Company Quick10K Filing
Apogee Enterprises
Price38.80 EPS2
Shares27 P/E23
MCap1,042 P/FCF27
Net Debt264 EBIT74
TEV1,306 TEV/EBIT18
TTM 2019-06-01, in MM, except price, ratios
10-Q 2020-05-30 Filed 2020-07-09
10-K 2020-02-29 Filed 2020-04-24
10-Q 2019-11-30 Filed 2020-01-09
10-Q 2019-08-31 Filed 2019-10-03
10-Q 2019-06-01 Filed 2019-07-11
10-K 2019-03-02 Filed 2019-04-26
10-Q 2018-12-01 Filed 2019-01-10
10-Q 2018-09-01 Filed 2018-10-09
10-Q 2018-06-02 Filed 2018-07-12
10-K 2018-03-03 Filed 2018-04-30
10-Q 2017-12-02 Filed 2018-01-11
10-Q 2017-09-02 Filed 2017-10-12
10-Q 2017-06-03 Filed 2017-07-12
10-K 2017-03-04 Filed 2017-04-28
10-Q 2016-11-26 Filed 2017-01-05
10-Q 2016-08-27 Filed 2016-10-06
10-Q 2016-05-28 Filed 2016-07-07
10-K 2016-02-27 Filed 2016-04-25
10-Q 2015-11-28 Filed 2016-01-07
10-Q 2015-08-29 Filed 2015-10-08
10-Q 2015-05-30 Filed 2015-07-09
10-K 2015-02-28 Filed 2015-04-29
10-Q 2014-11-29 Filed 2015-01-08
10-Q 2014-08-30 Filed 2014-10-09
10-Q 2014-05-31 Filed 2014-07-10
10-K 2014-03-01 Filed 2014-04-30
10-Q 2013-11-30 Filed 2014-01-09
10-Q 2013-08-31 Filed 2013-10-10
10-Q 2013-06-01 Filed 2013-07-11
10-K 2013-03-02 Filed 2013-05-16
10-Q 2012-12-01 Filed 2013-01-10
10-Q 2012-09-01 Filed 2012-10-11
10-Q 2012-06-02 Filed 2012-07-12
10-K 2012-03-03 Filed 2012-04-30
10-Q 2011-11-26 Filed 2012-01-05
10-Q 2011-08-27 Filed 2011-10-06
10-Q 2011-05-28 Filed 2011-07-07
10-K 2011-02-26 Filed 2011-04-27
10-Q 2010-11-27 Filed 2011-01-06
10-Q 2010-08-28 Filed 2010-10-07
10-Q 2010-05-29 Filed 2010-06-30
10-K 2010-02-27 Filed 2010-04-28
10-Q 2009-11-28 Filed 2010-01-07
8-K 2020-06-30 Officers, Exhibits
8-K 2020-06-26 Earnings, Exhibits
8-K 2020-06-24 Officers, Shareholder Vote, Exhibits
8-K 2020-05-29
8-K 2020-04-23
8-K 2020-04-06
8-K 2020-04-02
8-K 2020-01-14
8-K 2019-12-19
8-K 2019-12-19
8-K 2019-11-12
8-K 2019-10-31
8-K 2019-10-10
8-K 2019-09-17
8-K 2019-09-12
8-K 2019-08-05
8-K 2019-08-05
8-K 2019-06-27
8-K 2019-06-26
8-K 2019-06-25
8-K 2019-04-25
8-K 2019-04-11
8-K 2019-02-08
8-K 2018-12-20
8-K 2018-10-02
8-K 2018-09-18
8-K 2018-06-28
8-K 2018-06-27
8-K 2018-04-26
8-K 2018-04-12
8-K 2018-01-05

APOG 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.3 apog-ex10320200530.htm
EX-31.1 apog-ex31120200530.htm
EX-31.2 apog-ex31220200530.htm
EX-32.1 apog-ex32120200530.htm
EX-32.2 apog-ex32220200530.htm

Apogee Enterprises Earnings 2020-05-30

Balance SheetIncome StatementCash Flow
1.21.00.70.50.20.02012201420172020
Assets, Equity
0.40.30.20.10.0-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.1-0.2-0.32012201420172020
Ops, Inv, Fin

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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 May 30, 2020
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: (952835-1874
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
 
NASDAQ Global Select Market
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
 
x
  
Accelerated filer
 
o
 
 
 
 
 
 
 
Non-accelerated filer
 
o
  
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 July 7, 2020, 26,356,670 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
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 
 

3


PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements

CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except stock data)
 
May 30, 2020
 
February 29, 2020
Assets
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
11,636

