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What changed in APOGEE ENTERPRISES, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of APOGEE ENTERPRISES, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+235 added−224 removedSource: 10-K (2023-04-21) vs 10-K (2022-04-22)

Top changes in APOGEE ENTERPRISES, INC.'s 2023 10-K

235 paragraphs added · 224 removed · 162 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

50 edited+17 added−16 removed19 unchanged
Biggest changeOur standard warranties are generally from two to 10 years for our architectural glass, curtainwall and window system products, while we generally offer warranties of two years or less on our other products and services. 6 Table of Contents Sources and Availability of Raw Materials Materials used in the Architectural Framing Systems segment include aluminum billet and extrusions, fabricated glass, plastic extrusions, hardware, paint and chemicals.
Biggest changeThe nature and extent of these warranties depend upon the product or service, the market and, in some cases, the customer being served. Our standard warranties are generally from two to 10 years for our curtainwall, window system and architectural glass products, while we generally offer warranties of two years or less on our other products and services.
Product Demand and Distribution Channels Architectural Framing Systems, Architectural Glass and Architectural Services segments Demand for the products and services offered by our architectural segments is affected by changes in the North American commercial construction industry, as well as by changes in general economic conditions.
Product Demand and Distribution Channels Architectural Framing Systems, Architectural Services and Architectural Glass segments Demand for the products and services offered by our architectural segments is affected by changes in the North American commercial construction industry, as well as by changes in general economic conditions.
Through a link to a third-party content provider, our website provides free access to the Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), as soon as reasonably practicable after electronic filing such material with, or furnishing it to, the Securities and Exchange Commission (SEC).
Through a link to a third-party content provider, our website provides free access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), as soon as reasonably practicable after electronic filing such material with, or furnishing it to, the Securities and Exchange Commission (SEC).
To measure our progress, we have established three consolidated enterprise financial targets, which we expect to achieve by the end of fiscal year 2025: • Return on Invested Capital (ROIC)* greater than 12 percent, • operating margin greater than 10 percent, • and revenue growth greater than 1.2 times the overall non-residential construction market. *ROIC is a non-GAAP measure.
To measure our progress, we have established three consolidated enterprise financial targets, which we expect to achieve by the end of fiscal year 2025: • Return on Invested Capital (ROIC)* greater than 12 percent • Operating margin greater than 10 percent • Revenue growth greater than 1.2 times the overall non-residential construction market. *ROIC is a non-GAAP measure.
We intend to shift our business mix toward higher operating margin offerings and improve our return on invested capital performance. We will accomplish this by allocating resources to grow our top performing businesses, actively addressing underperforming businesses, and investing to add new differentiated product and service offerings to accelerate our growth. 3. Strengthen our core capabilities.
We intend to shift our business mix toward higher operating margin offerings and improve our return on invested capital performance. We will accomplish this by allocating resources to grow our top performing businesses, actively addressing underperforming businesses, and investing to add new differentiated product and service offerings to accelerate our growth and increase margins. 3. Strengthen our core capabilities.
Prior to this position and since 2001, he held several 3M global business unit leadership roles, serving as Vice President and General Manager for divisions within Safety & Industrial, Transportation & Electronics, and the Consumer business groups. Curtis Dobler 56 Executive Vice President and Chief Human Resources Officer since April 2019. Prior to joining the Company, Mr.
Prior to this position and since 2001, he held several 3M global business unit leadership roles, serving as Vice President and General Manager for divisions within Safety & Industrial, Transportation & Electronics, and the Consumer business groups. Curtis Dobler 57 Executive Vice President and Chief Human Resources Officer since April 2019. Prior to joining the Company, Mr.
Our Architectural Framing Systems segment competes against several national, regional and local aluminum window and storefront manufacturers, as well as regional paint and anodizing finishing companies. Our businesses compete by providing a broad portfolio of high-quality products, robust engineering capabilities, and dependable, short lead-time service.
Architectural Framing Systems segment Our Architectural Framing Systems segment competes against several national, regional, and local aluminum window and storefront manufacturers, as well as regional finishing companies. Our businesses compete by providing a broad portfolio of high-quality products, robust engineering capabilities, and dependable, short lead-time service.
We will also build a relentless focus on operational execution, driving productivity improvements, and maintaining a competitive cost structure, so that we may bring more value to our customers and improve our own profitability. 2. Actively manage our portfolio to drive higher margins and returns.
We will also have a relentless focus on operational execution, driving productivity improvements, and maintaining a competitive cost structure, so that we may bring more value to our customers and improve our own profitability. 2. Actively manage our portfolio to drive higher margins and returns.
Longman served as Chief Executive Officer and Chief Operating Officer for Harvey Building Products, a manufacturer of windows, doors and accessory products, from March 2018 to November 2020 and in various functional and business leadership roles at Colfax Fluid Handling, a diversified technology company, from 2012 to 2018.
Longman served as Chief Executive Officer and Chief Operating Officer for Harvey Building Products, a manufacturer of windows, doors and accessory products, from March 2018 to November 2020 and in various functional and business leadership roles at Colfax Fluid Handling, a diversified technology company, from 2012 to 2018. 10 Table of Contents
Jewell 47 President of Architectural Framing Systems segment since August 2019. Prior to this role, Mr. Jewell served as Senior Vice President, Business Development and Strategy for the Company from May 2018 to August 2019 and in Senior leadership positions at Valspar, a developer, manufacturer and distributor of paints and coatings, from 2010 to 2017. Troy R.
Brent C. Jewell 48 President of Architectural Framing Systems segment since August 2019. Prior to this role, Mr. Jewell served as Senior Vice President, Business Development and Strategy for the Company from May 2018 to August 2019 and in Senior leadership positions at Valspar, a developer, manufacturer and distributor of paints and coatings, from 2010 to 2017. Troy R.
Our competitive strengths include innovative proprietary products and process technologies, a highly automated manufacturing model, innovative marketing programs, strong relationships with our customers, and an established distribution network. Warranties We offer product and service warranties that we believe are competitive for the markets in which our products and services are sold.
Our competitive strengths include innovative proprietary products and process technologies, a highly automated manufacturing model, innovative marketing programs, strong relationships with our customers, and an established distribution network. 7 Table of Contents Warranties We offer product and service warranties that we believe are competitive for the markets in which our products and services are sold.
Our Architectural Glass segment provides a wide range of high-performance glass products, offering customized solutions that enable architects and building owners to meet their design, aesthetic, and performance goals. We fabricate insulating, laminated, and monolithic glass units that are used in windows, curtainwall, storefront, and entrance systems. We provide premium glass solutions to meet our customers’ design and energy-performance requirements.
Architectural Glass segment Our Architectural Glass segment provides a wide range of high-performance glass products, offering customized solutions that enable architects and building owners to meet their design, aesthetic, and performance goals. We fabricate insulating, laminated, and monolithic glass units that are used in windows, curtainwall, storefront, and entrance systems.
In fiscal 2022, this segment accounted for approximately 20 percent of our net sales. • The Architectural Services segment integrates technical services, project management, and field installation services to design, engineer, fabricate, and install building glass and curtainwall systems.
In fiscal 2023, this segment accounted for approximately 45 percent of our net sales. • The Architectural Services segment integrates technical services, project management, and field installation services to design, engineer, fabricate, and install building glass and curtainwall systems.
In fiscal 2022, this segment accounted for approximately 45 percent of our net sales. • The Architectural Glass segment coats and fabricates, high-performance glass used in custom window and wall systems on commercial buildings.
In fiscal 2023, this segment accounted for approximately 29 percent of our net sales. • The Architectural Glass segment coats and fabricates high-performance glass used in custom window and wall systems on commercial buildings.
Competitive Conditions Architectural Framing Systems, Architectural Glass and Architectural Services segments The North American commercial construction market is highly fragmented. Competitive factors include price, product quality, product attributes and performance, reliable service, on-time delivery, lead-time, warranties and the ability to provide project management, technical engineering and design services.
Competitive Conditions The North American commercial construction market is highly fragmented. Competitive factors include price, product quality, product attributes and performance, reliable service, on-time delivery, lead-time, warranties, and the ability to provide project management, technical engineering and design services.
Providing a safe and secure work environment is one of our highest priorities and we devote significant time and resources to workplace safety. Our safety programs are designed to comply with stringent regulatory requirements and to meet or exceed best practices in our industry.
Health, Wellness and Safety The safety of our employees is integral to our Company. Providing a safe and secure work environment is one of our highest priorities and we devote significant time and resources to workplace safety. Our safety programs are designed to comply with stringent regulatory requirements and to meet or exceed best practices in our industry.
International Sales Information regarding export and international sales is included in Item 8, Financial Statements and Supplementary Data, within Note 15 of our Consolidated Financial Statements. Available Information The Company maintains a website at www.apog.com .
International Sales Information regarding export and international sales is included in Item 8, Financial Statements and Supplementary Data, within Note 15 of our Consolidated Financial Statements. Available Information We maintain a website at www.apog.com .
Johnson 48 President of Apogee’s Architectural Services segment (Harmon) since March 2020. Prior to this role, Mr. T. Johnson served in several leadership roles in the Architectural Services segment since 2011. Nick C. Longman 50 President of the Architectural Glass segment since June 2021. Prior to joining the Company, Mr.
Johnson 49 President of Apogee’s Architectural Services segment since March 2020. Prior to this role, Mr. Johnson served in several leadership roles in the Architectural Services segment since 2011. Nick C. Longman 51 President of the Architectural Glass segment since June 2021. Prior to joining the Company, Mr.
Our aim is to create an environment where people feel included as a part of a team because of their diversity of outlooks, perspectives, and characteristics, which ultimately adds value for our Company. We strive to create a culture of inclusion, reduce bias in our talent practices, and invest in and engage with our communities.
Our aim is to create an environment where people feel included as a part of a team because of their diversity of outlooks, perspectives, and characteristics and have an equal opportunity to add value to our Company. We strive to create a culture of inclusion, reduce bias in our talent practices, and invest in and engage with our communities.
Our architectural products and services are used in subsets of the construction industry differentiated by the following types of factors: 5 Table of Contents • Building type - Our products and services are primarily used in commercial buildings (office buildings, hotels and retail centers), institutional buildings (education facilities, health care facilities and government buildings), and multi-family residential buildings (a subset of residential construction). • Level of customization - Many of our projects involve a high degree of customization, as the product or service is designed to meet customer-specified requirements for aesthetics, performance and size, and local building codes. • Customers and distribution channels - Our customers are mainly glazing subcontractors and general contractors, with project design being influenced by architects and building owners.
Additionally, we evaluate data on U.S. and Canadian non-residential construction market activity, industry analysis and longer-term trends provided by external data sources. 6 Table of Contents Our architectural products and services are used in subsets of the construction industry differentiated by the following types of factors: • Building type - Our products and services are primarily used in commercial buildings (office buildings, hotels and retail centers), institutional buildings (education facilities, health care facilities and government buildings), and multi-family residential buildings (a subset of residential construction). • Level of customization - Many of our projects involve a high degree of customization, as the product or service is designed to meet customer-specified requirements for aesthetics, performance and size, and local building codes. • Customers and distribution channels - Our customers are mainly glazing subcontractors and general contractors, with project design being influenced by architects and building owners.
Following this review, we established a new enterprise strategy, with three key elements: 1. Become the economic leader in our target markets. We will achieve this by developing a deep understanding of our target markets and aligning our businesses with clear go-to-market strategies to drive value for our customers through differentiated product and service offerings.
Become the economic leader in our target markets. We will achieve this by developing a deep understanding of our target markets and aligning our businesses with clear go-to-market strategies to drive value for our customers through differentiated product and service offerings.
See discussion of non-GAAP measures within the Overview section of Management's Discussion and Analysis. 4 Table of Contents Products and Services Architectural Framing Systems, Architectural Glass and Architectural Services segments These three segments primarily serve the construction industry and participate in various phases of the value stream to design, engineer, fabricate and install custom glass and aluminum window, curtainwall, storefront and entrance systems for the exterior of buildings, primarily in the commercial, institutional, and multi-family residential construction sectors.
Products and Services Architectural Framing Systems, Architectural Services and Architectural Glass segments These three segments primarily serve the construction industry and participate in various phases of the value stream to design, engineer, fabricate and install custom glass and aluminum window, curtainwall, storefront and entrance systems for the exterior of buildings, primarily in the commercial, institutional, and multi-family residential construction sectors.
Our window, curtainwall, storefront and entrance systems are sold using a combination of direct sales forces, independent sales representatives and distributors. • Geographic location - We primarily supply architectural glass products and aluminum framing systems, including window, curtainwall, storefront and entrance systems, to customers in North America.
