NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
1.
|
Summary of Significant Accounting Policies and Related Data
|
Basis of Consolidation.
The consolidated financial statements include the balances of Apogee Enterprises, Inc. and its subsidiaries (Apogee, the Company or we) after elimination of intercompany balances and transactions. We consolidate variable interest entities where it has been determined that the Company is the primary beneficiary of those entities' operations.
Fiscal Year.
Our fiscal year ends on the Saturday closest to the last day of February, or as determined by the Board of Directors. Fiscal
2016
,
2015
and
2014
each consisted of
52
weeks. Our Brazilian subsidiary follows a calendar year-end and is consolidated on a
two
-month lag.
Accounting Estimates.
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ significantly from those estimates.
Cash Equivalents.
Highly liquid investments with an original maturity of three months or less are included in cash equivalents and are stated at cost, which approximates fair value.
Inventories.
Inventories, which consist primarily of purchased glass and aluminum, are valued at lower of cost or market using the first-in, first-out (FIFO) method. Our manufacturing operations recognize costs of sales using standard costs with full overhead absorption, which generally approximates actual cost.
Property, Plant and Equipment.
Property, plant and equipment are recorded at cost. Significant improvements and renewals that extend the useful life of the asset are capitalized. Repairs and maintenance are charged to expense as incurred. When property is retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any related gains or losses are included in selling, general and administrative expenses. Depreciation is computed on a straight-line basis, based on the following estimated useful lives:
|
|
|
|
Years
|
Buildings and improvements
|
15 to 25
|
Machinery and equipment
|
3 to 15
|
Office equipment and furniture
|
3 to 10
|
Goodwill and Other Intangible Assets.
Goodwill represents the excess of the cost over the net tangible and identified intangible assets of acquired businesses. We evaluate goodwill for impairment annually at our year-end, or more frequently if impairment indicators exist. Step one of the process compares the fair value of each of our reporting units to carrying value, including goodwill. If the fair value exceeds the carrying value, goodwill impairment is not indicated. We have seven business units which each represent a reporting unit for the goodwill impairment analysis. Based on our analysis, the estimated fair value of each reporting unit exceeded its carrying value and, therefore, goodwill impairment was not indicated. In all periods presented, we have followed a consistent discounted cash flow methodology in order to evaluate goodwill for impairment.
Intangible assets with defined useful lives are amortized based on estimated useful lives ranging from three to 20 years. The remaining useful lives of all intangible assets are reviewed annually, and we have determined that the remaining lives were appropriate.
Long-Lived Assets.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If impairment indicators are present and the estimated undiscounted future cash flows are less than the carrying value of the assets, the carrying values would be reduced to the estimated fair value. Fair value is measured using discounted cash flows or independent opinions of value, as appropriate.
Self-Insurance.
We obtain commercial insurance for potential losses for general liability, employment practices, workers' compensation, automobile liability, architect's and engineer's errors and omissions risk, product rework and other miscellaneous coverages. A substantial portion of this risk is retained on a self-insured basis through our wholly-owned insurance subsidiary. We establish a reserve for estimated ultimate losses on reported claims and those incurred but not yet reported utilizing actuarial projections. Reserves are classified within accrued or long-term self-insurance reserves based on expectations of when the estimated loss will be paid.
Additionally, we maintain a self-insurance reserve for health insurance programs offered to eligible employees, included within accrued self-insurance reserves. The reserve includes an estimate for losses on reported claims as well as for amounts incurred but not yet reported, based on historical trends.
Warranty.
We are subject to claims associated with our products and services, principally as a result of disputes with our customers involving the performance or aesthetics of our architectural products and services. We reserve estimated exposures on known claims, as well as on a portion of anticipated claims for product warranty and rework costs based on historical product liability claims as a ratio of sales. Our warranty reserves are included in other current and non-current liabilities based on the estimated timing of dispute resolution.
Environmental Liability.
We recognize environmental clean-up liabilities on an undiscounted basis when loss is probable and can be reasonably estimated based upon estimates by specialists and applicable law. Such estimates are based primarily upon the estimated cost of investigation and remediation required, and the likelihood that, where applicable, other potentially responsible parties will not be able to fulfill their commitments at the sites where the Company may be jointly and severally liable. The reserve for environmental liabilities is included in other current and non-current liabilities in the consolidated balance sheets.
Foreign Currency.
The financial statements of subsidiaries located outside of the U.S. are measured in their functional currency, which is local currency. Assets and liabilities of these subsidiaries are translated at the exchange rates at the balance sheet date. Income and expense items are translated using average monthly exchange rates. Translation adjustments are included in accumulated other comprehensive loss in the consolidated balance sheets.
Revenue Recognition.
We recognize revenue when title has transferred, except within our Architectural Services segment, which enters into fixed-price installation contracts. These contracts are typically performed over a
12
- to
18
-month timeframe, and we record revenue for these contracts on a percentage-of-completion basis as we are able to reasonably estimate total contract revenue and total contract costs. We compare the total costs incurred to date to the total estimated costs for the contract, and record that proportion of the total contract revenue in the period. Contract costs include materials, labor and other direct costs related to contract performance. We believe utilizing the cost-to-cost method for revenue recognition provides the greatest degree of accuracy in measuring revenue throughout the contract period. Provisions are established for estimated losses, if any, on uncompleted contracts in the period in which such losses are determined. Amounts representing contract change orders, claims or other items are included in contract revenue only upon customer approval. Approximately
25 percent
of our consolidated net sales in fiscal
2016
and
2015
, and
26 percent
in
2014
, were recorded on a percentage-of-completion basis.