 
$
14,952

Receivables, net of allowance for doubtful accounts
 
156,304

 
196,806

Inventories
 
75,285

 
71,089

Costs and earnings on contracts in excess of billings
 
65,980

 
73,582

Other current assets
 
21,488

 
25,481

Total current assets
 
330,693

 
381,910

Property, plant and equipment, net
 
320,073

 
324,386

Operating lease right-of-use assets
 
49,911

 
52,892

Goodwill
 
190,544

 
185,516

Intangible assets
 
136,071

 
140,191

Other non-current assets
 
44,332

 
44,096

Total assets
 
$
1,071,624

 
$
1,128,991

Liabilities and Shareholders’ Equity
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
62,369

 
$
69,056

Accrued payroll and related benefits
 
25,630

 
40,119

Billings on contracts in excess of costs and earnings
 
15,321

 
32,696

Operating lease liabilities
 
10,462

 
11,272

Current portion of debt
 
155,400

 
5,400

Other current liabilities
 
110,348

 
118,314

Total current liabilities
 
379,530

 
276,857

Long-term debt
 
55,500

 
212,500

Non-current operating lease liabilities
 
40,814

 
43,163

Non-current self-insurance reserves
 
24,140

 
22,831

Other non-current liabilities
 
67,496

 
56,862

Commitments and contingent liabilities (Note 8)
 
 
 
 
Shareholders’ equity
 
 
 
 
Common stock of $0.33-1/3 par value; authorized 50,000,000 shares; issued and outstanding 26,368,864 and 26,443,166 respectively
 
8,790

 
8,814

Additional paid-in capital
 
153,862

 
154,016

Retained earnings
 
382,225

 
388,010

Common stock held in trust
 
(696
)
 
(685
)
Deferred compensation obligations
 
696

 
685

Accumulated other comprehensive loss
 
(40,733
)
 
(34,062
)
Total shareholders’ equity
 
504,144

 
516,778

Total liabilities and shareholders’ equity
 
$
1,071,624

 
$
1,128,991


See accompanying notes to consolidated financial statements.

4


CONSOLIDATED RESULTS OF OPERATIONS
(unaudited)
 
 
Three Months Ended
(In thousands, except per share data)
 
May 30, 2020
 
June 1, 2019
Net sales
 
$
289,095

 
$
355,365

Cost of sales
 
228,844

 
274,398

Gross profit
 
60,251

 
80,967

Selling, general and administrative expenses
 
53,782

 
57,926

Operating income
 
6,469

 
23,041

Interest and other expense, net
 
2,463

 
2,611

Earnings before income taxes
 
4,006

 
20,430

Income tax expense
 
1,130

 
4,987

Net earnings
 
$
2,876

 
$
15,443

Earnings per share - basic
 
$
0.11

 
$
0.58

Earnings per share - diluted
 
$
0.11

 
$
0.58

Weighted average basic shares outstanding
 
26,168

 
26,597

Weighted average diluted shares outstanding
 
26,418

 
26,843


See accompanying notes to consolidated financial statements.

5


CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(unaudited)
 
 
Three Months Ended
(In thousands)
 
May 30, 2020
 
June 1, 2019
Net earnings
 
$
2,876

 
$
15,443

Other comprehensive (loss) earnings:
 
 
 
 
Unrealized gain on marketable securities, net of $26 and $47 of tax expense, respectively
 
97

 
181

Unrealized (loss) gain on derivative instruments, net of ($189) and $2 of tax (benefit) expense, respectively
 
(617
)
 
5

Foreign currency translation adjustments
 
(6,151
)
 
(2,560
)
Other comprehensive loss
 
(6,671
)
 
(2,374
)
Total comprehensive (loss) earnings
 
$
(3,795
)
 
$
13,069



See accompanying notes to consolidated financial statements.

6


CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
 
Three Months Ended
(In thousands)
 
May 30, 2020
 
June 1, 2019
Operating Activities
 
 
 
 
Net earnings
 
$
2,876

 
$
15,443

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
12,540

 
11,102

Share-based compensation
 
1,406

 
1,618

Deferred income taxes
 
(738
)
 
6,438

Noncash lease expense
 
2,945

 
2,902

Other, net
 
1,039

 
(1,762
)
Changes in operating assets and liabilities:
 
 
 
 
Receivables
 
39,650

 
(16,982
)
Inventories
 
(4,700
)
 
835

Costs and earnings on contracts in excess of billings
 
7,558

 
(6,007
)
Accounts payable and accrued expenses
 
(22,334
)
 
(15,317
)
Billings on contracts in excess of costs and earnings
 
(17,181
)
 
(1,198
)
Refundable and accrued income taxes
 
2,847

 
(4,369
)
Operating lease liability
 
(2,781
)
 