Our high-performance architectural glass is primarily sold using both a direct sales force and independent sales representatives. • Geographic location - We primarily supply architectural glass products and aluminum framing systems, including window, curtainwall, storefront and entrance systems, to customers in North America.
Silberhorn 54 Chief Executive Officer of the Company since January 2021. Prior to joining the Company, Mr. Silberhorn worked for 3M, a diversified global manufacturer and technology company, most recently serving as Senior Vice President of 3M's Transformation, Technologies and Services from April 2019 through December 2020.
Silberhorn worked for 3M, a diversified global manufacturer and technology company, most recently serving as Senior Vice President of 3M's Transformation, Technologies and Services from April 2019 through December 2020.
We also evaluated our operating model to ensure we have the organizational structure and capabilities needed to deliver consistent profitable growth. Through this work, we validated the Company’s strengths that we can leverage as we move forward. We also identified several challenges facing the Company and opportunities for improved performance.
We also evaluated our operating model to ensure we have the organizational structure and capabilities needed to deliver consistent profitable growth. Through this work, we validated the Company’s strengths that we can leverage as we move forward. We also identified opportunities for improved performance. Following this review, we established a new enterprise strategy, with three key elements: 1.
We maintain strong relationships with architects, developers, and other industry stakeholders, and provide strong customer service and reliable delivery. Our Architectural Services segment competes against national and regional glass installation companies. We compete by offering a robust set of capabilities at a competitive cost. Our capabilities include preconstruction services, engineering and design, project management, manufacturing, and field installation.
Architectural Services segment Our Architectural Services segment competes against international, national and regional glass installation companies. We compete by offering a robust set of capabilities at a competitive cost. Our capabilities include preconstruction services, engineering and design, project management, manufacturing, and field installation.
We are shifting from our historical, decentralized operating model, to one with center-led functional expertise that enables us to leverage the scale of the enterprise to better support the needs of the business. We are establishing a Company-wide operating system with common tools and processes that are based on the foundation of Lean and Continuous Improvement.
We are shifting from our historical, decentralized operating model, to one with center-led functional expertise that enables us to leverage the scale of the enterprise to better support the needs of the business.
With respect to sustainability, many of our architectural products and services help architects, developers, and building owners achieve their energy-efficiency and sustainability goals by improving energy performance, thereby reducing greenhouse gas emissions, providing daylight and natural ventilation, and increasing comfort and safety for occupants.
Our solutions also help meet functional requirements such as energy efficiency, hurricane, blast and other impact resistance and/or sound control. Many of our architectural products and services help architects, developers, and building owners achieve their energy-efficiency and sustainability goals by improving energy performance, reducing greenhouse gas emissions, providing daylight and natural ventilation, and increasing comfort and safety for occupants.
In fiscal 2022, this segment accounted for approximately 27 percent of our net sales. • The Large-Scale Optical Technologies (LSO) segment manufactures high-performance glass and acrylic products for custom framing, museum, and technical glass markets. In fiscal 2022, this segment accounted for approximately 8 percent of our net sales.
In fiscal 2023, this segment accounted for approximately 19 percent of our net sales. • The Large-Scale Optical Technologies (LSO) segment manufactures high-performance glazing products for the custom framing, fine art, and engineered optics markets. In fiscal 2023, this segment accounted for approximately 7 percent of our net sales.
Centers for Disease Control and Prevention and other local, state, and federal government agencies, to protect our employees. Diversity, Equity and Inclusion Our diversity, equity and inclusion program promotes a workplace where each employee’s abilities are recognized, respected, and utilized to further the Company’s goals.
Diversity, Equity and Inclusion Our diversity, equity and inclusion program promotes a workplace where each employee’s abilities are recognized, respected, and utilized to further the Company’s goals.
We conduct diversity and code of conduct trainings with employees and managers to make clear our views on diversity and promote an inclusive and diverse workplace, where all individuals feel respected and part of a team regardless of their race, national origin, ethnicity, gender, age, religion, disability, sexual orientation or gender identity.
We conduct diversity and code of conduct trainings with employees and managers annually to define our expectations on creating an inclusive and diverse workplace, where all individuals feel respected and part of a team regardless of their race, national origin, ethnicity, gender, age, religion, disability, sexual orientation or gender identity. 9 Table of Contents Talent Management and Development Our talent management program is focused on developing employees and leaders to meet the Company's evolving needs.
In addition, the programs encourage the development of a proactive, inter-dependent safety culture in which leadership and employees interact to ensure safety is viewed as everyone’s responsibility. We offer comprehensive health and wellness programs for our employees.
These annual assessments and audits provide suggestions for continuous improvement in safety programs and measure employee engagement. In addition, the programs encourage the development of a proactive, inter-dependent safety culture in which leadership and employees interact to ensure safety is viewed as everyone’s responsibility.
Talent Management and Development Our talent management program is focused on developing employees and leaders to meet the Company’s evolving needs. Managers actively engage with their employees to provide coaching and feedback and identify training and development opportunities to improve performance in the employee’s current role and to position the employee for future growth.
Employees are able to track and manage their growth through a performance management system and managers actively engage with their employees to provide coaching and feedback, identify training and development opportunities to improve performance in the employee’s current role, and to position the employee for future growth.
Investing in our employees and their well-being, offering competitive compensation and benefits, promoting diversity and inclusion, and adopting positive human capital management practices are critical components of our corporate strategy. Health, Wellness and Safety The safety of our employees is integral to our Company.
Investing in our employees and their well-being, offering competitive compensation and benefits, promoting diversity and inclusion, and adopting positive human capital management practices are critical components of our corporate strategy. Additional information related to our human capital management is available on our website at www.apog.com by clicking “Sustainability” and then “People”.
Our high-performance architectural glass is primarily sold using both a direct sales force and independent sales representatives. Our installation services are sold by a direct sales force in certain metropolitan areas in the U.S.
Our window, curtainwall, storefront and entrance systems are sold using a combination of direct sales forces, independent sales representatives and distributors. Our installation services are sold by a direct sales force in certain metropolitan areas in the U.S and Canada.
Also available on our website are various corporate governance documents, including our Code of Business Ethics and Conduct, Corporate Governance Guidelines, and charters for the Audit, Compensation, and Nominating and Corporate Governance Committees of the Board of Directors. 8 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Name Age Positions with Apogee Enterprises and Past Experience Ty R.
These reports are also available on the SEC's website at www.sec.gov . Also available on our website are various corporate governance documents, including our Code of Business Ethics and Conduct, Corporate Governance Guidelines, and charters for the Audit, Compensation, and Nominating and Corporate Governance Committees of the Board of Directors.
Raw materials used within the Architectural Glass segment include flat glass, vinyl, silicone sealants and lumber. Within the Architectural Services segment, materials used include fabricated glass, finished aluminum extrusions, fabricated metal panels and hardware. Materials used in the LSO segment are primarily glass and acrylic.
Sources and Availability of Raw Materials Materials used in the Architectural Framing Systems segment include aluminum billet and extrusions, fabricated glass, plastic extrusions, hardware, paint and chemicals. Within the Architectural Services segment, materials used include fabricated glass, finished aluminum extrusions, fabricated metal panels and hardware.
We deliver these services using an operating model which reduces costs and risks for our customers, and we’ve established a track record of regularly meeting each project's unique execution requirements. LSO segment Our LSO segment competes with European and U.S. providers of both basic and valued-added glass and acrylic.
We deliver these services using an operating model which reduces costs and risks for our customers, and we have established a track record of regularly meeting each project's unique execution requirements. Architectural Glass segment In our Architectural Glass segment, we experience competition from regional glass fabricators and international competitors who can provide certain products with attributes similar to ours.
In addition, we offer a wide range of renovation solutions to help modernize aging buildings, providing significantly improved energy performance, while preserving historically accurate aesthetics. LSO segment The LSO segment provides coated glass and acrylic primarily for use in custom picture framing, museum framing, wall decor and technical glass for other display applications.
In addition, we offer a wide range of renovation solutions to help modernize aging buildings, providing significantly improved energy performance, while preserving historically accurate aesthetics. Architectural Framing Systems segment Our Architectural Framing Systems segment designs, engineers and fabricates aluminum window, curtainwall, storefront and entrance systems.
Our Architectural Framing Systems segment designs, engineers and fabricates aluminum window, curtainwall, storefront and entrance systems. We also extrude aluminum and provide finishing services for metal components used in a variety of building materials applications, as well as plastic components for other markets.
We also extrude aluminum and provide finishing services for metal components used in a variety of building materials applications, as well as plastic components for other markets. Architectural Services segment Our Architectural Services segment delivers value by integrating technical capabilities, project management skills and field installation services, to provide design, engineering, fabrication and installation for the exteriors of commercial buildings.
Most of our raw materials are readily available from a variety of domestic and international sources. Intellectual Property We have several patents, trademarks, trade names, trade secrets and proprietary technologies and customer relationships that we believe, in the aggregate, constitute a valuable asset.
Intellectual Property We have several patents, trademarks, trade names, trade secrets and proprietary technologies and customer relationships that we believe, in the aggregate, constitute a valuable asset. However, we do not believe that our business is materially dependent on any individual patent, trademark or other intellectual property asset.
Competition for qualified employees in the markets and industries in which we operate is intense, and the success of our Company depends on our ability to attract, select, develop and retain a productive and engaged workforce.
Equal Employment Opportunity Commission, our U.S employees had the following race and ethnicity demographics: Employee Demographic Percent of Total White 64% Hispanic / Latinx 18% Black / African American 11% Asian 5% Multiracial, Native American, Native Hawaiian, and Pacific Islander 2% Competition for qualified employees in the markets and industries in which we operate is intense, and the success of our Company depends on our ability to attract, select, develop and retain a productive and engaged workforce.
However, we do not believe that our business is materially dependent on any individual patent, trademark or other intellectual property asset. Seasonality Activity in the construction industry is impacted by the seasonal impact of weather and weather events in our operating locations, with activity in some markets reduced in winter due to inclement weather.
Seasonality Activity in the construction industry is impacted by the seasonal impact of weather and weather events in our operating locations, with activity in some markets reduced in winter due to inclement weather. Working Capital Requirements Trade and contract-related receivables and other contract assets are the largest components of our working capital.
Backlog is not a significant metric for the LSO segment, as orders are typically booked and billed within a short time-frame. Compliance with Government Regulations We are subject to various environmental and occupational safety and health laws and regulations in the United States and in other countries in which we operate.
Inventory requirements, mainly related to raw materials, are most significant in our Architectural Framing Systems and Architectural Glass segments. Compliance with Government Regulations We are subject to various environmental and occupational safety and health laws and regulations in the United States and in other countries in which we operate.
In addition to standard health programs including medical insurance and preventive care, we have a variety of resources available to employees relating to physical and mental wellness. The COVID-19 pandemic has magnified the importance of keeping our employees safe and healthy. In response to the pandemic, we have taken actions consistent with recommendations of the U.S.
Our leadership team and Board of Directors are briefed regularly on our health and safety performance metrics. We offer comprehensive health and wellness programs for our employees. In addition to standard health programs, including medical insurance and preventive care, we have a variety of resources available to employees relating to physical and mental wellness.
In our Architectural Glass segment, we experience competition from regional glass fabricators and international competitors who can provide certain products with attributes similar to ours. We differentiate by providing a wide range of high-quality products, including several proprietary offerings, that we can bundle together into customized solutions.
We differentiate by providing a wide range of high-quality products, including several proprietary offerings, that we can bundle together into customized solutions. We maintain strong relationships with architects, developers, and other industry stakeholders, and provide strong customer service and reliable delivery. LSO segment Our LSO segment competes with European and U.S. providers of both basic and valued-added glass and acrylic.
These remediation activities are being conducted without significant disruption to our operations. 7 Table of Contents Human Capital Resources The Company had approximately 5,500 employees on February 26, 2022, down from 6,100 employees on February 27, 2021. As of February 26, 2022, approximately 420 of these employees were represented by U.S. labor unions.
Human Capital Resources We had approximately 4,900 employees on February 25, 2023, down from 5,500 employees on February 26, 2022, of which 77 percent are male and 23 percent are female. As of February 25, 2023, approximately 610, or approximately 12 percent, of these employees were represented by U.S. labor unions.
This will be supported by a robust talent management program and a commitment to strong governance to ensure compliance and drive sustainable performance. During the fiscal year, we began to implement our new strategy, building significant momentum in the transformation of our business.
We are establishing a Company-wide operating system with common tools and processes that are based on the foundation of Lean and Continuous Improvement, which we are calling "Apogee Management System". This will be supported by a robust talent management program and a commitment to strong governance to ensure compliance and drive sustainable performance.