Revenue excludes sales taxes as the Company considers itself a pass-through conduit for collecting and remitting sales taxes.
Pricing and Sales Incentives.
The Company records estimated reductions to revenue for customer programs and incentive offerings including pricing arrangements, promotions and other volume-based incentives at the later of the date revenue is recognized or the incentive is offered. Sales incentives given to customers are recorded as a reduction to net sales unless (1) the Company receives an identifiable benefit for goods or services in exchange for the consideration, and (2) the Company can reasonably estimate the fair value of the benefit received.
Shipping and Handling.
All amounts billed to a customer in a sales transaction related to shipping and handling represent revenues earned and are reported as revenue. Costs incurred by the Company for shipping and handling are reported as cost of sales.
Research and Development.
Research and development costs are expensed as incurred within selling, general and administrative expenses, and were
$8.0 million
,
$6.5 million
and
$7.8 million
for fiscal
2016
,
2015
and
2014
, respectively. Of these amounts,
$2.4 million
,
$2.4 million
and
$2.1 million
, respectively, were focused primarily upon design of custom window and curtainwall systems in accordance with customer specifications and are included in cost of sales.
Advertising.
Advertising costs are expensed as incurred and were
$1.2 million
in fiscal
2016
,
$1.1 million
in fiscal
2015
, and
$1.2 million
in fiscal
2014
, and they are included in selling, general and administrative expenses.
Income Taxes.
The Company recognizes deferred tax assets and liabilities based upon the future tax consequences of temporary differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. See Note 13 for additional information regarding income taxes.
Subsequent Events.
We have evaluated subsequent events for potential recognition and disclosure through the date of this filing and determined that there were no subsequent events that required recognition or disclosure in the consolidated financial statements.
New Accounting Standards
.
In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09,
Improvements to Employee Share-Based Payment Accounting
, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2016. We are currently evaluating the impact this standard will have on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02,
Leases
, which provides for a comprehensive change to lease accounting. The new standard requires that a lessee recognize a lease obligation liability and a right to use asset for virtually all leases of property, plant and equipment, subsequently amortized over the lease term. The new standard is effective for fiscal years beginning after December 15, 2018, with a modified retrospective transition. We are currently evaluating the impact this standard will have on our consolidated financial statements.
In November 2015, the FASB issued ASU 2015-17,
Balance Sheet Classification of Deferred Taxes
, which requires all deferred tax assets and liabilities, along with any related valuation allowance, to be classified as noncurrent on the balance sheet. The new standard is effective for fiscal years beginning after December 15, 2016, and may be applied prospectively or retrospectively, with early adoption permitted. We plan to adopt this standard in the first quarter of our fiscal 2017 and do not expect this to have a significant impact on our consolidated balance sheet.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers
, which outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. Under the new standard, an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2017, Apogee's fiscal 2019. We are currently evaluating the impact this standard will have on our consolidated financial statements.
Receivables
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
Trade accounts
|
$
|
102,627
|
|
|
$
|
111,494
|
|
Construction contracts
|
41,631
|
|
|
33,582
|
|
Contract retainage
|
28,249
|
|
|
24,547
|
|
Other receivables
|
2,822
|
|
|
5,242
|
|
Total receivables
|
175,329
|
|
|
174,865
|
|
Less allowance for doubtful accounts
|
(2,497
|
)
|
|
(3,242
|
)
|
Net receivables
|
$
|
172,832
|
|
|
$
|
171,623
|
|
Inventories
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
Raw materials
|
$
|
21,404
|
|
|
$
|
19,761
|
|
Work-in-process
|
9,958
|
|
|
14,385
|
|
Finished goods
|
25,486
|
|
|
23,076
|
|
Costs and earnings in excess of billings on uncompleted contracts
|
6,538
|
|
|
4,186
|
|
Total inventories
|
$
|
63,386
|
|
|
$
|
61,408
|
|
Other Current Liabilities
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
Warranties
|
$
|
14,666
|
|
|
$
|
10,022
|
|
Taxes, other than income taxes
|
5,058
|
|
|
5,203
|
|
Unearned revenue
|
533
|
|
|
1,266
|
|
Volume discounts
|
837
|
|
|
1,145
|
|
Current portion of deferred gain on sale leaseback
|
507
|
|
|
1,015
|
|
Current portion of long-term compensation plans
|
840
|
|
|
841
|
|
Other
|
6,898
|
|
|
6,109
|
|
Total other current liabilities
|
$
|
29,339
|
|
|
$
|
25,601
|
|
We hold the following marketable securities, all classified as available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated
Fair
Value
|
February 27, 2016
|
|
|
|
|
|
|
|
Mutual fund
|
$
|
30,178
|
|
|
$
|
—
|
|
|
$
|
(55
|
)
|
|
$
|
30,123
|
|
Municipal bonds
|
12,393
|
|
|
285
|
|
|
(109
|
)
|
|
12,569
|
|
Total marketable securities
|
$
|
42,571
|
|
|
$
|
285
|
|
|
$
|
(164
|
)
|
|
$
|
42,692
|
|
February 28, 2015
|
|
|
|
|
|
|
|
Municipal bonds
|
$
|
10,973
|
|
|
$
|
127
|
|
|
$
|
(118
|
)
|
|
$
|
10,982
|
|
Total marketable securities
|
$
|
10,973
|
|
|
$
|
127
|
|
|
$
|
(118
|
)
|
|
$
|
10,982
|
|
We are invested in a mutual fund holding short-term government securities as a means of deploying excess cash generated from operations while preserving liquidity.