(1,517
)
Other
 
849

 
(928
)
Net cash provided (used) by operating activities
 
23,976

 
(9,742
)
Investing Activities
 
 
 
 
Capital expenditures
 
(8,606
)
 
(11,198
)
Other
 
(1,082
)
 
(824
)
Net cash used by investing activities
 
(9,688
)
 
(12,022
)
Financing Activities
 
 
 
 
Borrowings on line of credit
 
139,500

 
103,000

Payments on line of credit
 
(146,500
)
 
(55,500
)
Repurchase and retirement of common stock
 
(4,731
)
 
(20,010
)
Dividends paid
 
(4,872
)
 
(4,598
)
Other
 
(731
)
 
(1,270
)
Net cash (used) provided by financing activities
 
(17,334
)
 
21,622

Decrease in cash and cash equivalents
 
(3,046
)
 
(142
)
Effect of exchange rates on cash
 
(270
)
 
(143
)
Cash, cash equivalents and restricted cash at beginning of year
 
14,952

 
29,241

Cash, cash equivalents and restricted cash at end of period
 
$
11,636

 
$
28,956

Noncash Activity
 
 
 
 
Capital expenditures in accounts payable
 
$
1,458

 
$
1,667


See accompanying notes to consolidated financial statements.

7


CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
(In thousands)
 
Common Shares Outstanding
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Common Stock Held in Trust
 
Deferred Compensation Obligation
 
Accumulated Other Comprehensive (Loss) Income
 
Total Shareholders' Equity
Balance at February 29, 2020
 
26,443

 
$
8,814

 
$
154,016

 
$
388,010

 
$
(685
)
 
$
685

 
$
(34,062
)
 
$
516,778

Net earnings
 

 

 

 
2,876

 

 

 

 
2,876

Unrealized gain on marketable securities, net of $26 tax expense
 

 

 

 

 

 

 
97

 
97

Unrealized loss on foreign currency hedge, net of $189 tax benefit
 

 

 

 

 

 

 
(617
)
 
(617
)
Foreign currency translation adjustments
 

 

 

 

 

 

 
(6,151
)
 
(6,151
)
Issuance of stock, net of cancellations
 
183

 
62

 
(39
)
 

 
(11
)
 
11

 

 
23

Share-based compensation
 

 

 
1,406

 

 

 

 

 
1,406

Share repurchases
 
(231
)
 
(77
)
 
(1,370
)
 
(3,284
)
 

 

 

 
(4,731
)
Other share retirements
 
(26
)
 
(9
)
 
(151
)
 
(505
)
 

 

 

 
(665
)
Cash dividends
 

 

 

 
(4,872
)
 

 

 

 
(4,872
)
Balance at May 30, 2020
 
26,369

 
$
8,790

 
$
153,862

 
$
382,225

 
$
(696
)
 
$
696

 
$
(40,733
)
 
$
504,144


(In thousands)
 
Common Shares Outstanding
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Common Stock Held in Trust
 
Deferred Compensation Obligation
 
Accumulated Other Comprehensive (Loss) Income
 
Total Shareholders' Equity
Balance at March 2, 2019
 
27,015

 
$
9,005

 
$
151,842

 
$
367,597

 
$
(755
)
 
$
755

 
$
(32,127
)
 
$
496,317

Net earnings
 

 

 

 
15,443

 

 

 

 
15,443

Unrealized gain on marketable securities, net of $47 tax expense
 

 

 

 

 

 

 
181

 
181

Unrealized gain on foreign currency hedge, net of $2 tax expense
 

 

 

 

 

 

 
5

 
5

Foreign currency translation adjustments
 

 

 

 

 

 

 
(2,560
)
 
(2,560
)
Issuance of stock, net of cancellations
 
79

 
26

 
14

 

 
(12
)
 
12

 

 
40

Share-based compensation
 

 

 
1,618

 

 

 

 

 
1,618

Share repurchases
 
(532
)
 
(177
)
 
(3,051
)
 
(16,782
)
 

 

 

 
(20,010
)
Other share retirements
 
(32
)
 
(11
)
 
(183
)
 
(1,266
)
 

 

 

 
(1,460
)
Cash dividends
 

 

 

 
(4,598
)
 

 

 

 
(4,598
)
Balance at June 1, 2019
 
26,530

 
$
8,843

 
$
150,240

 
$
360,394

 
$
(767
)
 
$
767

 
$
(34,501
)
 
$
484,976





See accompanying notes to consolidated financial statements.