These include propriety, high-performance coatings, digital printing, heat soaking of tempered glass, and thermal spacers. Our Architectural Services segment delivers value by integrating technical capabilities, project management skills and field installation services, to provide design, engineering, fabrication and installation for the exteriors of commercial buildings.
We provide premium glass solutions to meet our customers’ design and energy-performance requirements. These include propriety, high-performance coatings, digital and silkscreen printing, heat soaking of tempered glass, and thermal spacers. LSO segment The LSO segment provides coated glass and acrylic primarily for use in custom picture framing, museum framing, wall decor and technical glass for other display applications.
This commitment requires focus and dedication to fundamental aspects of our business to minimize the risk of accidents, injury, and exposure to health hazards. We utilize a safety culture assessment process along with a safety compliance audits to monitor safety programs within our businesses. These assessments and audits provide suggestions for continuous improvement in safety programs and measure employee engagement.
This commitment requires focus and dedication to fundamental aspects of our business to minimize the risk of accidents, injury, and exposure to health hazards. We will continue to develop an enterprise-wide health and safety program to build centralized oversight of workplace safety and to actively share best practices across our business.
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We realigned Architectural Framing Systems to better leverage the scale and capabilities of the organization, and to bring more clarity and focus in our go-to-market approach. We refocused Architectural Glass to emphasize differentiated, high value-added products.
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We plan to continue to execute this strategy over the next several years.
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We also announced our intention to move the Sotawall business into Architectural Services, beginning in fiscal 2023, to create a single, unified offering for larger custom curtainwall projects. During the fiscal year, we began several enterprise transformation initiatives designed to strengthen core processes and systems and provide new capabilities across several functional areas.
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See discussion of non-GAAP measures within the Overview section of Management's Discussion and Analysis. In fiscal 2023, we made significant progress toward these financial targets through the execution of our strategy. We advanced our Lean and Continuous Improvement initiatives, which resulted in meaningful productivity improvements, particularly in Architectural Glass.
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Finally, we relaunched our Lean and Continuous Improvement program, adding key talent and developing a set of tools and processes that we will use to drive improved performance across the enterprise. We plan to continue to execute this strategy over the next several years.
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We increased our focus on differentiated products and services, and effectively managed pricing to share in the value we delivered for our customers. We integrated the Sotawall business into the Architectural Services segment, in order to create a single, unified offering for larger custom curtainwall projects.
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Our solutions also help meet functional requirements such as energy efficiency, hurricane, blast and other impact resistance and/or sound control.
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We advanced several initiatives to strengthen our core 5 Table of Contents capabilities, driving the standardization of key business processes and systems.We also relaunched our talent development and leadership training programs and added key talent across the organization.
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Additionally, we evaluate data on U.S. and Canadian non-residential construction market activity, industry analysis and longer-term trends provided by external data sources.
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Raw materials used within the Architectural Glass segment include flat glass, vinyl, silicone sealants and lumber. Materials used in the LSO segment are primarily glass and acrylic. Most of our raw materials are readily available from a variety of domestic and international sources.
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The nature and extent of these warranties depend upon the product or service, the market and, in some cases, the customer being served.
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These remediation activities are nearing completion and are being conducted without significant disruption to our operations. Sustainability Focus As a leading provider of architectural products and services, we are committed to integrating sustainable business practices and environmental stewardship throughout our business.
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Working Capital Requirements Trade and contract-related receivables and other contract assets are the largest components of our working capital. Inventory requirements, mainly related to raw materials, are most significant in our Architectural Framing Systems and Architectural Glass segments.
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Our company-wide commitment to sustainable business practices is focused on delivering long-term profitable growth while carefully stewarding the resources entrusted to us, and delivering products and services that address our customers’ increasing focus on energy efficiency and reducing their carbon footprint. Our architectural products and services are key enablers of green building and sustainable design.
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Backlog Backlog represents the dollar amount of signed contracts or firm orders, generally as a result of a competitive bidding process, which may be expected to be recognized as revenue in the future. Backlog is not a term defined under U.S. generally accepted accounting principles (GAAP) and is not a measure of contract profitability.
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We have long been at the forefront of developing innovative products and services that conserve resources and help architects and building owners achieve their sustainability goals, such as attaining Leadership in Energy and Environmental Design (LEED) certifications.
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In addition to backlog, we have a substantial amount of projects with short lead times that book-and-bill within the same reporting period and are not included in backlog. We have good visibility beyond backlog, as projects awarded, verbal commitments and bidding activities are not included in backlog.
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Our high-performance thermal framing systems, energy-efficient architectural glass, and other products are designed to help improve building energy efficiency, reduce greenhouse gas emissions, and increase security and comfort for building occupants. Our products are made primarily with glass and aluminum components, which are recyclable at the end of their useful lives.
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Architectural Framing Systems segment backlog as of fiscal year-end was $428.7 million, compared to $411.3 million at the end of the prior year, reflecting an increase in order volume.
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In addition, many of our framing products can be specified with recycled aluminum content. Our commitment to sustainable business practices and environmental stewardship also extends to our own operations. Through our Apogee Management System we are continually focused on incorporating environmentally sustainable manufacturing processes, eliminating waste, and minimizing our resource consumption.
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We expect approximately 78 percent of the backlog in this segment to be fulfilled in fiscal 2023, with the remainder expected to be filled in fiscal 2024 and beyond; however, the timing of backlog may be impacted by project delays.
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To further our efforts, we are planning to calculate our Scope 1 and Scope 2 greenhouse gas emissions and are committed to disclosing our baseline greenhouse gas emissions data in 8 Table of Contents fiscal 2024. In addition to our company-wide environmental policy, we have policies at each facility to ensure compliance with all applicable environmental laws and regulations.
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Backlog is not a significant metric for the Architectural Glass segment, as orders are typically booked and billed within a short time-frame. Backlog in the Architectural Services segment as of fiscal year-end was $517.7 million, compared to $570.9 million at the end of the prior year, due to execution of projects in backlog, timing of firm orders, and signed contracts.
Added
We also strive to make a difference in the communities where we operate. Apogee has a long legacy of giving back to the communities where we do business through volunteerism, donations, and financial support. We work to strengthen the communities where we operate by investing in our business and creating good jobs.
Removed
We expect approximately 61 percent of the backlog in this segment to be filled during fiscal 2023, with the remainder expected to be filled in fiscal 2024 and beyond; however, the timing of backlog may be impacted by project delays.
Added
Based on the most recent information available from our latest filing with the U.S.
Removed
These reports are also available on the SEC's website at www.sec.gov .
Added
Our Apogee Safety Council meets regularly to review facility-level performance, maintain our policies, and provide short and long-term plans to achieve our ambition of achieving an incident rate of zero. We utilize a safety culture assessment process along with safety compliance audits to monitor safety programs within our businesses and regularly share best practices.
Removed
Nisheet Gupta 47 Executive Vice President and Chief Financial Officer of the Company since June 2020. Prior to joining the Company, Mr. Gupta served Vice President of Global Finance Operations at Land O’Lakes, a leading agribusiness and food company, since 2017. Prior to joining Land O’ Lakes, Mr.
Added
We also conduct employee engagement surveys at the site level annually to hear directly from our employees with respect to what we are doing well, in addition to areas where they may need additional support.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

29 edited+6 added−7 removed42 unchanged
Biggest changeThe extent to which COVID-19 will continue to impact our businesses in the future will depend on numerous evolving factors including, but not limited to, the emergence of new variants of the coronavirus, such as the Delta and Omicron variants, and the effectiveness of ongoing public health initiatives, which have been boosted by vaccine production and distribution. 9 Table of Contents Market and Industry Risks North American and global economic and industry-related business conditions materially affect our sales and results of operations Our Architectural Framing Systems, Architectural Glass and Architectural Services segments are significantly influenced by North American economic conditions and the cyclical nature of the North American commercial construction industry.
Biggest changeMarket and Industry Risks North American and global economic and industry-related business conditions materially affect our sales and results of operations Our Architectural Framing Systems, Architectural Services and Architectural Glass segments are influenced by North American economic conditions and the cyclical nature of the North American commercial construction industry.
In recent years, we have seen increased volatility in the price of aluminum that we purchase from both domestic and international sources. Due to our Architectural Framing Systems segment presence in Canada, we have significant cross-border activity, as our Canadian businesses purchase inputs from U.S.-based suppliers and sell to U.S.-based customers.
In recent years, we have seen increased volatility in the price of aluminum that we purchase from both domestic and international sources. Due to our Architectural Framing Systems segment and Architectural Services segment presence in Canada, we have significant cross-border activity, as our Canadian businesses purchase inputs from U.S.-based suppliers and sell to U.S.-based customers.
The commercial construction industry is impacted by macroeconomic trends, such as availability of credit, employment levels, consumer confidence, interest rates and commodity prices. In addition, changes in architectural design trends, demographic trends, and/or remote work trends could negatively impact demand for our products.
The commercial construction industry is impacted by macroeconomic trends, such as availability of credit, employment levels, consumer confidence, interest rates and commodity prices. In addition, changes in architectural design trends, demographic trends, and/or remote work trends could impact demand for our products.
Loss of key personnel and inability to source sufficient labor could adversely affect our operating results Our success depends on the skills of the Company's leadership, construction project managers and other key technical personnel, and our ability to secure sufficient manufacturing and installation labor.
Loss of key personnel and inability to source sufficient labor could adversely affect our operating results Our success depends on the skills of our leadership, construction project managers and other key technical personnel, and our ability to secure sufficient manufacturing and installation labor.
There are risks inherent in completing acquisitions, including: 10 Table of Contents • diversion of management’s attention from existing business activities; • difficulties or delays in integrating and assimilating information and financial systems, operations and products of an acquired business or other business venture or in realizing projected efficiencies, growth prospects, cost savings and synergies; • potential loss of key employees, customers and suppliers of the acquired businesses or adverse effects on relationships with existing customers and suppliers; • adverse impact on overall profitability if the acquired business does not achieve the return on investment projected at the time of acquisition; and • with respect to the acquired assets and liabilities, inaccurate assessment of additional post-acquisition capital investments; undisclosed, contingent or other liabilities; problems executing backlog of material supply or installation projects; unanticipated costs; and an inability to recover or manage such liabilities and costs.
There are risks inherent in completing acquisitions, including: • diversion of management’s attention from existing business activities; • difficulties or delays in integrating and assimilating information and financial systems, operations and products of an acquired business or other business venture or in realizing projected efficiencies, growth prospects, cost savings and synergies; • potential loss of key employees, customers and suppliers of the acquired businesses or adverse effects on relationships with existing customers and suppliers; • adverse impact on overall profitability if the acquired business does not achieve the return on investment projected at the time of acquisition; and • with respect to the acquired assets and liabilities, inaccurate assessment of additional post-acquisition capital investments; undisclosed, contingent or other liabilities; problems executing backlog of material supply or installation projects; unanticipated costs; and an inability to recover or manage such liabilities and costs.
Strategic Risks We could be unable to effectively manage and implement our new enterprise strategy, which could have a material adverse effect on our business, financial condition, and results of operations.
Strategic Risks We could be unable to effectively manage and implement our enterprise strategy, which could have a material adverse effect on our business, financial condition, and results of operations.
Our growth strategy includes differentiating our product and service offerings, shifting our business mix toward higher operating margins and return on invested capital performance, and shifting away from our historical, decentralized operating model. Execution of this strategy will require additional investments of time and resources and could fail to achieve the desired results.
Our strategy includes differentiating our product and service offerings, shifting our business mix toward higher operating margins and return on invested capital performance, and moving away from our historical, decentralized operating model. Execution of this strategy will require additional investments of time and resources and could fail to achieve the desired results.
Our ability to mitigate these costs, or recover the cost increases through price increases, may continue to lag the cost increases, which could negatively impact our margins.
Our ability to mitigate these costs, or recover the cost increases through price increases, may lag the cost increases, which could negatively impact our margins.
The performance and financial condition of one 11 Table of Contents or more suppliers may cause us to alter our business terms or to cease doing business with a particular supplier or suppliers, or change our sourcing practices generally, which could in turn adversely affect our business and financial condition.
The performance and financial condition of one or more suppliers may cause us to alter our business 12 Table of Contents terms or to cease doing business with a particular supplier or suppliers, or change our sourcing practices generally, which could in turn adversely affect our business and financial condition.
We are subject to a legal and regulatory framework imposed under federal and state laws and regulatory agencies, including 12 Table of Contents laws and regulations that apply specifically to U.S. public companies and laws and regulations applicable to our manufacturing and construction site operations.