We have a wholly-owned insurance subsidiary, Prism Assurance, Ltd. (Prism), which holds our municipal bonds. Prism insures a portion of our general liability, workers' compensation and automobile liability risks using reinsurance agreements to meet statutory requirements. The reinsurance carrier requires Prism to maintain fixed-maturity investments, which are generally high-quality municipal bonds, for the purpose of providing collateral for Prism's obligations under the reinsurance agreement.
We test for other-than-temporary losses on a quarterly basis and whenever events or changes in circumstances indicate that the carrying amount of an investment may not be recoverable. We consider the unrealized losses indicated above to be temporary in nature. We intend to hold our investments until the full principal amount can be recovered, and we have the ability to do so based on other sources of liquidity.
The following table presents the length of time that our securities were in continuous unrealized loss positions, but were not deemed to be other than temporarily impaired, as of
February 27, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
Greater Than or Equal to
12 Months
|
|
Total
|
(In thousands)
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
Municipal bonds
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,345
|
|
|
$
|
(109
|
)
|
|
$
|
1,345
|
|
|
$
|
(109
|
)
|
The amortized cost and estimated fair values of our municipal bonds at
February 27, 2016
, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities, as borrowers may have the right to call or prepay obligations with or without penalty.
|
|
|
|
|
|
|
|
|
(In thousands)
|
Amortized Cost
|
|
Estimated Market Value
|
Due within one year
|
$
|
50
|
|
|
$
|
50
|
|
Due after one year through five years
|
3,853
|
|
|
3,903
|
|
Due after five years through 10 years
|
7,198
|
|
|
7,428
|
|
Due after 10 years through 15 years
|
1,292
|
|
|
1,188
|
|
Total
|
$
|
12,393
|
|
|
$
|
12,569
|
|
Gross realized gains and losses were
insignificant
for all periods presented and are included in other income (expense), net in our consolidated results of operations.
|
|
4.
|
Fair Value Measurements
|
Financial assets and liabilities are classified in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement: Level 1 (unadjusted quoted prices in active markets for identical assets or liabilities); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data). We do not have any Level 3 assets or liabilities.
Financial assets and liabilities measured at fair value are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Quoted Prices in
Active Markets
(Level 1)
|
|
Other Observable Inputs
(Level 2)
|
|
Total Fair
Value
|
February 27, 2016
|
|
|
|
|
|
Cash equivalents
|
|
|
|
|
|
Money market funds
|
$
|
23,199
|
|
|
$
|
—
|
|
|
$
|
23,199
|
|
Commercial paper
|
—
|
|
|
29,774
|
|
|
29,774
|
|
Total cash equivalents
|
23,199
|
|
|
29,774
|
|
|
52,973
|
|
Short-term securities
|
|
|
|
|
|
|
Mutual fund
|
30,123
|
|
|
—
|
|
|
30,123
|
|
Municipal bonds
|
—
|
|
|
50
|
|
|
50
|
|
Total short-term securities
|
30,123
|
|
|
50
|
|
|
30,173
|
|
Long-term securities
|
|
|
|
|
|
Municipal bonds
|
—
|
|
|
$
|
12,519
|
|
|
12,519
|
|
Total assets at fair value
|
$
|
53,322
|
|
|
$
|
42,343
|
|
|
$
|
95,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Quoted Prices in
Active Markets
(Level 1)
|
|
Other Observable
Inputs
(Level 2)
|
|
Total Fair
Value
|
February 28, 2015
|
|
|
|
|
|
Cash equivalents
|
|
|
|
|
|
Money market funds
|
$
|
34,386
|
|
|
$
|
—
|
|
|
$
|
34,386
|
|
Short-term securities
|
|
|
|
|
|
Municipal bonds
|
—
|
|
|
327
|
|
|
327
|
|
Long-term securities
|
|
|
|
|
|
Mutual funds
|
305
|
|
|
—
|
|
|
305
|
|
Municipal bonds
|
—
|
|
|
10,655
|
|
|
10,655
|
|
Total assets at fair value
|
$
|
34,691
|
|
|
$
|
10,982
|
|
|
$
|
45,673
|
|
Cash equivalents
Fair value of money market funds was determined based on quoted prices for identical assets in active markets. Commercial paper was measured at fair value using inputs based on quoted prices for similar securities in active markets.
Short- and long-term securities
Mutual funds were measured at fair value based on quoted prices for identical assets in active markets.
Municipal bonds were measured at fair value based on market prices from recent trades of similar securities and are classified as short-term or long-term based on maturity date.
|
|
5.
|
Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
Land
|
$
|
8,827
|
|
|
$
|
9,054
|
|
Buildings and improvements
|
149,685
|
|
|
142,833
|
|
Machinery and equipment
|
296,388
|
|
|
279,172
|
|
Office equipment and furniture
|
48,805
|
|
|
49,849
|
|
Construction in progress
|
18,384
|
|
|
11,695
|
|
Total property, plant and equipment
|
522,089
|
|
|
492,603
|
|
Less accumulated depreciation
|
(319,627
|
)
|
|
(299,063
|
)
|
Net property, plant and equipment
|
$
|
202,462
|
|
|
$
|
193,540
|
|
Depreciation expense was
$29.8 million
,
$27.5 million
and
$24.8 million
in fiscal
2016
,
2015
and
2014
, respectively.
|
|
6.