8


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.
Summary of Significant Accounting Policies

Basis of presentation
The consolidated financial statements of Apogee Enterprises, Inc. (we, us, our or the Company) have been prepared in accordance with accounting principles generally accepted in the United States. The information included in this Form 10-Q should be read in conjunction with the Company’s Form 10-K for the year ended February 29, 2020. We use the same accounting policies in preparing quarterly and annual financial statements. All adjustments necessary for a fair presentation of quarterly operating results are reflected herein and are of a normal, recurring nature. The results of operations for the three-month period ended May 30, 2020 are not necessarily indicative of the results to be expected for the full year.

COVID-19 considerations
The ongoing COVID-19 pandemic continues to cause volatility and uncertainty in global markets impacting worldwide economic activity. We have experienced some delays in commercial construction projects and orders as a result of COVID-19. In our Architectural Glass and Architectural Framing segments, orders have been delayed or have slowed, as customers and end markets face some uncertainty and delays in timing of work. In our Architectural Services segment, some construction site closures or project delays have occurred, and job sites have had to adjust to increased physical distancing and health-related precautions. Within our LSO segment, temporary closure of many retail locations resulted in the shutdown of our factories for most of the first quarter, in response to governmental “stay at home” directives. We have also been impacted by quarantine-related absenteeism among our workforce, resulting in labor and capacity constraints at some of our facilities. The extent to which COVID-19 will impact our business will depend on future developments and public health advancements, which are highly uncertain and cannot be predicted with confidence. However, towards the end of our first quarter and into the second quarter, we began to see some early signs of improvement, including the gradual reopening of retailers, moderating project delays and fewer workforce absences.

Furthermore, in response to COVID-19, we have implemented a variety of countermeasures to promote the health and safety of our employees during this pandemic, including health screening, physical distancing practices, enhanced cleaning, use of personal protective equipment, business travel restrictions, and remote work capabilities, in addition to quarantine-related paid leave and other employee assistance programs.

Adoption of new accounting standards
In the current quarter, we adopted the guidance in ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The guidance provides for a new impairment model on financial instruments which is based on expected credit losses, which was applied following a modified retrospective approach. Additionally, the new guidance makes targeted improvements to the impairment model for certain available-for-sale debt securities, including eliminating the concept of "other than temporary" from that model. The portion of the guidance related to available-for-sale debt securities was adopted following a prospective approach. The adoption of this ASU did not have a significant impact on earnings or financial condition. Refer to additional disclosures in Notes 2 and 4.

Subsequent events
We have evaluated subsequent events for potential recognition and disclosure through the date of this filing and determined that there were no subsequent events that required recognition or disclosure in the consolidated financial statements other than as described in Note 8.

2.
Revenue, Receivables and Contract Assets and Liabilities

Revenue
The following table disaggregates total revenue by timing of recognition (see Note 12 for disclosure of revenue by segment):
 
 
Three Months Ended
(In thousands)
 
May 30, 2020
 
June 1, 2019
Recognized at shipment
 
$
116,163

 
$
155,265

Recognized over time
 
172,932

 
200,100

Total
 
$
289,095

 
$
355,365






9


Receivables
Receivables reflected in the financial statements represent the net amount expected to be collected. An allowance for credit losses is established based on expected losses. Expected losses are estimated by reviewing individual accounts, considering aging, financial condition of the debtor, recent payment history, current and forecast economic conditions and other relevant factors. Upon billing, aging of receivables is monitored until collection. An account is considered current when it is within agreed upon payment terms. An account is written off when it is determined that the asset is no longer collectible. Retainage on construction contracts represents amounts withheld by our customers on long-term projects until the project reaches a level of completion where amounts are released.
(In thousands)
 
May 30, 2020
 
February 29, 2020
Trade accounts
 
$
122,092

 
$
141,126

Construction contracts
 
12,630

 
20,808

Contract retainage
 
23,778

 
37,341

Total receivables
 
158,500

 
199,275

Less: allowance for credit losses
 
(2,196
)
 
(2,469
)
Net receivables
 
$
156,304

 
$
196,806



The following table summarizes the activity in the allowance for credit losses:
(In thousands)
 
May 30, 2020
Beginning balance
 
$
2,469

Additions charged to costs and expenses
 
69

Deductions from allowance, net of recoveries
 
(274
)
Other changes (1)
 
(68
)
Ending balance
 
$
2,196

      (1) Result of foreign currency effects
 
 


Contract assets and liabilities
Contract assets consist of retainage, costs and earnings in excess of billings and other unbilled amounts typically generated when revenue recognized exceeds the amount billed to the customer. Contract liabilities consist of billings in excess of costs and earnings and other deferred revenue on contracts. Retainage is classified within receivables and deferred revenue is classified within other current liabilities on our consolidated balance sheets.