We are subject to a legal and regulatory framework imposed under federal and state laws and regulatory agencies, including 13 Table of Contents laws and regulations that apply specifically to U.S. public companies and laws and regulations applicable to our manufacturing and construction site operations.
Refer to additional information included within Notes 1 and 6 to the Financial Statements contained in Item 8 within this Annual Report on Form 10-K. 13 Table of Contents The discounted cash flow projections and revenue projections used in these analyses are dependent upon achieving forecasted levels of revenue and profitability.
Refer to additional information included within Notes 1 and 6 to the Financial Statements contained in Item 8 within this Annual Report on Form 10-K. The discounted cash flow projections and revenue projections used in these analyses are dependent upon achieving forecasted levels of revenue and profitability.
Our efforts to comply with evolving laws, regulations, and reporting standards may increase our general and administrative expenses, divert management time and attention, or limit our operational flexibility, all of which could have a material adverse effect on our business, financial position, and results of operations.
Our efforts to comply with evolving laws, regulations, and reporting standards, including climate-related regulations, may increase our general and administrative expenses, divert management time and attention, or limit our operational flexibility, all of which could have a material adverse effect on our business, financial position, and results of operations.
Failure to meet our guidance or analyst expectations for net sales and earnings would have an adverse impact on the market price of our common stock.
Failure to meet our guidance or analyst expectations for net sales and earnings could have an adverse impact on the market price of our common stock.
We could encounter difficulties in maintaining our existing systems, developing and implementing new systems or in our efforts to standardize information technology systems across our business units. Such difficulties could lead to disruption in business operations and/or significant additional expenses that could adversely affect our results.
We could encounter difficulties in maintaining our existing systems, developing and implementing new systems or in our efforts to standardize enterprise resource planning and information technology systems across our business units. Such difficulties could lead to disruption in business operations and/or significant additional expenses that could adversely affect our results.
These systems have in the past been, and may in the future be, subject to cyber-attacks and other attempts to gain unauthorized access, breach, damage, disrupt or otherwise compromise such systems, none of which have been material to us to date.
These systems have in the past been, and may in the future be, subject to cyber-attacks and other attempts to gain unauthorized access, breach, damage, disrupt or otherwise compromise such systems, none of which have been material to us in the last three years to date.
During the fourth quarter of fiscal 2022, based on the finalization of our plans for integrating the Sotawall business into the Architectural Services segment, beginning in fiscal 2023, we determined impairment of indefinite and finite-lived intangibles within the Architectural Framing Systems segment and we recorded intangible impairment expense of $49.5 million.
During the fourth quarter of fiscal 2022, based on the finalization of our plans for integrating the Sotawall business into the Architectural Services segment, beginning in fiscal 2023, we determined impairment of indefinite and finite-lived intangibles related to the Sotawall business and we recorded intangible impairment expense of $49.5 million.
If we encounter problems with distribution, our ability to deliver our products to market could be adversely affected. Our operations are vulnerable to interruptions in the event of work stoppages, whether due to health concerns, such as COVID-19 or otherwise, labor disputes or shortages, and natural disasters that may affect our distribution and transportation to job sites.
If we encounter problems with distribution, our ability to deliver our products to market could be adversely affected. Our operations are vulnerable to interruptions in the event of work stoppages, whether due to public health concerns, labor disputes or shortages, and natural disasters that may affect our distribution and transportation to job sites.
Global instability and uncertainty arising from events outside of our control, such as significant natural disasters, political crises, public health crises and pandemics, and/or other catastrophic events could materially affect our results of operations Natural disasters, political crises, public health crises, such as the current COVID-19 pandemic, and other catastrophic events or other events outside of our control, including Russia's invasion of Ukraine, may negatively impact our facilities or the facilities of third parties on which we depend, have broader adverse impacts on the commercial construction market, consumer confidence and spending, and/or impact both the well-being of our employees and our ability to operate our facilities.
Global instability and uncertainty arising from events outside of our control, such as significant natural disasters, political crises, public health crises and pandemics, and/or other catastrophic events could materially affect our results of operations Natural disasters, political crises, public health crises, and other catastrophic events or other events outside of our control, may negatively impact our facilities or the facilities of third parties on which we depend, have broader adverse impacts on the commercial construction market, consumer confidence and spending, and/or impact both the well-being of our employees and our ability to operate our facilities.
Global economic conditions may impact their ability to operate their businesses, including recent impacts from the evolving COVID-19 pandemic. They may also be impacted by the increasing costs or availability of raw materials, labor and distribution, resulting in demands for less attractive contract terms or an inability for them to meet our requirements or conduct their own businesses.
Global economic conditions may impact their ability to operate their businesses. They may also be impacted by the increasing costs or availability of raw materials, labor and distribution, resulting in demands for less attractive contract terms or an inability for them to meet our requirements or conduct their own businesses.
For example, we may be unable to increase our sales and earnings by differentiating our product and service offerings in a cost-effective manner. We may fail to accurately predict future customer needs and preferences, and thus focus on the wrong business mix. Our centralized operating system may not produce the desired operating efficiencies.
For example, we may be unable to increase our sales and earnings by differentiating our product and service offerings in a cost-effective manner. We may fail to accurately predict future customer needs and preferences, and thus focus on the wrong business mix.
If revenue or profitability were to fall below forecasted levels, or if market conditions were to decline in a material or sustained manner, further impairment could be indicated and we could incur an additional non-cash impairment expense that would negatively impact our financial condition and results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
If revenue or profitability were to fall below forecasted levels, or if market conditions were 14 Table of Contents to decline in a material or sustained manner, further impairment could be indicated and we could incur an additional non-cash impairment expense that would negatively impact our financial condition and results of operations.
A decline in consumer confidence, whether as a result of an economic slowdown (due to COVID-19 concerns discussed above or otherwise), uncertainty regarding the future or other factors, could result in a decrease in net sales and operating income of this segment.
A decline in consumer confidence, whether as a result of an economic slowdown, uncertainty regarding the future or other factors, could result in a decrease in net sales and operating income of this segment.
Our LSO segment competes with several international specialty glass manufacturers and international and domestic acrylic suppliers. If these competitors are able to successfully improve their product attributes, service capabilities and production capacity and/or increase their sales and marketing focus in the U.S. custom picture framing market, this segment's net sales and margins could be negatively impacted.
If these competitors are able to successfully improve their product attributes, service capabilities and production capacity and/or increase their sales and marketing focus in the U.S. custom picture framing market, this segment's net sales and margins could be negatively impacted.
Further, there is additional risk in our ability to accurately forecast our operational and financial performance and provide earnings guidance as a result of evolving conditions because of the COVID-19 pandemic and related economic downturn, continued inflationary cost increases and uncertainty resulting from the Russian invasion of Ukraine.
Further, there may be additional risk in our ability to accurately forecast our operational and financial performance and provide earnings guidance as a result of evolving conditions resulting from public health crises, economic downturns, and continued inflationary cost increases.
Risks related to acquisitions and integration activities could adversely affect our operating results We have completed and may complete additional acquisitions in the future to accelerate the execution of our growth strategies, including new geographies, adjacent market sectors and new product introductions.
Our centralized operating system may not produce the desired operating efficiencies. 11 Table of Contents Risks related to acquisitions and integration activities could adversely affect our operating results We may complete acquisitions in the future as part of the execution of our strategic roadmap, including new geographies, adjacent market sectors and new product introductions.
Continuing inflation may negatively impact our profitability. Rising inflation, interest rates, or construction costs could reduce the demand for our products and services and impact our profitability. Higher interest rates may make it more expensive to finance construction projects, and as a result, reduce the number of projects and the demand for our products and services.
Higher interest rates make it more expensive to finance construction projects, and as a result, may reduce the number of projects available to us and the demand for our products and services, and also increase the interest expenses associated with our borrowings.
Continued supply and demand imbalances for these resources may continue to exert upward pressure on costs. Furthermore, in some of our segments, we operate on contracts wherein we bear part or all of the risk of inflation on materials costs and the cost of installation services.
Cost inflation, including significant cost increases for freight, aluminum, glass, paint and other materials used in our operations, has impacted, and could continue to impact, our profitability. Furthermore, in some of our segments, we operate on contracts wherein we bear part or all of the risk of inflation on materials costs and the cost of installation services.
Our Architectural Framing Systems and Architectural Glass segments have seen an increase in imports of products into the U.S. from international suppliers due to the relative strength of the U.S. dollar. If foreign imports occur at increased levels for extended periods of time, our net sales and margins in those segments could be negatively impacted.
If foreign imports occur at increased levels for extended periods of time, our net sales and margins in those segments could be negatively impacted. Our LSO segment competes with several international specialty glass manufacturers and international and domestic acrylic suppliers.
Based on our annual impairment valuation analysis performed in the fourth quarter of fiscal 2022, there was no goodwill impairment identified. During fiscal 2021, our annual impairment analysis determined impairment of goodwill at two of our reporting units within the Architectural Framing Systems segment and we determined impairment of our EFCO trade name.
Based on our annual impairment valuation analysis performed in the fourth quarter of fiscal 2023, there was no impairment of goodwill or indefinite and finite-lived intangibles identified.
Removed
COVID-19 Pandemic Risks The novel coronavirus (COVID-19) pandemic, efforts to mitigate the pandemic, and the related weakening economic conditions, have impacted our business and could have a significant negative impact on our operations, liquidity, financial condition and financial results To date, we have experienced delays in commercial construction projects and other adverse consequences due to the COVID-19 pandemic.
Added
Continuing inflation may negatively impact our profitability. Rising inflation, interest rates, and construction costs, or any one of them, could reduce the demand for our products and services and impact our profitability.
Removed
Quarantines and "stay in place" orders, the timing and length of containment and eradication solutions, travel restrictions, construction site closures and project delays, absenteeism by infected workers, labor shortages and other disruptions to our supply chain or to our customers, have adversely impacted our sales and operating results.
Added
With the realignment of the Sotawall business from the Architectural Framing Systems segment into the Architectural Services segment at the beginning of the first quarter of fiscal 2023, the historical comparative segment results for these two segments has been recast and as such this impairment expense recorded during fiscal 2022 is now reflected in the Architectural Services segment.
Removed
In addition, the pandemic contributed to an economic downturn that has impacted demand for certain of our products and services. Order lead times have been, and may continue to be, extended or delayed. Within the LSO segment, we also experienced the temporary closure of many of our customer's retail locations.
Added
Failure to maintain effective internal controls over financial reporting could adversely impact our ability to timely and accurately report financial results and comply with our reporting obligations, which could materially affect our business.
Removed
We also were required temporarily to shut down our factories in this segment to comply with government "stay in place" orders.
Added
Regardless of how internal financial reporting control systems are designed, implemented, and enforced, they cannot ensure with absolute certainty that our policy objectives will be met in every instance. Because of the inherent limitations of all such systems, our internal controls over financial reporting may not always prevent or detect misstatements.
Removed
We expect this global pandemic to continue to have an impact on our future revenue and results of operations, although the negative impacts on our business directly due to the COVID-19 pandemic had moderated by the end of fiscal 2022.
Added
Failure to maintain effective internal control over financial reporting could adversely affect our ability to accurately and timely report financial results, to prevent or detect fraud, or to comply with the requirements of the SEC or the Sarbanes-Oxley Act of 2002, which could necessitate a restatement of our financial statements, and/or result in an investigation, or the imposition of sanctions, by regulators.
Removed
Cost inflation, including significant cost increases for freight, aluminum, glass, paint and other materials used in our operations, has impacted, and could continue to impact, our profitability. The availability and price of necessary raw materials for our products may be negatively impacted by the international sanctions and market volatility caused by Russia’s invasion of Ukraine.
Added
Such failure could additionally expose us to litigation and/or reputational harm, impair our ability to obtain financing, or increase the cost of any financing we obtain. All of these impacts could adversely affect the price of our common stock and our business overall. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Removed
As a result, in the prior year, we recorded a goodwill impairment expense and an indefinite-lived intangible asset impairment expense of $63.8 million and $6.3 million, respectively.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperty Location Owned/ Leased Function Architectural Framing Systems segment Wausau, WI Owned Manufacturing/Administrative Stratford, WI Owned Manufacturing Reed City, MI Owned Manufacturing Walker, MI Leased Manufacturing/Administrative Dallas, TX Leased Manufacturing Toronto, ON Canada Leased Manufacturing/Warehouse/Administrative Brampton, ON Canada Leased Manufacturing/Warehouse/Administrative Monett, MO Owned Manufacturing/Warehouse/Administrative Architectural Glass segment Owatonna, MN Owned Manufacturing/Administrative Nazaré Paulista, Brazil Owned (1) Manufacturing/Administrative Architectural Services segment Minneapolis, MN Leased Administrative West Chester, OH Leased Manufacturing Mesquite, TX Leased Manufacturing Glen Burnie, MD Leased Manufacturing Orlando, FL Leased Manufacturing LSO segment McCook, IL Leased Manufacturing/Warehouse/Administrative Faribault, MN Owned Manufacturing/Administrative Other Minneapolis, MN Leased Administrative (1) This is an owned facility; however, the land is leased from the city.