|
Goodwill and Other Intangible Assets
|
The carrying amount of goodwill attributable to each reporting segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Architectural Glass
|
|
Architectural Services
|
|
Architectural Framing Systems
|
|
Large-Scale
Optical
|
|
Total
|
Balance at March 1, 2014
|
$
|
26,628
|
|
|
$
|
1,120
|
|
|
$
|
39,716
|
|
|
$
|
10,557
|
|
|
$
|
78,021
|
|
Foreign currency translation
|
(273
|
)
|
|
—
|
|
|
(1,891
|
)
|
|
—
|
|
|
(2,164
|
)
|
Balance at February 28, 2015
|
26,355
|
|
|
1,120
|
|
|
37,825
|
|
|
10,557
|
|
|
75,857
|
|
Foreign currency translation
|
(716
|
)
|
|
—
|
|
|
(1,145
|
)
|
|
—
|
|
|
(1,861
|
)
|
Balance at February 27, 2016
|
$
|
25,639
|
|
|
1,120
|
|
|
36,680
|
|
|
$
|
10,557
|
|
|
$
|
73,996
|
|
No
goodwill impairment has been recorded in fiscal 2016, 2015 or 2014.
The following tables provide the gross carrying amount of other intangible assets and related accumulated amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 27, 2016
|
(In thousands)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Foreign
Currency
Translation
|
|
Net
|
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
Debt issue costs
|
$
|
3,677
|
|
|
$
|
(2,758
|
)
|
|
$
|
—
|
|
|
$
|
919
|
|
Non-compete agreements
|
6,673
|
|
|
(6,419
|
)
|
|
(16
|
)
|
|
238
|
|
Customer relationships
|
24,174
|
|
|
(12,737
|
)
|
|
(1,162
|
)
|
|
10,275
|
|
Trademarks and other intangibles
|
8,213
|
|
|
(3,271
|
)
|
|
(431
|
)
|
|
4,511
|
|
Total definite-lived intangible assets
|
$
|
42,737
|
|
|
$
|
(25,185
|
)
|
|
$
|
(1,609
|
)
|
|
$
|
15,943
|
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
Trademarks
|
$
|
4,239
|
|
|
$
|
—
|
|
|
$
|
(320
|
)
|
|
$
|
3,919
|
|
Total intangible assets
|
$
|
46,976
|
|
|
$
|
(25,185
|
)
|
|
$
|
(1,929
|
)
|
|
$
|
19,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2015
|
(In thousands)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Foreign
Currency
Translation
|
|
Net
|
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
Debt issue costs
|
$
|
3,668
|
|
|
$
|
(2,560
|
)
|
|
$
|
—
|
|
|
$
|
1,108
|
|
Non-compete agreements
|
6,690
|
|
|
(6,364
|
)
|
|
(10
|
)
|
|
316
|
|
Customer relationships
|
25,677
|
|
|
(11,932
|
)
|
|
(1,315
|
)
|
|
12,430
|
|
Trademarks and other intangibles
|
8,275
|
|
|
(2,920
|
)
|
|
(168
|
)
|
|
5,187
|
|
Total definite-lived intangible assets
|
$
|
44,310
|
|
|
$
|
(23,776
|
)
|
|
$
|
(1,493
|
)
|
|
$
|
19,041
|
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
Trademarks
|
$
|
4,768
|
|
|
$
|
—
|
|
|
$
|
(529
|
)
|
|
$
|
4,239
|
|
Total intangible assets
|
$
|
49,078
|
|
|
$
|
(23,776
|
)
|
|
$
|
(2,022
|
)
|
|
$
|
23,280
|
|
Amortization expense on definite-lived intangible assets was
$1.6 million
,
$2.1 million
and
$1.9 million
in fiscal
2016
,
2015
and
2014
, respectively. The amortization expense associated with the debt issue costs is included in interest expense while the remainder is in selling, general and administrative expenses in the consolidated results of operations. Estimated future amortization expense for definite-lived intangible assets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
Estimated amortization expense
|
$
|
1,589
|
|
|
$
|
1,525
|
|
|
$
|
1,465
|
|
|
$
|
1,354
|
|
|
$
|
1,168
|
|
Debt consists of
$20.4 million
of industrial revenue bonds, which mature in fiscal years 2021 through 2043. The fair value of the industrial revenue bonds approximates carrying value at
February 27, 2016
, due to the variable interest rates on these instruments. The bonds would be considered classified as Level 2 within the fair value hierarchy described in Note 4.
We maintain a
$125.0 million
committed revolving credit facility that expires in
December 2019
.
No
borrowings were outstanding under the credit facility as of
February 27, 2016
or
February 28, 2015
. At
February 27, 2016
, the Company was in compliance with all financial covenants as provided below:
|
|
|
|
|
|
|
|
|
Debt covenant financial ratios
|
|
Maximum
|
|
Company's ratio
|
Debt-to-EBITDA ratio
|
|
3.00
|
|
|
0.16
|
|
|
|
Minimum
|
|
Company's net worth
|
Net worth calculation (in millions)
|
|
$
|
356.7
|
|
|
406.2
|
|
Both ratios are computed quarterly, with EBITDA calculated on a rolling four-quarter basis. If the Company is not in compliance with either of these covenants, our credit facility may be terminated and/or any amounts then outstanding may be declared immediately due and payable. We have the ability to issue letters of credit of up to
$40.0 million
under this credit facility, the outstanding amounts of which decrease the available commitment. At both
February 27, 2016
and
February 28, 2015
,
$101.5 million
was available under this credit facility.
We also maintain a
$4.0 million
Canadian dollar revolving demand facility available to our Canadian operation.
No
borrowings were outstanding under the facility as of
February 27, 2016
or
February 28, 2015
. Borrowings under the facility are made available at the sole discretion of the lender and are payable on demand, with interest at rates specified in the credit agreement for the demand facility.