The time period between when performance obligations are complete and when payment is due is not significant. In certain of our businesses that recognize revenue over time, progress billings follow an agreed-upon schedule of values, and retainage is withheld by the customer until the project reaches a level of completion where amounts are released.
(In thousands)
 
May 30, 2020
 
February 29, 2020
Contract assets
 
$
89,757

 
$
110,923

Contract liabilities
 
18,209

 
35,954



The decrease in contract assets was mainly due to a reduction in contract retainage. The change in contract liabilities was due to timing of project activity within our businesses that operate under long-term contracts.
Other contract-related disclosures
 
Three Months Ended
(In thousands)
 
May 30, 2020
 
June 1, 2019
Revenue recognized related to contract liabilities from prior year-end
 
$
13,011

 
$
14,194

Revenue recognized related to prior satisfaction of performance obligations
 
2,877

 
1,949


Some of our contracts have an expected duration of longer than a year, with performance obligations extending over that timeframe. Generally, these contracts are in our businesses with long-term contracts which recognize revenue over time. As of May 30, 2020, the transaction price associated with unsatisfied performance obligations was approximately $995.9 million. The performance obligations are expected to be satisfied, and the corresponding revenue to be recognized, over the following estimated time periods:

10


(In thousands)
 
May 30, 2020
Within one year
 
$
434,077

Within two years
 
417,457

Beyond
 
144,325

Total
 
$
995,859



3.
Supplemental Balance Sheet Information

Inventories
(In thousands)
 
May 30, 2020
 
February 29, 2020
Raw materials
 
$
38,502

 
$
36,611

Work-in-process
 
17,221

 
17,520

Finished goods
 
19,562

 
16,958

Total inventories
 
$
75,285

 
$
71,089



Other current liabilities
(In thousands)
 
May 30, 2020
 
February 29, 2020
Warranties
 
$
12,421

 
$
12,822

Accrued project losses
 
48,054

 
48,962

Property and other taxes
 
6,315

 
5,952

Accrued self-insurance reserves
 
7,343

 
8,307

Other
 
36,215

 
42,271

Total other current liabilities
 
$
110,348

 
$
118,314



Other non-current liabilities
(In thousands)
 
May 30, 2020
 
February 29, 2020
Deferred benefit from New Market Tax Credit transactions
 
$
15,717

 
$
15,717

Retirement plan obligations
 
8,242

 
8,294

Deferred compensation plan
 
8,298

 
8,452

Deferred tax liabilities
 
13,915

 
7,940

Other
 
21,324

 
16,459

Total other non-current liabilities
 
$
67,496

 
$
56,862



4.
Financial Instruments

Marketable securities
Through our wholly-owned insurance subsidiary, Prism Assurance, Ltd. (Prism), we hold the following available-for-sale marketable securities, made up of municipal and corporate bonds: 
(In thousands)
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated
Fair Value
May 30, 2020
 
$
12,595

 
$
403

 
$
5

 
$
12,993

February 29, 2020
 
11,692

 
275

 

 
11,967



Prism insures a portion of our general liability, workers’ compensation and automobile liability risks using reinsurance agreements to meet statutory requirements. The reinsurance carrier requires Prism to maintain fixed-maturity investments for the purpose of providing collateral for Prism’s obligations under the reinsurance agreements.


11


The amortized cost and estimated fair values of these bonds at May 30, 2020, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities, as borrowers may have the right to call or prepay obligations with or without penalty.
(In thousands)
 
Amortized Cost
 
Estimated Fair Value
Due within one year
 
$
898

 
$
911

Due after one year through five years
 
7,017

 
7,255

Due after five years through 10 years
 
3,880

 
4,019

Due beyond 15 years
 
800

 
808

Total
 
$
12,595

 
$
12,993



Derivative instruments
In August 2019, we entered into an interest rate swap to hedge exposure to variability in cash flows from interest payments on our floating-rate revolving credit facility. As of May 30, 2020, the interest rate swap contract had a notional value of $65 million.

We periodically enter into forward purchase foreign currency cash flow hedge contracts, generally with an original maturity date of less than one year, to hedge foreign currency exchange rate risk. As of May 30, 2020, we held foreign exchange forward contracts with a U.S. dollar notional value of $34.3 million, with the objective of reducing the exposure to fluctuations in the Canadian dollar and the Euro.

These derivative instruments are recorded within our consolidated balance sheets within other current assets and liabilities. Gains or losses associated with these instruments are recorded as a component of accumulated other comprehensive income.