Biggest changeProperty Location Owned/ Leased Function Architectural Framing Systems segment Wausau, WI Owned Manufacturing/Administrative Stratford, WI Owned Manufacturing Reed City, MI Owned Manufacturing Walker, MI Leased Manufacturing/Administrative Mesquite, TX Leased Manufacturing Monett, MO Owned Manufacturing/Warehouse/Administrative Toronto, ON Canada Leased Manufacturing/Warehouse/Administrative Architectural Services segment Minneapolis, MN Leased Administrative West Chester, OH Leased Manufacturing Mesquite, TX Leased Manufacturing Glen Burnie, MD Leased Manufacturing/Warehouse Brampton, ON Canada Leased Manufacturing/Warehouse/Administrative Architectural Glass segment Owatonna, MN Owned Manufacturing/Administrative Nazaré Paulista, Brazil Owned (1) Manufacturing/Administrative LSO segment McCook, IL Leased Manufacturing/Warehouse/Administrative Faribault, MN Owned Manufacturing/Administrative Other Minneapolis, MN Leased Administrative (1) This is an owned facility; however, the land is leased from the city.
ITEM 2. PROPERTIES The following table lists, by segment, the Company's principal physical properties as of February 26, 2022. We believe these properties are generally in good operating condition, suitable for their respective uses and adequate for our current needs as our business is presently conducted.
ITEM 2. PROPERTIES The following table lists, by segment, the Company's principal physical properties as of February 25, 2023. We believe these properties are generally in good operating condition, suitable for their respective uses and adequate for our current needs as our business is presently conducted.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe have in the past and are currently subject to product liability and warranty claims, including certain legal claims related to a commercial sealant product formerly incorporated into our products. The Company is also subject to litigation arising out of areas such as employment practices, workers compensation and general liability matters.
Biggest changeWe have in the past and are currently subject to product liability and warranty claims, including certain legal claims related to a commercial sealant product formerly incorporated into our products. In December 2022, the claimant in an arbitration of one such claim was awarded $20 million.
Although it is very difficult to accurately predict the outcome of any such proceedings, facts currently available indicate that no matters will result in losses that would have a material adverse effect on the results of operations, cash flows or financial condition of the Company.
Although it is very difficult to accurately predict the outcome of any such proceedings, facts currently available indicate that no matters will result in losses that would have a material adverse effect on the results of operations, cash flows or financial condition of the Company. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Added
The Company intends to appeal the award and believes, after taking into account all currently available information, including the advice of counsel and the likelihood of available insurance coverage, that this award will not have a material adverse effect on the Company's business, financial condition, results of operations or cash flows.
Added
The Company is also subject 15 Table of Contents to litigation arising out of areas such as employment practices, workers compensation and general liability matters.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeFiscal Year First Second Third Fourth Total 2022 $ 0.2000 $ 0.2000 $ 0.2000 $ 0.2200 $ 0.8200 2021 0.1875 0.1875 0.1875 0.2000 0.7625 2020 0.1750 0.1750 0.1750 0.1875 0.7125 Purchases of Equity Securities by the Company The following table provides information with respect to purchases made by the Company of its own stock during the fourth quarter of fiscal 2022: Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b) Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (b) November 28, 2021 through December 24, 2021 238,938 $ 43.76 237,872 1,124,128 December 25, 2021 through January 22, 2022 677,804 48.58 676,025 2,448,103 January 23, 2022 through February 26, 2022 623,565 45.02 623,565 1,824,538 Total 1,540,307 $ 45.92 1,537,462 1,824,538 (a) The shares in this column represent the total number of shares that were repurchased by us pursuant to our publicly announced repurchase program, plus the shares surrendered to us by plan participants to satisfy withholding tax obligations related to share-based compensation.
Biggest changeFiscal Year First Second Third Fourth Total 2023 $ 0.2200 $ 0.2200 $ 0.2200 $ 0.2400 $ 0.9000 2022 0.2000 0.2000 0.2000 0.2200 0.8200 2021 0.1875 0.1875 0.1875 0.2000 0.7625 Purchases of Equity Securities by the Company The following table provides information with respect to purchases made by the Company of its own stock during the fourth quarter of fiscal 2023: Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b) Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (b) November 27, 2022 through December 24, 2022 1,045 $ 45.82 — 1,253,399 December 25, 2022 through January 21, 2023 6,981 45.19 — 1,253,399 January 22, 2023 through February 25, 2023 74 44.36 — 1,253,399 Total 8,100 $ 45.27 — 1,253,399 (a) The shares in this column represent the total number of shares that were surrendered to us by plan participants to satisfy withholding tax obligations related to share-based compensation.
The Board increased the authorization by 750,000 shares, announced on January 24, 2008; by 1,000,000 shares on each of the announcement dates of October 8, 2008, January 13, 2016, January 9, 2018, January 14, 2020, and October 7, 2021; and by 2,000,000 shares, announced on October 3, 2018 and January 14, 2022.
The Board increased the authorization by 750,000 shares, announced on January 24, 2008; by 1,000,000 shares on each of the announcement dates of October 8, 2008, January 13, 2016, January 9, 2018, January 14, 2020, October 7, 2021 and June 22, 2022; and by 2,000,000 shares, announced on October 3, 2018 and January 14, 2022.
Most of our direct competitors in our various business units are either privately owned or divisions of larger, publicly owned companies. ITEM 6. [RESERVED]
Most of our direct competitors in our various business units are either privately owned or divisions of larger, publicly owned companies. ITEM 6. [RESERVED] 17 Table of Contents
Comparative Stock Performance The graph below compares the cumulative total shareholder return on a $100 investment in our common stock for the last five fiscal years with the cumulative total return on a $100 investment in the Russell 2000 Index, a broad equity market index, and the Standard & Poor's Small Cap 600 Growth Index, an index that includes companies of similar market capitalization.
The repurchase program does not have an expiration date. 16 Table of Contents Comparative Stock Performance The graph below compares the cumulative total shareholder return on a $100 investment in our common stock for the last five fiscal years with the cumulative total return on a $100 investment in the Russell 2000 Index, a broad equity market index, and the Standard & Poor's Small Cap 600 Growth Index, an index that includes companies of similar market capitalization.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Apogee common stock is traded on the NASDAQ Stock Market under the ticker symbol "APOG". As of April 8, 2022, there were 1,124 shareholders of record and 14,507 shareholders for whom securities firms acted as nominees.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Apogee common stock is traded on the NASDAQ Stock Market under the ticker symbol "APOG". As of April 6, 2023, there were 1,114 shareholders of record and 13,453 shareholders for whom securities firms acted as nominees.
(b) In fiscal 2004, announced on April 10, 2003, the Board of Directors authorized the repurchase of 1,500,000 shares of Company stock.
We did not purchase any shares pursuant to our publicly announce repurchase program during the fiscal quarter. (b) In fiscal 2004, announced on April 10, 2003, the Board of Directors authorized the repurchase of 1,500,000 shares of Company stock.
The graph assumes an investment at the close of trading on March 4, 2017, and also assumes the reinvestment of all dividends. 15 Table of Contents 2017 2018 2019 2020 2021 2022 Apogee $ 100.00 $ 76.44 $ 63.62 $ 54.34 $ 69.37 $ 86.10 S&P Small Cap 600 Growth Index 100.00 112.36 120.65 112.72 165.53 162.88 Russell 2000 Index 100.00 111.31 116.96 110.20 166.40 155.92 We selected the Standard & Poor's Small Cap 600 Growth Index as an index of companies with similar market capitalization because we are unable to identify a peer group of companies similar to us in size and scope of business activities or a widely recognized published industry index that accurately reflects our diverse business activities.
The graph assumes an investment at the close of trading on March 3, 2018, and also assumes the reinvestment of all dividends. 2018 2019 2020 2021 2022 2023 Apogee $ 100.00 $ 83.23 $ 71.10 $ 90.76 $ 112.65 $ 115.88 S&P Small Cap 600 Growth Index 100.00 107.38 100.33 147.33 144.97 133.63 Russell 2000 Index 100.00 105.08 99.01 149.51 140.09 134.63 We selected the Standard & Poor's Small Cap 600 Growth Index as an index of companies with similar market capitalization because we are unable to identify a peer group of companies similar to us in size and scope of business activities or a widely recognized published industry index that accurately reflects our diverse business activities.
Removed
The repurchase program does not have an expiration date.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

66 edited+48 added−37 removed33 unchanged
Biggest changeReconciliation of Non-GAAP Financial Information Adjusted Operating Income and Adjusted Net Earnings per Diluted Common Share (Unaudited) Diluted per share amounts Year-ended Year-ended (In thousands) February 26, 2022 February 27, 2021 February 26, 2022 February 27, 2021 Operating income $ 22,045 $ 25,527 $ 0.14 $ 0.59 Impairment expense on intangible assets and goodwill 49,473 70,069 1.96 2.66 Restructuring 30,512 4,884 1.21 0.19 Gain on sale of building (19,456) (19,346) (0.77) (0.74) Impairment of equity investment N/A N/A 0.12 — COVID-19 — 4,988 — 0.19 Post-acquisition and acquired project matters — 1,000 — 0.04 Income tax impact on above adjustments (1) N/A N/A (0.17) (0.53) Adjusted operating income $ 82,574 $ 87,122 $ 2.48 $ 2.40 (1) Income tax impact calculated using an estimated statutory tax rate of 25%, which reflects the estimated blended statutory tax rate for the jurisdiction in which the charge or income occurred.
Biggest change(3) Gain on sale of building and related fixed assets within the Architectural Glass segment during the fourth quarter of fiscal 2022. 18 Table of Contents Reconciliation of Non-GAAP Financial Information Adjusted Net Earnings and Adjusted Earnings per Diluted Common Share (Unaudited) Diluted per share amounts Year-ended Year-ended (In thousands) February 25, 2023 February 26, 2022 February 25, 2023 February 26, 2022 Net earnings $ 104,107 $ 3,486 $ 4.64 $ 0.14 Worthless stock deduction and other discrete tax benefits (1) (14,833) — (0.66) — Impairment expense on goodwill and intangible assets (2) — 49,473 — 1.96 Restructuring costs (3) — 30,512 — 1.21 Impairment of equity investment (4) — 3,000 — 0.12 Gain on sale of assets (5) — (19,456) — (0.77) Income tax impact on above adjustments (6) — (4,414) — (0.17) Adjusted net earnings $ 89,274 $ 62,601 $ 3.98 $ 2.48 Shares outstanding for EPS 22,416 25,292 Per share amounts are computed independently for each of the items presented so the sum of the items may not equal the total amount (1) Adjustment related to discrete income tax benefits for the Sotawall business in fiscal 2023, primarily related to a worthless stock deduction and the release of valuation allowance on deferred tax assets.
Adjusted operating income and adjusted earnings per diluted share (adjusted diluted EPS) are supplemental non-GAAP financial measures provided by the Company to assess performance on a more comparable basis from period-to-period by excluding amounts that management does not consider part of core operating results.
Adjusted operating income, adjusted net earnings and adjusted earnings per diluted share (adjusted diluted EPS) are supplemental non-GAAP financial measures provided by the Company to assess performance on a more comparable basis from period-to-period by excluding amounts that management does not consider part of core operating results.
Fiscal 2021 net sales increased 45.1 percent, or $31.6 million, compared to the prior year, reflecting a more favorable sales mix, as demand recovered from the impact of COVID in the prior year period.
Fiscal 2022 net sales increased 45.1 percent, or $31.6 million, compared to fiscal 2021, reflecting a more favorable sales mix, as demand recovered from the impact of COVID in the prior year period.
If future revenue were to fall below forecasted levels or if market conditions were to decline in a material or sustained manner, further impairment could be indicated on these indefinite-lived intangible assets.
If future revenue were to fall below forecasted levels or if market conditions were to decline in a material or sustained manner, impairment could be indicated on these indefinite-lived intangible assets.
We used discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in the internally developed forecasts. The market approach uses a multiple of earnings and revenue based on guidelines for publicly traded companies. Based on these analyses, estimated fair value exceeded carrying value at all of our reporting units.