Debt maturities and other selected information are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
|
Total
|
Maturities
|
$—
|
|
$—
|
|
$—
|
|
$—
|
|
$5,400
|
|
$15,000
|
|
$
|
20,400
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except percentages)
|
2016
|
|
2015
|
Average daily borrowings during the year
|
$
|
21,730
|
|
|
$
|
21,260
|
|
Maximum borrowings outstanding during the year
|
22,480
|
|
|
22,600
|
|
Weighted average interest rate during the year
|
0.29
|
%
|
|
0.30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
Interest on debt
|
$
|
544
|
|
|
$
|
581
|
|
|
$
|
895
|
|
Other interest expense
|
49
|
|
|
343
|
|
|
364
|
|
Interest expense
|
$
|
593
|
|
|
$
|
924
|
|
|
$
|
1,259
|
|
Interest payments were
$0.5 million
in fiscal
2016
,
$0.8 million
in fiscal
2015
and
$0.7 million
in fiscal
2014
.
|
|
8.
|
Other Non-Current Liabilities
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
February 27, 2016
|
|
February 28, 2015
|
Retirement plan obligations
|
$
|
9,992
|
|
|
$
|
11,186
|
|
Deferred benefit from New Markets Tax Credit
|
10,741
|
|
|
10,741
|
|
Deferred compensation plan
|
4,814
|
|
|
4,052
|
|
Deferred gain on sale leaseback arrangements
|
1,818
|
|
|
1,818
|
|
Other
|
9,549
|
|
|
10,855
|
|
Total other non-current liabilities
|
$
|
36,914
|
|
|
$
|
38,652
|
|
|
|
9.
|
Employee Benefit Plans
|
401(k) Retirement Plan
The Company sponsors a single 401(k) retirement plan covering substantially all full-time non-union employees, as well as union employees at
two
of its manufacturing facilities. Under the plan, employees are allowed to contribute up to
60 percent
of eligible earnings to the plan, up to statutory limits. The Company contributes a match of
100 percent
of the first
one percent
contributed and
50 percent
of the next
five percent
contributed on eligible compensation that non-union employees contribute and according to contract terms for union employees. The Company match was
$5.4 million
in fiscal
2016
,
$4.7 million
in fiscal
2015
and
$4.2 million
in fiscal
2014
.
Deferred Compensation Plan
The Company maintains a plan that allows participants to defer compensation. The deferred compensation liability was
$5.0 million
and
$4.2 million
at
February 27, 2016
and
February 28, 2015
, respectively. The Company has investments in corporate-owned life insurance policies (COLI) of
$4.8 million
and mutual funds of
$0.3 million
with the intention of utilizing them as a long-term funding source for this plan. The COLI assets are recorded at their net cash surrender values and are included in other non-current assets in the consolidated balance sheet.
Plans under Collective Bargaining Agreements
We contribute to various multi-employer union retirement plans, which provide retirement benefits to the majority of our union employees; none of the plans are considered significant. The total contribution to these plans in fiscal
2016
,
2015
and
2014
was
$3.6 million
,
$4.3 million
and
$3.7 million
, respectively.
Pension Plan
The Company sponsors the Tubelite Inc. Hourly Employees' Pension Plan (Tubelite Plan), a defined-benefit pension plan that was frozen to new entrants in fiscal 2004, with no additional benefits accruing to plan participants after such time.
Officers' Supplemental Executive Retirement Plan (SERP)
The Company sponsors an unfunded SERP for the benefit of certain executives, a defined-benefit pension plan that was frozen to new entrants in fiscal 2009, with no additional benefits accruing to plan participants after such time.
Obligations and Funded Status of Defined-Benefit Pension Plans
The following tables present reconciliations of the benefit obligation of the defined-benefit pension plans and the funded status of the defined-benefit pension plans. The Tubelite plan uses a measurement date as of the calendar month-end closest to our fiscal year-end, while the SERP uses a measurement date aligned with our fiscal year-end.
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
Change in projected benefit obligation
|
|
|
|
Benefit obligation beginning of period
|
$
|
16,253
|
|
|
$
|
14,274
|
|
Interest cost
|
566
|
|
|
550
|
|
Actuarial (gain) loss
|
(907
|
)
|
|
2,424
|
|
Benefits paid
|
(1,012
|
)
|
|
(995
|
)
|
Benefit obligation at measurement date
|
$
|
14,900
|
|
|
$
|
16,253
|
|
Change in plan assets
|
|
|
|
Fair value of plan assets beginning of period
|
$
|
4,419
|
|
|
$
|
4,430
|
|
Actual return on plan assets
|
(62
|
)
|
|
134
|
|
Company contributions
|
916
|
|
|
850
|
|
Benefits paid
|
(1,012
|
)
|
|
(995
|
)
|
Fair value of plan assets at measurement date
|
$
|
4,261
|
|
|
$
|
4,419
|
|
Underfunded status
|
$
|
(10,639
|
)
|
|
$
|
(11,834
|
)
|
The underfunded status of our plans is recognized in the consolidated balance sheets as:
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
Current liabilities
|
$
|
(647
|
)
|
|
$
|
(648
|
)
|
Other non-current liabilities
|
(9,992
|
)
|
|
(11,186
|
)
|
Total
|
$
|
(10,639
|
)
|
|
$
|
(11,834
|
)
|
The following is included in accumulated other comprehensive loss and has not yet been recognized as a component of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
Net actuarial loss
|
$
|
5,899
|
|
|
$
|
6,857
|
|
Accumulated other comprehensive loss
|
$
|
5,899
|
|
|
$
|
6,857
|
|
The amount recognized in comprehensive earnings, net of tax expense, is as follows:
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
Net actuarial (gain) loss
|
$
|
(610
|
)
|
|
$
|
1,458
|
|
Total
|
$
|
(610
|
)
|
|
$
|
1,458
|
|
Components of the defined-benefit pension plans' net periodic benefit cost are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
2016
|
|
2015
|
|
2014
|
Interest cost
|
|
$
|
566
|
|
|
$
|
550
|
|
|
$
|
538
|
|
Expected return on assets
|
|
(137
|
)
|
|
(171
|
)
|
|
(183
|
)
|
Amortization of unrecognized net loss
|
|
249
|
|
|
172
|
|
|
163
|
|
Net periodic benefit cost
|
|
$
|
678
|
|
|
$
|
551
|
|
|
$
|
518
|
|
Total net periodic pension benefit cost is expected to be approximately
$0.7 million
in fiscal
2017
. The estimated net actuarial loss for the defined-benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost for fiscal
2017
is
$0.2 million
, net of tax benefit.