Fair value measurements
Financial assets and liabilities are classified in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement: Level 1 (unadjusted quoted prices in active markets for identical assets or liabilities); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data). We do not have any Level 3 financial assets or liabilities.
(In thousands)
 
Quoted Prices in
Active Markets
(Level 1)
 
Other Observable Inputs (Level 2)
 
Total Fair Value
May 30, 2020
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Money market funds
 
$
3,689

 
$

 
$
3,689

Commercial paper
 

 
500

 
500

Municipal and corporate bonds
 

 
12,993

 
12,993

Cash surrender value of life insurance
 

 
15,777

 
15,777

Liabilities:
 
 
 
 
 
 
Deferred compensation
 

 
13,889

 
13,889

Foreign currency forward/option contract
 

 
239

 
239

Interest rate swap contract
 

 
1,085

 
1,085

 
 
 
 
 
 
 
February 29, 2020
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Money market funds
 
$
2,689

 
$

 
$
2,689

Commercial paper
 

 
1,500

 
1,500

Municipal and corporate bonds
 

 
11,967

 
11,967

Cash surrender value of life insurance
 

 
16,560

 
16,560

Liabilities:
 
 
 
 
 
 
Deferred compensation
 

 
14,042

 
14,042

Foreign currency forward/option contract
 

 
340

 
340

Interest rate swap contract
 

 
561

 
561







12


Money market funds and commercial paper
Fair value of money market funds was determined based on quoted prices for identical assets in active markets. Commercial paper was measured at fair value using inputs based on quoted prices for similar securities in active markets. These assets are included within cash and cash equivalents on our consolidated balance sheets.

Municipal and corporate bonds
Municipal and corporate bonds were measured at fair value based on market prices from recent trades of similar securities and are classified within our consolidated balance sheets as other current or other non-current assets based on maturity date.

Cash surrender value of life insurance and deferred compensation
Contracts insuring the lives of certain employees who are eligible to participate in certain non-qualified pension and deferred compensation plans are held in trust. Cash surrender value of the contracts is based on performance measurement funds that shadow the deferral investment allocations made by participants in certain deferred compensation plans. Changes in cash surrender value are recorded in other expense. The deferred compensation liability balances are valued based on amounts allocated by participants to the underlying performance measurement funds.

Derivative instruments
The interest rate swap is measured at fair value using other observable market inputs, based off of benchmark interest rates. Forward foreign exchange contracts are measured at fair value using other observable market inputs, such as quotations on forward foreign exchange points and foreign currency exchange rates. Derivative positions are primarily valued using standard calculations and models that use as their basis readily observable market parameters. Industry standard data providers are our primary source for forward and spot rate information for both interest and currency rates.

Nonrecurring fair value measurements
Certain assets are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances. These include certain long-lived assets that are written down to estimated fair value when they are determined to be impaired, utilizing a valuation approach incorporating Level 3 inputs.

5.
Goodwill and Other Identifiable Intangible Assets

The carrying amount of goodwill attributable to each reporting segment was:  
(In thousands)
 
Architectural Framing Systems
 
Architectural Glass
 
Architectural Services
 
Large-Scale
Optical
 
Total
Balance at March 2, 2019
 
$
148,446

 
$
25,709

 
$
1,120

 
$
10,557

 
$
185,832

Foreign currency translation
 
(263
)
 
(53
)
 

 

 
(316
)
Balance at February 29, 2020
 
148,183

 
25,656

 
1,120

 
10,557

 
185,516

Adjustment (1)
 
6,315

 

 

 

 
6,315

Foreign currency translation
 
(955
)
 
(332
)
 

 

 
(1,287
)
Balance at May 30, 2020
 
$
153,543

 
$
25,324

 
$
1,120

 
$
10,557

 
$
190,544

 
 
 
 
 
 
 
 
 
 
 
(1) During the quarter ended May 30, 2020, we recorded a $6.3 million increase to goodwill and corresponding increase to deferred tax liabilities to correct an immaterial error related to prior periods. The error was not material to any previously reported annual or interim consolidated financial statements.


We evaluate goodwill for impairment annually at our year-end, or more frequently if events or changes in circumstances indicate the carrying value of the goodwill may not be recoverable. During the first quarter of fiscal 2021, we identified qualitative indicators of impairment, including a significant decline in our stock price and market capitalization, along with concerns resulting from the COVID-19 pandemic at four of our nine identified reporting units. Therefore, we performed a quantitative goodwill impairment evaluation as of May 30, 2020 at these four reporting units, EFCO Corporation ("EFCO"), Alumicor Limited ("Alumicor"), Sotawall Limited ("Sotawall") and Viracon, Inc ("Viracon").

Evaluating goodwill for impairment involves the determination of the fair value of each reporting unit in which goodwill is recorded using a qualitative or quantitative analysis. A reporting unit is an operating segment or a component of an operating segment for which discrete financial information is available and reviewed by management on a regular basis. If the fair value of a reporting unit exceeds the carrying value, goodwill impairment is not indicated.