We used discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in the internally developed forecasts. The market approach uses a multiple of earnings and revenue based on publicly traded companies. Based on these analyses, estimated fair value exceeded carrying value at all of our reporting units.
If revenue or profitability were to fall below forecasted levels, or if market conditions were to decline in a material or sustained manner, impairment could be indicated at these or our other reporting units and we could incur non-cash impairment expense that would negatively impact our net earnings.
If revenue or profitability were to fall below forecasted levels, or if market conditions were to decline in a material or sustained manner, impairment could be indicated at our reporting units and we could incur non-cash impairment expense that would negatively impact our net earnings.
For our fiscal 2022 annual impairment test, we elected to bypass the qualitative assessment process and to proceed directly to comparing the fair value of each of our reporting units to carrying value, including goodwill. If fair value exceeds the carrying value, goodwill impairment is not indicated.
For our fiscal 2023 annual impairment test, we elected to bypass the qualitative assessment process and proceed directly to comparing the fair value of each of our reporting units to carrying value, including goodwill. If fair value exceeds the carrying value, goodwill impairment is not indicated.
In addition, we received a benefit of $4.9 million in fiscal 2022 compared to $7.4 million in fiscal 2021, as a result of a Canadian wage subsidy program offered to support Canadian business impacted by the COVID-19 pandemic, thereby offsetting cost actions that would have been taken had this subsidy not been secured.
In addition, we received a benefit of $4.9 million in fiscal 2022, compared to a benefit of $7.4 million in fiscal 2021, as a result of a Canadian wage subsidy program offered to support Canadian business impacted by the COVID-19 pandemic, thereby offsetting cost actions that would have been taken had this subsidy not been secured, in each of these years.
Due to the nature of the work required under these long-term contracts, the estimation of costs incurred and remaining to complete on a project is subject to many variables and requires significant judgment.
Due to the nature of the work required under these long-term contracts, the estimation of total revenue and costs incurred and remaining to complete on a project is subject to many variables and requires significant judgment.
We consider contract modifications to exist when the modification, generally through a change order, either creates new or changes existing enforceable rights and obligations, and we evaluate these types of modifications to determine whether they may be considered distinct performance obligations.
We consider contract modifications to exist when the modification, generally through a change order, either creates 25 Table of Contents new or changes existing enforceable rights and obligations, and we evaluate these types of modifications to determine whether they may be considered distinct performance obligations.
These costs were partially offset by $19.5 million of gain on sale of assets related to the sale of a manufacturing facility in the Architectural Glass segment and by positive impacts from continued recovery of the LSO segment (which closed for most of the first and second quarters of the prior year, based on COVID-related government directives).
These costs were partially offset by $19.5 million of gain on sale of assets related to the sale of a manufacturing facility in the Architectural Glass segment and by positive impacts from continued recovery of the LSO segment (which closed for most of the first and second quarters of fiscal 2021, based on COVID-related government directives).
Based on this assessment, management must evaluate the need for, and amount of, a valuation allowance against the deferred tax assets. As facts and circumstances change, adjustment to the valuation allowance may be required.
Based on this assessment, management must evaluate the need for, and amount of, a valuation allowance against the deferred tax assets. As facts and circumstances change, adjustment to the valuation allowance may be required. 27 Table of Contents
Operating margin decreased 510 basis points for the fiscal year ended 2022 compared to the prior year period, as a result of $27.1 million of restructuring costs during the current year, as well as the impact of higher material and freight costs from inflation, partially offset by $19.5 million gain on sale of a manufacturing facility in Georgia.
Operating margin decreased 510 basis points for the fiscal year ended 2022 compared to fiscal 2021, as a result of $27.1 million of restructuring costs fiscal 2022, as well as the impact of higher material and freight costs from inflation, partially offset by $19.5 million gain on sale of a manufacturing facility in Georgia.
We have three businesses which operate under long-term, fixed-price contracts, representing approximately 38 percent of our total revenue in fiscal February 26, 2022. The contracts for these businesses have a single, bundled performance obligation, as these businesses generally provide interrelated products and services and integrate these products and services into a combined output specified by the customer.
We have three businesses which operate under long-term, fixed-price contracts, representing approximately 36 percent of our total revenue in fiscal February 25, 2023. The contracts for these businesses have a single, bundled performance obligation, as these businesses generally provide interrelated products and services and integrate these products and services into a combined output specified by the customer.
Total selling, general and administrative (SG&A) expense for fiscal 2022, including impairment expense on goodwill and intangible assets noted in the table above, was 19.2 percent, a decrease of 110 basis points from fiscal 2021.
SG&A expense, including impairment expense on goodwill and intangible assets noted in the table above, was 19.2 percent for fiscal 2022, a decrease of 110 basis points from fiscal 2021.
Net interest expense declined by 10 basis points compared to the prior year, due to the lower average debt balance in fiscal 2022.
Net interest expense declined by 10 basis points compared to fiscal 2021, due to the lower average debt balance in fiscal 2022.
Net sales increased 4.5 percent, or $25.8 million, from fiscal 2021, primarily reflecting flow through from pricing actions taken to offset inflation, partially offset by lower volume.
Net sales increased 7.4 percent, or $37.8 million, from fiscal 2021, primarily reflecting flow-through from pricing actions taken to offset inflation, partially offset by lower volume.
Refer to the table below for a reconciliation to GAAP of these adjusted amounts.
Refer to the tables below for a reconciliation to GAAP of these adjusted amounts.
We evaluated goodwill on a qualitative basis prior to and subsequent to this change and concluded no adjustment to the carrying value of goodwill was necessary as a result of this change.
We evaluated goodwill on a qualitative basis prior to and subsequent to this change for these reporting units and concluded no adjustment to the carrying value of goodwill was necessary as a result of this change.
(Percentage of net sales) 2022 2021 2020 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 79.1 77.6 77.0 Gross margin 20.9 22.4 23.0 Selling, general and administrative expenses 15.4 14.6 16.7 Impairment expense on intangible assets and goodwill 3.8 5.7 — Operating income 1.7 2.1 6.3 Interest expense, net 0.3 0.4 0.7 Other (expense) income, net (0.3) 0.1 0.1 Earnings before income taxes 1.1 1.8 5.7 Income tax expense 0.8 0.6 1.3 Net earnings 0.3 % 1.3 % 4.5 % Effective income tax rate 74.9 % 31.7 % 22.4 % Fiscal 2022 Compared to Fiscal 2021 Gross margin was 20.9 percent in fiscal 2022, a decrease of 150 basis points from fiscal 2021.
(Percentage of net sales) 2023 2022 2021 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 76.7 79.1 77.6 Gross margin 23.3 20.9 22.4 Selling, general and administrative expenses 14.6 15.4 14.6 Impairment expense on intangible assets and goodwill — 3.8 5.7 Operating income 8.7 1.7 2.1 Interest expense, net 0.5 0.3 0.4 Other expense (income), net 0.1 0.3 (0.1) Earnings before income taxes 8.1 1.1 1.8 Income tax expense 0.9 0.8 0.6 Net earnings 7.2 % 0.3 % 1.3 % Effective income tax rate 10.7 % 74.9 % 31.7 % Fiscal 2023 Compared to Fiscal 2022 Gross margin was 23.3 percent in fiscal 2023, an increase of 240 basis points from fiscal 2022.
During fiscal 2022, we conducted a strategic review of our business and the markets we serve in order to establish a new enterprise strategy with three key elements, as discussed in Item 1 on page 4 of this Form 10-K.
In fiscal 2022, we conducted a strategic review of our business and the markets we serve in order to establish a new enterprise strategy with three key elements, and during fiscal 2023, we made significant progress on execution of our strategy, as discussed in Item 1 on page 5 of this Form 10-K.
In addition to the above standby letters of credit, we are required, in the ordinary course of business, to provide surety or performance bonds that commit payments to our customers for any non-performance. At February 26, 2022, $352.5 million of our backlog was bonded by performance bonds with a face value of $1.2 billion.
In addition to the above standby letters of credit, we are required, in the ordinary course of business, to provide surety or performance bonds that commit payments to our customers for any non-performance. At February 25, 2023, $523.0 million of our backlog was bonded by performance bonds with a face value of $1.4 billion.
In the fair value analysis, we assumed a discount rate of 12.3 percent, a royalty rate of 1.5 percent, and a long-term growth rate of 3.0 percent.
In the fair value analysis, we assumed discount rates ranging from 13.0 percent to 13.5 percent, a royalty rate of 1.5 percent, and a long-term growth rate of 3.0 percent.
We have remaining authority to repurchase 1,824,538 shares under this program, which has no expiration date, and we will continue to evaluate making future share repurchases, depending on our cash flow and debt levels, market conditions, including the continuing effects of the COVID-19 pandemic, and other potential uses of cash.
We have remaining authority to repurchase 1,253,399 shares under this program, which has no expiration date, and we will continue to evaluate making future share repurchases, depending on our cash flow and debt levels, market conditions, and other potential uses of cash. Additional Liquidity Considerations.
Our estimates are evaluated on an ongoing basis and are drawn from historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results could differ under other assumptions or circumstances.
Our estimates are evaluated on an ongoing basis and are drawn from historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results could differ under other assumptions or circumstances. We consider the following items in our consolidated financial statements to require significant estimation or judgment.
Large-Scale Optical Technologies (LSO) (In thousands) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net sales $ 101,673 $ 70,050 $ 87,911 45.1 % (20.3) % Operating income 23,618 31,203 22,642 (24.3) % 37.8 % Operating margin 23.2 % 44.5 % 25.8 % Fiscal 2022 Compared to Fiscal 2021.
Large-Scale Optical Technologies (LSO) (In thousands) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net sales $ 104,215 $ 101,673 $ 70,050 2.5 % 45.1 % Operating income 25,348 23,618 31,203 7.3 % (24.3) % Operating margin 24.3 % 23.2 % 44.5 % Fiscal 2023 Compared to Fiscal 2022.
We also reserve for estimated exposures on other claims as they are known and reasonably estimable. Income taxes We are required to make judgments regarding the potential tax effects of various financial transactions and ongoing operations to estimate our obligation to taxing authorities. These tax obligations include income, real estate, franchise and sales/use taxes.
Income taxes We are required to make judgments regarding the potential tax effects of various financial transactions and ongoing operations to estimate our obligation to taxing authorities. These tax obligations include income, real estate, franchise and sales/use taxes.
In fiscal 2021, most of the segment's customers and the segment's manufacturing operations were closed for a large part of the first and second quarters to comply with COVID-related government directives.
In fiscal 2021, most of the segment's customers and the segment's manufacturing operations were closed for a large part of the first and second quarters to comply with COVID-related government directives. The segment had operating margin of 23.2 percent in fiscal 2022, compared to operating margin of 44.5 percent in fiscal 2021.
The 23 Table of Contents reporting units for our fiscal 2022 annual impairment test align with reporting segments, with the exception of our Architectural Framing Systems segment, which contains two reporting units, Window and Wall Systems and Storefront and Finishing Solutions, which represent $55.6 million and $37.6 million, of the goodwill balance at February 26, 2022, respectively.
The reporting units for our fiscal 2023 annual impairment test align with reporting segments, with the exception of our Architectural Framing Systems segment. This segment contains two reporting units, Window and Wall Systems and Storefront and Finishing Solutions, which represent $54.5 million and $35.7 million, of the goodwill balance at February 25, 2023, respectively.
Management uses these non-GAAP measures to evaluate the Company’s historical and prospective financial performance, measure operational profitability on a consistent basis, and provide enhanced transparency to the investment community. 17 Table of Contents Return on average invested capital (ROIC) is a non-GAAP financial measure that we define as operating income (adjusted for certain items that are unusual in nature or whose fluctuations from period to period do not necessarily correspond to changes in the operations of the Company) after tax, divided by average invested capital.
Return on average invested capital (ROIC) is a non-GAAP financial measure that we define as operating income (adjusted for certain items that are unusual in nature or whose fluctuations from period to period do not necessarily correspond to changes in the operations of the Company) after tax, divided by average invested capital.
Impairment of goodwill, indefinite-lived intangible assets and long-lived assets Goodwill We have historically evaluated 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.
Impairment of goodwill and indefinite-lived intangible assets Goodwill We evaluate goodwill for impairment annually on the first day in our fiscal fourth quarter, or more frequently if events or changes in circumstances indicate the carrying value of the goodwill may not be recoverable.
Results of Operations Net Sales (Dollars in thousands) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net sales $ 1,313,977 $ 1,230,774 $ 1,387,439 6.8 % (11.3) % Fiscal 2022 Compared to Fiscal 2021 Net sales in fiscal 2022 increased by 6.8 percent compared to fiscal 2021, driven by record revenue in the LSO and Architectural Services segments and growth in the Architectural Framing Systems segment, partially offset by decreased volume in the Architectural Glass Segment.