Additional Information
Assumptions
|
|
|
|
|
|
|
|
|
|
Benefit Obligation Weighted-Average Assumptions
|
2016
|
|
2015
|
|
2014
|
Discount rate
|
3.85
|
%
|
|
3.60
|
%
|
|
4.00
|
%
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Benefit Expense Weighted-Average Assumptions
|
2016
|
|
2015
|
|
2014
|
Discount rate
|
3.60
|
%
|
|
4.00
|
%
|
|
3.75
|
%
|
Expected long-term rate of return on assets
|
2.00
|
%
|
|
4.50
|
%
|
|
4.50
|
%
|
Discount rate.
The discount rate reflects the current rate at which the defined-benefit plans' pension liabilities could be effectively settled at the end of the year based on the measurement date. The discount rate was determined by matching the expected benefit payments to payments from the Principal Discount Yield Curve. There are no known or anticipated changes in the discount rate assumption that will have a significant impact on pension expense in fiscal
2017
.
Expected return on assets.
To develop the expected long-term rate of return on assets, we considered historical long-term rates of return achieved by the plan investments, the plan's investment strategy, and current and projected market conditions.
In accordance with its policy, during fiscal 2016, the assets of the Tubelite plan were invested in a short-term bond fund and carried at fair value based on prices from recent trades of similar securities, which would be classified as Level 2 in the valuation hierarchy. Prior to this strategy change, the assets were invested in a long-term bond fund.
We do not maintain assets intended for the future use of the SERP.
Contributions
Pension contributions to the plans for each of fiscal
2016
and
2015
totaled
$0.9 million
, which equaled or exceeded the minimum funding requirement.
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the plans:
|
|
|
|
|
(In thousands)
|
|
Fiscal 2017
|
$
|
1,017
|
|
Fiscal 2018
|
1,004
|
|
Fiscal 2019
|
1,031
|
|
Fiscal 2020
|
1,016
|
|
Fiscal 2021
|
1,001
|
|
Fiscal 2022-2026
|
4,676
|
|
Employee Stock Purchase Plan
The Company also sponsors an employee stock purchase plan into which employees may contribute up to
$500
per week on an after-tax basis. The Company contributes a match of
15 percent
of the employee contribution. Contributions and matching funds are used to purchase shares of Company stock on the open market. The Company match to this plan was
$0.1 million
in each of fiscal
2016
,
2015
and
2014
.
10.
Commitments and Contingent Liabilities
Operating lease commitments.
As of
February 27, 2016
, the Company was obligated under non-cancelable operating leases for buildings and equipment. Certain leases provide for increased rentals based upon increases in real estate taxes or operating costs. Future minimum rental payments under non-cancelable operating leases are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Fiscal 2017
|
|
Fiscal 2018
|
|
Fiscal 2019
|
|
Fiscal 2020
|
|
Fiscal 2021
|
|
Thereafter
|
|
Total
|
Total minimum payments
|
$
|
8,329
|
|
|
$
|
7,773
|
|
|
$
|
7,068
|
|
|
$
|
5,775
|
|
|
$
|
3,319
|
|
|
$
|
2,663
|
|
|
$
|
34,927
|
|
Total rental expense, including operating leases and short-term equipment rentals, was
$15.5 million
,
$18.7 million
and
$15.4 million
in fiscal
2016
,
2015
and
2014
, respectively.
At
February 27, 2016
, we had
one
sale and leaseback agreement for equipment that provides an option to purchase the equipment at projected future fair market value upon expiration of the lease in
2021
. The lease is classified as an operating lease in accordance with applicable financial accounting standards. The Company has a deferred gain of
$2.3 million
under the sale and leaseback transaction, which is included in the balance sheet as other current and non-current liabilities. The average annual lease payment over the remaining life of the lease is
$1.0 million
.
Bond commitments.
In the ordinary course of business, predominantly in the Company’s Architectural Services segment, the Company is required to provide surety or performance bonds that commit payments to its customers for any non-performance. At
February 27, 2016
,
$134.5 million
of the Company’s backlog was bonded by performance bonds with a face value of
$328.6 million
. Performance bonds do not have stated expiration dates, as the Company is released from the bonds upon completion of the contract. The Company has never been required to make any payments related to these performance-based bonds with respect to any of its current portfolio of businesses.
Warranties.