13


We base our determination of fair value on a discounted cash flow methodology that involves significant judgment and projections of future performance. We also consider a market approach in our analysis by reviewing available data from recent transactions of comparable public companies when available. Assumptions about future revenues and expenses, capital expenditures and changes in working capital are based on the annual operating plan and long-term business plan for each reporting unit. These plans take into consideration numerous factors, including historical experience, current and future operational plans, anticipated future economic conditions and growth expectations for the industries and end markets in which we participate. These plans also take into consideration our assessment of risks inherent in our projections of future cash flows. Due to the inherent uncertainties involved in making estimates and assumptions, actual results may differ from those assumed in the forecasts. Inputs used to estimate these fair values included significant unobservable inputs that reflect the Company's assumptions about the inputs that market participants would use and, therefore, the fair value assessments are classified within Level 3 of the fair value hierarchy. We derived the discount rates using a capital asset pricing model and analyzing published rates for industries relevant to the reporting units to estimate the cost of equity financing. We used discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in the internally developed forecasts, updated for recent events.

Based on the results of the interim quantitative goodwill impairment analysis, the estimated fair value of each reporting unit exceeded its carrying value and, therefore, goodwill impairment was not indicated as of May 30, 2020. We utilized a discount rate of 11.0 percent in determining the discounted cash flows for EFCO and Alumicor, and a discount rate of 10.4 percent in determining the discounted cash flows for Sotawall and Viracon. We utilized a long-term growth rate of 3.0 percent in our fair value analysis for all reporting units. While these discount rates have increased from the time of our annual goodwill impairment evaluation at year-end, impairment is not indicated at this time due to the long-term future performance expectations for these businesses.

The gross carrying amount of other intangible assets and related accumulated amortization was:
(In thousands)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Foreign
Currency
Translation
 
Net
May 30, 2020
 
 
 
 
 
 
 
 
Definite-lived intangible assets:
 
 
 
 
 
 
 
 
Customer relationships
 
$
119,647

 
$
(34,136
)
 
$
(2,304
)
 
$
83,207

Other intangibles
 
41,095

 
(32,271
)
 
(824
)
 
8,000

Total definite-lived intangible assets
 
160,742

 
(66,407
)
 
(3,128
)
 
91,207

Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
Trademarks
 
45,300

 

 
(436
)
 
44,864

Total intangible assets
 
$
206,042

 
$
(66,407
)
 
$
(3,564
)
 
$
136,071

February 29, 2020
 
 
 
 
 
 
 
 
Definite-lived intangible assets:
 
 
 
 
 
 
 
 
Customer relationships
 
$
120,239

 
$
(33,121
)
 
$
(592
)
 
$
86,526

Other intangibles
 
41,069

 
(32,516
)
 
(189
)
 
8,364

Total definite-lived intangible assets
 
161,308

 
(65,637
)
 
(781
)
 
94,890

Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
Trademarks
 
45,421

 

 
(120
)
 
45,301

Total intangible assets
 
$
206,729

 
$
(65,637
)
 
$
(901
)
 
$
140,191


We hold intangible assets for certain acquired trade names and trademarks which are determined to have indefinite useful lives. We evaluate the reasonableness of the useful life and test indefinite-lived intangible assets for impairment annually at our year-end, or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. During the first quarter of fiscal 2021, we identified qualitative indicators of impairment, including deteriorating macroeconomic conditions resulting from the COVID-19 pandemic. Therefore, we performed an interim impairment evaluation on indefinite-lived intangible assets as of May 30, 2020. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. If an impairment loss is recognized, the adjusted carrying amount becomes the asset's new accounting basis.

Fair value is measured using the relief-from-royalty method. This method assumes the trade name or trademark has value to the
extent that the owner is relieved of the obligation to pay royalties for the benefits received from the asset. This method requires
us to estimate the future revenue from the related asset, the appropriate royalty rate, and the weighted average cost of capital. The assessment of fair value involves significant judgment and projections about future performance. In determining the discounted future revenue in our fair value analysis, we utilized a discount rate of 11.5 percent for EFCO and Alumicor and a discount rate

14


of 10.9 percent for Sotawall. A royalty rate of 1.5 percent was utilized for Alumicor and EFCO and a royalty rate of 2.0 percent was utilized for Sotawall. We utilized a long-term growth rate of 3.0 percent in the fair value analysis for all reporting units. Based on our analysis, the fair value of each of our trade names and trademarks exceeded its carrying amount and impairment was not indicated. We continue to conclude that the useful life of our indefinite-lived intangible assets is appropriate. If future revenue were to fall below forecasted levels or if market conditions were to decline in a material or sustained manner, due to COVID-19 or otherwise, impairment could be indicated on one or more of our indefinite-lived intangible assets.