Fiscal 2022 Compared to Fiscal 2021 Net sales in fiscal 2022 increased by 6.8 percent compared to fiscal 2021, driven by record revenue in the LSO and Architectural Services segments and growth in the Architectural Framing Systems segment, partially offset by decreased volume in the Architectural Glass Segment.
We consider the following items in our consolidated financial statements to require significant estimation or judgment. 22 Table of Contents Revenue recognition We generate revenue from the design, engineering and fabrication of architectural glass, curtainwall, window, storefront and entrance systems, and from installing those products on commercial buildings. We also manufacture value-added glass and acrylic products.
Revenue recognition We generate revenue from the design, engineering and fabrication of architectural glass, curtainwall, window, storefront and entrance systems, and from installing those products on commercial buildings. We also manufacture value-added glass and acrylic products.
In addition, we received a benefit of $7.4 million in fiscal 2021, as a result of a Canadian wage subsidy program offered to support Canadian business impacted by the COVID-19 pandemic, thereby offsetting cost actions that would have been taken had this subsidy not been secured.
This was partially offset by a benefit of $4.9 million, taken within the Architectural Framing Systems and Architectural Services segments, as a result of a Canadian wage subsidy program offered to support Canadian businesses impacted by the COVID-19 pandemic, thereby offsetting cost actions that would have been taken had this subsidy not been secured.
We also actively manage the risk of these exposures through contract negotiations and proactive project management. We reserve estimated exposures on known claims, as well as on a portion of anticipated claims for product warranty and rework costs, based on similar historical product liability claims, as a ratio of sales.
We reserve estimated exposures on known claims, as well as on a portion of anticipated claims for product warranty and rework costs, based on similar historical product liability claims, as a ratio of sales. We also reserve for estimated exposures on other claims as they are known and reasonably estimable.
Fiscal 2022 summary of results: • Consolidated net sales were $1.3 billion, an increase of 7 percent from $1.2 billion in fiscal 2021. • Operating income was $22.0 million, a decrease of 14 percent from $25.5 million in the prior year. • Diluted EPS was $0.14, compared to $0.59 in the prior year, a decrease of 76 percent. • Adjusted operating income was $82.6 million, a decrease of 5 percent compared to the prior year, and adjusted diluted EPS was $2.48 in fiscal 2022, an increase of 3 percent compared to the prior year.
Fiscal 2023 summary of results: • Consolidated net sales were $1.4 billion, an increase of 10 percent from $1.3 billion in fiscal 2022. • Operating income increased to $125.8 million, from $22.0 million in the prior year. • Diluted EPS was $4.64, compared to $0.14 in the prior year. • Adjusted operating income was $125.8 million, an increase of 52 percent compared to the prior year, and adjusted diluted EPS was $3.98 in fiscal 2023, an increase of 60 percent compared to the prior year.
This was driven by a $49.4 million impairment expense taken within the Architectural Framing Systems segment during the current year compared 18 Table of Contents to a $70.1 million impairment expense taken within the Architectural Framing Systems segment in the prior year.
This was driven by a $49.5 million impairment expense taken within the Architectural Services segment during fiscal 2022, compared to a $70.1 million impairment expense taken within the Architectural Framing Systems and Architectural Services segments in fiscal 2021.
The Company forecasts full year capital expenditures of $35 to $40 million. Recently Issued Accounting Pronouncements See Note 1 of the Notes to Consolidated Financial Statements within Item 8 of this Form 10-K for information pertaining to recently issued accounting pronouncements, incorporated herein by reference.
The company continues to expect a long-term average tax rate of approximately 24.5 percent, and forecasts capital expenditures in fiscal 2024 between $50 to $60 million. Recently Issued Accounting Pronouncements See Note 1 of the Notes to Consolidated Financial Statements within Item 8 of this Form 10-K for information pertaining to recently issued accounting pronouncements, incorporated herein by reference.
The segment had operating margin of 23.2 percent in fiscal 2022 compared to operating margin of 44.5 percent in fiscal 2021, reflecting the impact of a $19.3 million gain on the sale-leaseback of a building recognized during the third quarter of the prior year, partially offset by the impacts of the temporary shutdown and the related lower volume.
This was primarily due to a $19.3 million gain on the sale-leaseback of a building recognized during the third quarter of fiscal 2021, partially offset by the impacts of the temporary shutdown and the related lower volume.
At February 26, 2022, we had ongoing letters of credit of $16.4 million related to industrial revenue bonds, construction contracts and insurance collateral that expire in fiscal 2023 and reduce borrowing capacity under the revolving credit facility.
We are unable to reasonably estimate in which future periods the remaining unrecognized tax benefits will ultimately be settled. At February 25, 2023, we had ongoing letters of credit of $12.3 million related to industrial revenue bonds, construction contracts and insurance collateral that expire in fiscal 2024 and reduce borrowing capacity under the revolving credit facility.
We also are subject to project management and installation-related contingencies as a result of our fixed-price material supply and installation service contracts, primarily in our Architectural Services segment and certain of our Architectural Framing Systems businesses, including those taken on with our acquisition of EFCO.
We also are subject to project management and installation-related contingencies as a result of our fixed-price material supply and installation service contracts, primarily in our Architectural Services segment and certain of our Architectural Framing Systems businesses. The time period from when a claim is asserted to when it is resolved, either by negotiation, settlement or litigation, can be several years.
During the fourth quarter of fiscal 2022, we finalized plans for integrating the Sotawall business into the Architectural Services segment, beginning in fiscal 2023, and as a result, we recorded impairment expense of $49.5 million on indefinite- and finite-lived intangible assets.
In addition, the prior year included a $49.5 million impairment expense on indefinite and definite-lived intangibles taken within the Architectural Services segment, as a result of triggering events resulting from the finalization of our plans for integrating the Sotawall business into the Architectural Services segment, beginning in fiscal 2023.
The segment had an operating loss of $16.7 million and operating margin of (2.8) percent in fiscal 2022 compared to an operating loss of $44.8 million and operating margin of (7.8) percent in fiscal 2021, reflecting the impact of the $49.5 million and $70.1 million impairment expense and $1.7 million and $4.4 million of restructuring charges in fiscal 2022 and fiscal 2021, respectively, partially offset by the benefit of $4.9 million and $7.4 million in fiscal 2022 and 2021, respectively, from a Canadian wage subsidy program offered to Canadian businesses impacted by the COVID-19 pandemic.
The segment had operating income of $38.1 million and operating margin of 7.0 percent in fiscal 2022, compared to an operating loss of $29.0 million and operating margin of (5.7) percent in fiscal 2021, reflecting the impact of a $53.0 million impairment expense in fiscal 2021, and $1.7 million and $4.4 million of restructuring charges in fiscal 2022 and fiscal 2021, respectively.
We had total cash and short-term marketable securities of $37.6 million, and $218.6 million available under our committed revolving credit facility, at February 26, 2022. We believe that cash flows from operating activities will be adequate to meet our short-term and long-term liquidity and capital expenditure needs.
Due to our ability to generate strong cash from operations and our borrowing capability under our committed revolving credit facility, we believe that our sources of liquidity will be adequate to meet our short-term and long-term liquidity and capital expenditure needs.
We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Overview We are a leader in the design and development of value-added glass and metal products and services. Our four reporting segments are: Architectural Framing Systems, Architectural Glass, Architectural Services and Large-Scale Optical Technologies (LSO).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We are a leader in the design and development of value-added glass and metal products and services. Our four reporting segments are: Architectural Framing Systems, Architectural Glass, Architectural Services and Large-Scale Optical Technologies (LSO).
In fiscal 2022, we paid dividends totaling $20.3 million and repurchased 2,292,846 shares under our authorized share repurchase program, at a total cost of $100.0 million. We repurchased 1,177,704 shares under the program in fiscal 2021 and 686,997 shares under the program in fiscal 2020.
We repurchased 2,292,846 shares under the program in fiscal 2022 and 1,177,704 shares under the program in fiscal 2021. We have repurchased a total of 10,996,601 shares, at a total cost of $381.6 million, since the 2004 inception of this program.
In addition, we believe we have the ability to obtain both short-term and long-term debt to meet our financing needs for the foreseeable future. We also believe we will continue to be in compliance with our existing debt covenants over the next fiscal year.
In addition, we believe we have the ability to obtain both short-term and long-term debt to meet our financing needs, including additional sources of debt to finance potential 24 Table of Contents material acquisitions for the foreseeable future.
The time period from when a claim is asserted to when it is resolved, either by negotiation, settlement or litigation, can be several years. While we maintain various types of product liability insurance, the insurance policies include significant self-retention of risk in the form of policy deductibles. In addition, certain claims could be determined to be uninsured.
While we maintain various types of product liability insurance, the insurance policies include significant self-retention of risk in the form of policy deductibles. In addition, certain claims could be determined to be uninsured. We also actively manage the risk of these exposures through contract negotiations and proactive project management.
Purchase obligations in the table above relate to raw material commitments and capital expenditures. 21 Table of Contents We expect to make contributions of approximately $0.7 million to our defined-benefit pension plans in fiscal 2023, which will equal or exceed our minimum funding requirements.
We expect to make contributions of approximately $0.7 million to our defined-benefit pension plans in fiscal 2024, which will equal or exceed our minimum funding requirements. As of February 25, 2023, we had reserves of $5.3 million and $0.4 million for long-term unrecognized tax benefits and environmental liabilities, respectively.
Net sales increased 9.9 percent, or $26.7 million, compared to fiscal 2020, driven by increased volume from executing projects in backlog. Operating margin increased 170 basis points over fiscal 2020, primarily driven by improved volume leverage and strong project execution.
Fiscal 2022 Compared to Fiscal 2021. Net sales increased 13.6 percent, or $48.7 million, compared to fiscal 2021, driven by increased volume from executing projects in backlog.
As of February 26, 2022, no borrowings were outstanding under the revolving credit facility. As defined within the credit facility, we have two affirmative financial covenants which require us to stay below a maximum leverage ratio and to maintain a minimum interest expense-to-EBITDA ratio. At February 26, 2022, we were in compliance with both financial covenants. Other Financing Activities.
Our revolving credit facility contains two maintenance 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 February 25, 2023, we were in compliance with both financial covenants.
We continually review our portfolio of businesses and their assets and how they support our business strategy and performance objectives. As part of this review, we may acquire other businesses, pursue geographic expansion, take actions to manage capacity and further invest in, divest and/or sell parts of our current businesses.
As part of this review, we may acquire other businesses, pursue geographic expansion, take actions to manage capacity and further invest in, divest and/or sell parts of our current businesses. Outlook The Company is providing initial guidance for fiscal year 2024, with earnings per diluted share expected in the range of $3.90 to $4.25.
Net sales increased 18.1 percent, or $53.6 million, compared to the prior year, driven by increased volume from executing projects in backlog. Operating margin decreased 110 basis points over the prior year, reflecting the impact of inflation and isolated performance challenges on certain projects experienced during the first quarter of fiscal 2022. Fiscal 2021 Compared to Fiscal 2020.
Net sales increased 0.8 percent, or $3.2 million, compared to the prior year, driven by increased volume from executing projects in backlog. The segment had operating income of $18.1 million and operating margin of 4.4 percent in fiscal 2023, compared to operating loss of $22.1 million and operating margin of (5.4) percent in fiscal 2022.
Fiscal 2022 net sales decreased 6.4 percent, or $21.0 million, over the prior year, primarily reflecting lower volume.
The prior year included $27.1 million of restructuring costs, partially offset by $19.5 million gain on sale of a manufacturing facility in Georgia. 22 Table of Contents Fiscal 2022 Compared to Fiscal 2021. Fiscal 2022 net sales decreased 6.4 percent, or $21.0 million, over fiscal 2021, primarily reflecting lower volume.
The prior year period also included $7.4 million of income related to a New Markets Tax Credit transaction. Fiscal 2021 Compared to Fiscal 2020. Fiscal 2021 net sales decreased 14.7 percent, or $56.9 million, over fiscal 2020, due to market-related volume declines and project delays.
Fiscal 2021 also included $7.4 million of income related to a New Markets Tax Credit transaction.
Cash provided by operating activities was $100.5 million in fiscal 2022, a decrease of $41.4 million from fiscal 2021, primarily reflecting a decline in net earnings during the current fiscal year and the benefit in the prior year from reduced working capital and temporary actions related to the pandemic. Investing Activities.
