash, debt and liquidity
- Cash and cash equivalents were $37.2 million at year-end, versus $19.9 million a year earlier.
- Long-term debt was $62.0 million, down from $169.8 million; this included $50.0 million outstanding on the U.S. revolver and $12.0 million of industrial revenue bonds.
- The company reported $320.0 million available under its U.S. revolving facility and $25.0 million under Canadian facilities. It complied with its debt covenants.
- Operating cash flow more than doubled, primarily from favorable working-capital changes. Investing used $43.7 million; financing used $144.6 million, including debt repayments, dividends and share repurchases.
- FY2024 dividends were $0.97 per share. The company repurchased $11.8 million of shares under its program during the year.
Material changes, outlook and notable items
- Project Fortify: Announced in January 2024 to streamline operations, including eliminating selected lower-margin offerings and transferring production from Walker, Michigan, to facilities in Missouri and Wisconsin. FY2024 charges were $12.4 million. Management expects total pre-tax charges of $16–$18 million and annualized savings of $12–$14 million, with about 60% of savings expected in FY2025 and the balance in FY2026. Completion is expected by the third quarter of FY2025.
- Management’s longer-term enterprise targets are adjusted ROIC above 12%, adjusted operating margin above 10%, and revenue growth greater than 1.2 times the non-residential construction market. FY2024 adjusted ROIC was 16.5% and adjusted operating margin was 10.3%. The filing does not provide a specific FY2025 sales or EPS forecast.
- Architectural Services year-end backlog rose to $807.8 million from $726.7 million. Architectural Framing Systems backlog fell to $200.7 million from $243.3 million; the company expects this segment’s shorter-cycle mix to make backlog less useful and will stop reporting it beginning FY2025.
- Other income included a $4.7 million pre-tax gain from settlement of a New Markets Tax Credit transaction. Project Fortify also included $6.2 million of asset impairment charges.
- A claimant in a commercial-sealant-related arbitration received a $20 million award in December 2022. Apogee appealed and stated it believes the award will not materially adversely affect its business, results, financial condition or cash flows, considering available information and potential insurance coverage.
Risks and contingencies
Key risks include cyclicality in non-residential construction and sensitivity to interest rates, inflation and construction costs; volatility or supply disruption for aluminum and glass; fixed-price project cost overruns, execution delays and warranty claims; customer concentration in LSO; labor availability; and cybersecurity, regulatory and environmental risks. The company reported no cybersecurity incident with a material adverse effect. It had $1.3 billion of performance bonds outstanding, including $463.3 million related to backlog, and reported no payments under existing-business bonds. Warranty reserves were $21.4 million at year-end.
Investor verification priorities
- Track whether Project Fortify delivers the stated $12–$14 million annualized savings on schedule, and compare realized savings with restructuring charges.
- Assess Architectural Services project margins and cost estimates for long-term fixed-price contracts; revenue recognition estimates were identified as a critical audit matter.
- Monitor Architectural Framing Systems volume, pricing, backlog transition and impact of phasing out selected lower-margin work.
- Reconcile cash-flow improvement with working-capital movements and confirm continued debt-covenant compliance and liquidity availability.
- Follow the $20 million arbitration appeal, insurance coverage and developments in warranty and product-liability claims.
- Separate recurring operating performance from the $4.7 million tax-credit gain, restructuring charges and the prior-year tax benefit when comparing earnings.