Amortization expense on definite-lived intangible assets was $1.8 million and $1.9 million for the three-month periods ended May 30, 2020 and June 1, 2019, respectively. Amortization expense of other identifiable intangible assets is included in selling, general and administrative expenses. At May 30, 2020, the estimated future amortization expense for definite-lived intangible assets was:
(In thousands)
 
Remainder of Fiscal 2021
 
Fiscal 2022
 
Fiscal 2023
 
Fiscal 2024
 
Fiscal 2025
Estimated amortization expense
 
$
5,858

 
$
7,807

 
$
7,716

 
$
7,039

 
$
7,111



6.
Debt

As of May 30, 2020, we had a committed revolving credit facility with maximum borrowings of up to $235 million, maturing in June 2024, and a $150 million term loan maturing in April 2021. As of May 30, 2020, our total debt outstanding was $210.9 million, compared to $217.9 million as of February 29, 2020. Outstanding borrowings under the revolving credit facility were $40.5 million, as of May 30, 2020, and $47.5 million, as of February 29, 2020.

Our revolving credit facility and term loan contain two financial covenants that require us to stay below a maximum debt-to-EBITDA ratio and maintain a minimum ratio of interest expense-to-EBITDA. Both ratios are computed quarterly, with EBITDA calculated on a rolling four-quarter basis. At May 30, 2020, we were in compliance with both financial covenants. Additionally, at May 30, 2020, we had a total of $24.7 million of ongoing letters of credit related to industrial revenue bonds, construction contracts and insurance collateral that expire in fiscal years 2021 to 2032 and reduce borrowing capacity under the revolving credit facility.

At May 30, 2020, debt included $20.4 million of industrial revenue bonds that mature in fiscal years 2021 through 2043. The fair value of the industrial revenue bonds approximated carrying value at May 30, 2020, due to the variable interest rates on these instruments. All debt would be classified as Level 2 within the fair value hierarchy described in Note 4.

We also maintain two Canadian committed, revolving credit facilities totaling $25.0 million (USD). As of May 30, 2020 and February 29, 2020, no borrowings were outstanding under the facilities.

Interest payments were $1.4 million and $2.4 million for the three months ended May 30, 2020 and June 1, 2019, respectively.

7. Leases

We lease certain of the buildings and equipment used in our operations. We determine if an arrangement contains a lease at inception. Currently, all of our lease arrangements are classified as operating leases. We elected the package of practical expedients permitted under the transition guidance in adopting ASC 842, which among other things, allowed us to carry forward our historical lease classification. Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term and lease expense is recognized on a straight-line basis over the lease term. Our leases have remaining lease terms of one to ten years, some of which include renewal options that can extend the lease for up to an additional ten years at our sole discretion. We have made an accounting policy election not to record leases with an original term of 12 months or less on our consolidated balance sheet and such leases are expensed on a straight-line basis over the lease term.

In determining lease asset value, we consider fixed or variable payment terms, prepayments, incentives, and options to extend, terminate or purchase. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. We use a discount rate for each lease based upon an estimated incremental borrowing rate over a similar term. We have elected the practical expedient to account for lease and nonlease components (e.g., common-area maintenance costs) as a single lease component. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We are not a lessor in any transactions.




15


The components of lease expense were as follows:
 
 
Three Months Ended
(In thousands)
 
May 30, 2020
 
June 1, 2019
Operating lease cost
 
$
3,561

 
$
3,373

Short-term lease cost
 
470

 
682

Variable lease cost
 
747

 
713

Total lease cost
 
$
4,778

 
$
4,768


Other supplemental information related to leases was as follows:
 
 
Three Months Ended
(In thousands except weighted-average data)
 
May 30, 2020
 
June 1, 2019
Cash paid for amounts included in the measurement of operating lease liabilities
 
$
3,327

 
$
3,300

Lease assets obtained in exchange for new operating lease liabilities
 
$
158

 
$
706

Weighted-average remaining lease term - operating leases
 
5.8 years

 
5.5 years

Weighted-average discount rate - operating leases
 
3.60
%
 
3.74
%


Future maturities of lease liabilities are as follows:
(In thousands)
 
May 30, 2020
Remainder of Fiscal 2021
 
$
9,168

Fiscal 2022
 
10,933

Fiscal 2023
 
10,070

Fiscal 2024
 
8,090

Fiscal 2025
 
6,256

Fiscal 2026
 
5,008

Thereafter
 
6,378

Total lease payments
 
55,903

Less: Amounts representing interest
 
(4,627
)
Present value of lease liabilities