Operating Activities. Cash provided by operating activities was $102.7 million in fiscal 2023, an increase of $2.2 million from fiscal 2022, primarily driven by higher net earnings, which more than offset increased working capital related to revenue growth and inflation during the current fiscal year. 23 Table of Contents Investing Activities.
As such, a long-lived asset impairment charge of 24 Table of Contents $36.7 million in finite-lived intangible assets was recognized in the fourth quarter of fiscal year 2022 within the Architectural Framing Systems segment.
(2) Adjustment related to impairment charge recorded during the fourth quarter of the prior year on indefinite- and long-lived intangible assets within the Architectural Framing Systems segment as a result of triggering events during the fourth quarter of prior fiscal year.
Architectural Services (In thousands) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net sales $ 349,386 $ 295,807 $ 269,140 18.1 % 9.9 % Operating income 32,743 31,182 23,582 5.0 % 32.2 % Operating margin 9.4 % 10.5 % 8.8 % Fiscal 2022 Compared to Fiscal 2021.
Architectural Glass (In thousands) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net sales $ 316,554 $ 309,241 $ 330,256 2.4 % (6.4) % Operating income 28,610 1,785 18,678 1,502.8 % (90.4) % Operating margin 9.0 % 0.6 % 5.7 % Fiscal 2023 Compared to Fiscal 2022.
The effective tax rate for fiscal 2021 was 31.7 percent, compared to 22.4 percent in fiscal 2020, primarily due to nondeductible goodwill impairment in Canada and the impact of the unfavorable permanent items in relation to reduced earnings in fiscal 2021.
The effective tax rate in the prior year was primarily impacted by the valuation allowance recorded against the tax benefit of the Sotawall impairment and the impact of certain permanent items in relation to reduced earnings in fiscal 2022.
The segment had operating margin of 44.5 percent in fiscal 2021 compared to operating margin of 25.8 percent in fiscal 2020, reflecting the impact of a $19.3 million gain on the sale-leaseback of a building recognized during the third quarter of fiscal 2021, partially offset by the impacts of the temporary shutdown and the related lower volume. 20 Table of Contents Liquidity and Capital Resources (In thousands) 2022 2021 2020 Operating Activities Net cash provided by operating activities $ 100,471 $ 141,863 $ 107,262 Investing Activities Capital expenditures (21,841) (26,165) (51,428) Proceeds on sale of property 30,599 25,108 5,307 Financing Activities Payments on line of credit, net — (47,739) (177,500) (Repayment) borrowings on debt (2,000) (5,400) 150,000 Repurchase and retirement of common stock (100,414) (32,878) (25,140) Dividends paid (20,266) (19,601) (18,714) Operating Activities.
Liquidity and Capital Resources (In thousands) 2023 2022 2021 Operating Activities Net cash provided by operating activities $ 102,696 $ 100,471 $ 141,863 Investing Activities Capital expenditures (45,177) (21,841) (26,165) Proceeds on sale of property 7,755 30,599 25,108 Net cash (used) provided by investing activities (27,710) 9,283 (2,147) Financing Activities Borrowings (payments) on line of credit, net 158,014 — (47,739) Repayments on debt (151,000) (2,000) (5,400) Repurchase and retirement of common stock (74,312) (100,414) (32,878) Dividends paid (19,670) (20,266) (19,601) Net cash used by financing activities (91,023) (120,572) (107,876) We rely on cash provided by operations for the Company’s material cash requirements, including working capital needs, capital expenditures, satisfaction of contractual commitments (including principal and interest payments on our outstanding indebtedness) and shareholder return through dividend payments and share repurchases.
Indefinite-lived intangible assets We have intangible assets for certain acquired trade names and trademarks which are determined to have indefinite useful lives.
Given the amounts by which the fair value exceeds the carrying value for each of our reporting units, the decreases in estimated fair values described above would not have significantly impacted the results of our impairment tests. 26 Table of Contents Indefinite-lived intangible assets We have intangible assets for certain acquired trade names and trademarks which are determined to have indefinite useful lives.
Net interest expense declined by 30 basis points compared to the prior year, due to the lower average debt balance in fiscal 2021 and a favorable one-time legal settlement impacting interest.
Net interest expense increased by 20 basis points compared to the prior year, due to the higher average interest rate and higher average debt balance in fiscal 2023. 20 Table of Contents The effective tax rate for fiscal 2023 was 10.7 percent, compared to 74.9 percent in fiscal 2022.
This amount was recognized as impairment expense in the fourth quarter ended February 26, 2022. We continue to conclude that the useful lives of our remaining indefinite-lived intangible assets is appropriate.
If our discount rate were to increase by 50 basis points, the fair value of this tradename could fall below carrying value, which would indicate impairment. We continue to conclude that the useful lives of our remaining indefinite-lived intangible assets is appropriate.
Net cash provided by investing activities was $9.3 million in fiscal 2022, compared to net cash used by investing activities of $2.1 million in fiscal 2021, due to an increase of $5.5 million of proceeds from property sales in fiscal 2022 compared to fiscal 2021, related to the sale of an Architectural Glass manufacturing facility in Georgia in the fourth quarter of fiscal 2022, and reduced capital expenditures by $4.3 million in fiscal 2022 compared to fiscal 2021.
The current fiscal year included $7.8 million of proceeds from sale of property, while fiscal 2022 included $30.6 million of proceeds from property sales, primarily related to the sale of our Architectural Glass manufacturing facility in Georgia. Fiscal 2021 included $25.1 million of proceeds from sale of property, primarily related to the sale of an LSO manufacturing facility in Illinois.
Segment Analysis Architectural Framing Systems (In thousands) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net sales $ 596,608 $ 570,850 $ 686,596 4.5 % (16.9) % Operating loss (16,726) (44,761) 36,110 (62.6) % N/M Operating margin (2.8) % (7.8) % 5.3 % Fiscal 2022 Compared to Fiscal 2021.
Segment Analysis Architectural Framing Systems (In thousands) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net sales $ 649,778 $ 546,557 $ 508,770 18.9 % 7.4 % Operating income (loss) 81,875 38,088 (29,030) 115.0 % * Operating margin 12.6 % 7.0 % (5.7) % * Indicates calculation not meaningful. Fiscal 2023 Compared to Fiscal 2022.
Based on our annual analysis, the fair value of each of our trade names and trademarks exceeded the carrying amount, however, based on the finalization of our plans for integrating the Sotawall business into the Architectural Services segment, beginning in fiscal 2023, it was determined that the carrying value of the Sotawall trade name exceeded fair value by $12.7 million as it was determined to have an immaterial fair value as of fiscal 2022 year end.
Based on our annual analysis, the fair value of each of our trade names and trademarks exceeded the carrying amount, however, for our EFCO tradename, with a carrying value of $23.0 million, the fair value of the tradename did not exceed carrying value by a significant margin.
Removed
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This Annual Report on Form 10-K, including Management's Discussion and Analysis, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance.
Added
At the beginning of the first quarter of fiscal 2023, we began management of the Sotawall and Harmon businesses under the Architectural Services segment in order to create a single, unified offering for larger custom curtainwall projects.
Removed
The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “should,” "will," "continue" and similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
Added
The comparative fiscal 2022 segment results for the Architectural Framing Systems and Architectural Services segments have been recast to reflect the move of the Sotawall business into the Architectural Services segment from the Architectural Framing Systems segment, effective at the start of the first quarter of fiscal 2023.
Removed
All forecasts and projections in this document are “forward-looking statements,” and are based on management's current expectations or beliefs of the Company's near-term results, based on current information available pertaining to the Company, including the risk factors noted under Item 1A in this Form 10-K.
Added
Reconciliation of Non-GAAP Financial Information Adjusted Operating Income (Unaudited) Year-ended (In thousands) February 25, 2023 February 26, 2022 Operating income $ 125,788 $ 22,045 Impairment expense on goodwill and intangible assets (1) — 49,473 Restructuring costs (2) — 30,512 Gain on sale of assets (3) — (19,456) Adjusted operating income $ 125,788 $ 82,574 (1) Adjustment related to impairment charge recorded during the fourth quarter of the prior year on indefinite- and long-lived intangible assets within the Architectural Framing Systems segment as a result of triggering events during the fourth quarter of prior fiscal year.
Removed
From time to time, we also may provide oral and written forward-looking statements in other materials we release to the public, such as press releases, presentations to securities analysts or investors, or other communications by the Company.
Added
In the first quarter of fiscal 2023, the Sotawall business was re-aligned from the Architectural Framing Systems segment into the Architectural Services segment; the comparative fiscal 2022 results have been recast to reflect the change.
Removed
Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results. Accordingly, we wish to caution investors that any forward-looking statements made by or on behalf of the Company are subject to uncertainties and other factors that could cause actual results to differ materially from such statements.
Added
(2) Adjustment related to previously announced decision to exit certain operations in the Architectural Glass segment and reorganize operations within the Architectural Framing Systems segment, including $21.5 million of asset impairment charges, $6.2 million of employee termination costs and $2.8 million of other costs associated with these restructuring plans incurred during fiscal 2022.
Removed
These uncertainties and other risk factors include, but are not limited to, the risks and uncertainties set forth under Item 1A in this Form 10-K, all of which are incorporated by reference into this Item 7. 16 Table of Contents We wish to caution investors that other factors might in the future prove to be important in affecting the Company's results of operations.
Added
In the first quarter of fiscal 2023, the Sotawall business was re-aligned from the Architectural Framing Systems segment into the Architectural Services segment; the comparative fiscal 2022 results have been recast to reflect the change.
Removed
New factors emerge from time to time; it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Added
(3) Adjustment related to previously announced decision to exit certain operations in the Architectural Glass segment and reorganize operations within the Architectural Framing Systems segment, including $21.5 million of asset impairment charges, $6.2 million of employee termination costs and $2.8 million of other costs associated with these restructuring plans incurred during fiscal 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe have operations in Canada and Brazil, which primarily transact business in local currencies. We manage these operating activities locally. Revenues, costs, assets and liabilities of these operations are generally denominated in local currencies, thereby mitigating some of the risk associated with changes in foreign exchange rates. However, our consolidated financial results are reported in U.S. dollars.
Biggest changeRevenues, costs, assets and liabilities of these operations are generally denominated in local currencies, thereby mitigating some of the risk associated with changes in foreign exchange rates. However, our consolidated financial results are reported in U.S. dollars. Thus, changes in exchange rates between the Canadian dollar and Brazilian Real, versus the U.S. dollar, will impact our reported financial results.
We cannot accurately calculate the pre-tax impact a one percent change in the commodity costs of aluminum and/or lumber would have on our fiscal 2023 operating results, as the change in commodity costs would both impact the cost to purchase materials and the selling prices we offer our customers.
We cannot accurately calculate the pre-tax impact a one percent change in the commodity costs of aluminum and/or lumber would have on our fiscal 2024 operating results, as the change in commodity costs would both impact the cost to purchase materials and the selling prices we offer our customers.
The impact to our operating results would significantly depend on the competitive environment and the costs of other alternative products, which could impact our ability to pass commodities costs to our customers. 26 Table of Contents
The impact to our operating results would significantly depend on the competitive environment and the costs of other alternative products, which could impact our ability to pass commodities costs to our customers. 28 Table of Contents
If interest rates were to increase or decrease over the next 12 months by 200 basis points, net earnings would be impacted by approximately $0.8 million. Our debt exceeded investments at February 26, 2022, so as interest rates increase, net earnings decrease; as interest rates decrease, net earnings increase.
If interest rates were to increase or decrease over the next 12 months by 200 basis points, net earnings would be impacted by approximately $0.8 million. Our debt exceeded investments at February 25, 2023, so as interest rates increase, net earnings decrease; as interest rates decrease, net earnings increase.
In addition to the market risk related to interest rate changes on our financial instruments, the commercial construction markets in which our businesses operate are highly affected by changes in interest rates.
In addition to the market risk related to interest rate changes on our financial instruments, the commercial construction markets in which our businesses operate are highly affected by changes in interest rates. Increases in interest rates could adversely impact activity in the commercial construction industry and our operating results.
Increases in interest rates could adversely impact activity in the commercial construction industry and our operating results. 25 Table of Contents Foreign Currency Exchange Rate Risk We are subject to market risk due to changes in the value of foreign currencies in relation to our reporting currency, the U.S. dollar.
Foreign Currency Exchange Rate Risk We are subject to market risk due to changes in the value of foreign currencies in relation to our reporting currency, the U.S. dollar. We have operations in Canada and Brazil, which primarily transact business in local currencies. We manage these operating activities locally.
Removed
Thus, changes in exchange rates between the Canadian dollar and Brazilian real, versus the U.S. dollar, will impact our reported financial results.

Other APOG 10-K year-over-year comparisons