We accrue for warranty and claim costs as a percentage of sales based on historical trends and for specific sales credits as they become known and estimable. Actual warranty and claim costs are deducted from the accrual when paid. Factors that could have an impact on the warranty accrual in any given period include the following: changes in manufacturing quality, shifts in product mix and any significant changes in sales volume. A warranty rollforward is provided below:
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
Balance at beginning of period
|
$
|
11,275
|
|
|
$
|
11,978
|
|
Additional accruals
|
8,214
|
|
|
6,482
|
|
Claims paid
|
(3,149
|
)
|
|
(7,185
|
)
|
Balance at end of period
|
$
|
16,340
|
|
|
$
|
11,275
|
|
Letters of credit.
At
February 27, 2016
, we had ongoing letters of credit related to construction contracts and certain industrial revenue bonds. The total value of letters of credit under which we were obligated as of
February 27, 2016
was approximately
$23.5 million
, all of which have been issued under our credit facility. Our total availability under our
$125.0 million
credit facility is reduced by borrowings under the credit facility and also by letters of credit issued under the credit facility.
Purchase obligations.
Purchase obligations for raw material commitments and capital expenditures totaled
$245.0 million
as of
February 27, 2016
.
Environmental liability
. In fiscal 2008, we acquired one manufacturing facility which has certain historical environmental conditions. We are working to remediate these conditions, which are being conducted without significant disruption to our operations. Our liability for these remediation activities was
$1.6 million
and
$1.8 million
at
February 27, 2016
and
February 28, 2015
, respectively.
New Markets Tax Credit transaction.
In fiscal 2014, we entered into a transaction with JP Morgan Chase (JPM) related to an investment in plant and equipment within the Architectural Glass segment (the Project) whereby we received
$7.8 million
of cash from a qualified New Markets Tax Credit transaction (NMTC). The NMTC is intended to induce investment in underserved and impoverished areas of the U.S.
In exchange for substantially all of the benefits derived from the tax credits, JPM contributed
$10.7 million
into the Project. JPM does not have a material interest in the underlying economics of the Project. As a result of the transaction structure, the entities created under this transaction were determined to be variable-interest entities and have been consolidated.
Based on our contractual obligation to deliver tax benefits to JPM, we have included the value of JPM’s contribution in other non-current liabilities within our consolidated balance sheets. The NMTC is subject to 100 percent recapture for a period of seven years. Proceeds received in exchange for the transfer of the tax credits are expected to be recognized as earnings in fiscal 2021, if the expected tax benefits are delivered without risk of recapture to JPM and our performance obligation is relieved.
Direct and incremental costs incurred in structuring the arrangement have been deferred and will be recognized in proportion to the recognition of the related profits. These costs amounted to
$3.3 million
and are included in other non-current assets on our consolidated balance sheet.
Litigation.
The Company is a party to various legal proceedings incidental to its normal operating activities. In particular, like others in the construction supply and services industry, the Company’s construction supply and services businesses are routinely involved in various disputes and claims arising out of construction projects, sometimes involving significant monetary damages or product replacement. The Company is subject to litigation arising out of general liability, employment practices, workers' compensation and automobile claims. Although it is very difficult to accurately predict the outcome of such proceedings, facts currently available indicate that no such claims will result in losses that would have a material adverse effect on the results of operations, cash flows or financial condition of the Company.
A class of
200,000
shares of junior preferred stock with a par value of
$1.00
is authorized, but unissued.
Share Repurchases
During fiscal 2004, the Board of Directors authorized a share repurchase program of
1,500,000
shares of common stock. The Board of Directors subsequently increased this authorization by
750,000
shares in fiscal 2008; by
1,000,000
shares in fiscal 2009; and by another
1,000,000
shares in fiscal 2016. The Company repurchased
575,000
shares under the program during fiscal
2016
, for a total cost of
$24.9 million
. During fiscal 2015, the Company repurchased
203,509
shares under the program, for a total cost of
$6.9 million
. There were no share repurchases during fiscal
2014
. The Company has repurchased a total of
3,057,632
shares, at a total cost of
$61.5 million
, since the inception of this program and has remaining authority to repurchase
1,192,368
shares under this program, which has no expiration date.
In addition to the shares repurchased according to this repurchase plan, during fiscal
2016
,
2015
and
2014
, the Company also withheld
$5.1 million
,
$5.2 million
and
$3.6 million
, respectively, of Company stock from employees in order to satisfy stock-for-stock option exercises or tax obligations related to stock-based compensation, pursuant to terms of board and shareholder-approved compensation plans.
Accumulated Other Comprehensive Loss
The following summarizes the accumulated other comprehensive loss, net of tax at
February 27, 2016
and
February 28, 2015
:
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
2016
|
|
2015
|
Net unrealized gain on marketable securities
|
|
$
|
79
|
|
|
$
|
6
|
|
Pension liability adjustments
|
|
(3,758
|
)
|
|
(4,368
|
)
|
Foreign currency translation adjustments
|
|
(27,692
|
)
|
|
(17,958
|
)
|
Total accumulated other comprehensive loss
|
|
$
|
(31,371
|
)
|
|
$
|
(22,320
|
)
|
|
|
12.
|
Share-Based Compensation
|
We have a 2009 Stock Incentive Plan and a 2009 Non-Employee Director Stock Incentive Plan (the Plans) which provide for the issuance of
1,888,000
and
350,000
shares, respectively, for various forms of stock-based compensation to employees and non-employee directors. Awards under these Plans may be in the form of incentive stock options, nonstatutory options or stock-settled stock appreciation rights (SARs) and are granted with an exercise price equal to the fair market value of the Company’s stock at the date of award. We also issue nonvested share awards and nonvested share unit awards under the Plans. Issued SARs vest over a
three
-year period and options issued to non-employee directors vest at the end of
six
months, both with a
10
-year term. Nonvested share awards and nonvested share unit awards generally vest over a
two
,
three
or
four
-year period.
We had a 2002 Omnibus Stock Incentive Plan, which was terminated in June 2009; no new grants may be made under this plan, although exercises of SARs and options previously granted thereunder will still occur in accordance with the terms of the various grants.
Total stock-based compensation expense under all Plans included in the results of operations was
$4.9 million
for fiscal
2016
,
$4.8 million
for fiscal
2015
and
$4.7 million
for
2014
.
Stock Options and SARs
There were no stock options or SARs issued in any fiscal year presented. The following table summarizes activity for the year ended
February 27, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted
Average
Exercise Price
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
Aggregate
Intrinsic
Value
|
Outstanding at February 28, 2015
|
624,095
|
|
|
$
|
11.92
|
|
|
|
|
|
Awards exercised
|
(220,381
|
)
|
|
12.10
|
|
|
|
|
|
Outstanding and exercisable at February 27, 2016
|
403,714
|
|
|
$
|
11.81
|
|
|
4.5 Years
|
|
$
|
11,140,783
|
|
Cash proceeds from the exercise of stock options were
$1.6 million
,
$1.2 million
and
$4.2 million
for fiscal
2016
,
2015
and
2014
, respectively. The aggregate intrinsic value of securities exercised (the amount by which the stock price on the date of exercise exceeded the stock price of the award on the date of grant) was
$7.5 million
in fiscal
2016
,
$4.6 million
in fiscal
2015
and
$6.2 million
in fiscal
2014
. The tax benefit realized for tax deductions from option exercises totaled
$3.9 million
,
$3.3 million
and
$2.6 million
for fiscal
2016
,
2015
and
2014
, respectively.
Nonvested Share Awards and Units
The following table summarizes nonvested share activity for fiscal
2016
:
|
|
|
|
|
|
|
|
|
Number of
Shares and
Units
|
|
Weighted Average
Grant Date
Fair Value
|
February 28, 2015
|
400,708
|
|
|
$
|
23.49
|
|
Granted
|
118,563
|
|
|
52.80
|
|
Vested
|
(237,457
|
)
|
|
21.49
|
|
Canceled
|
(6,357
|
)
|
|
38.94
|
|
February 27, 2016
|
275,457
|
|
|
$
|
37.48
|
|
At
February 27, 2016
, there was
$6.3 million
of total unrecognized compensation cost related to nonvested share and nonvested share unit awards, which is expected to be recognized over a weighted average period of approximately
21
months. The total fair value of shares vested during fiscal
2016
was
$12.3 million
.
Earnings before income taxes consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
U.S.
|
$
|
100,859
|
|
|
$
|
59,898
|
|
|
$
|
36,700
|
|
International
|
(3,535
|
)
|
|
5,101
|
|
|
3,066
|
|
Earnings before income taxes
|
$
|
97,324
|
|
|
$
|
64,999
|
|
|
$
|
39,766
|
|
The components of income tax expense (benefit) for each of the last three fiscal years are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
Current:
|
|
|
|
|
|
Federal
|
$
|
35,888
|
|
|
$
|
7,328
|
|
|
$
|
15,711
|
|
State and local
|
2,866
|
|
|
1,198
|
|
|
1,440
|
|
International
|
(636
|
)
|
|
1,790
|
|
|
1,437
|
|
Total current
|
$
|
38,118
|
|
|
$
|
10,316
|
|
|
$
|
18,588
|
|
Deferred:
|
|
|
|
|
|
Federal
|
$
|
(5,403
|
)
|
|
$
|
4,738
|
|
|
$
|
(4,549
|
)
|
State and local
|
(512
|
)
|
|
(363
|
)
|
|
(378
|
)
|
International
|
(224
|
)
|
|
(101
|
)
|
|
(353
|
)
|
Total deferred
|
$
|
(6,139
|
)
|
|
$
|
4,274
|
|
|
$
|
(5,280
|
)
|
Total non-current tax benefit
|
$
|
3
|
|
|
$
|
(107
|
)
|
|
$
|
(1,528
|
)
|
Total income tax expense
|
$
|
31,982
|
|
|
$
|
14,483
|
|
|
$
|
11,780
|
|
Income tax payments, net of refunds were
$25.9 million
,
$11.3 million
and
$12.9 million
in fiscal
2016
,
2015
and
2014
, respectively.
The following table provides a reconciliation of the statutory federal income tax rate to our consolidated effective tax rates:
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Federal income tax expense at statutory rate
|
35.0%
|
|
35.0%
|
|
35.0%
|
Manufacturing deduction
|
(3.4)
|
|
(2.3)
|
|
(3.5)
|
State and local income taxes, net of federal tax benefit
|
1.6
|
|
1.2
|
|
0.9
|
Tax credits - research & development
|
(0.8)
|
|
(1.1)
|
|
(1.6)
|
Tax credits - 48C
|
—
|
|
(9.9)
|
|
—
|
Nondeductible acquisition costs
|
—
|
|
—
|
|
0.3
|
Tax reserve adjustments - statute expirations and benefits recognized
|
—
|
|
(0.2)
|
|
(2.2)
|
Change in valuation allowance
|
—
|
|
0.1
|
|
0.4
|
Other, net
|
0.5
|
|
(0.5)
|
|
0.3
|
Income tax expense
|
32.9%
|
|
22.3%
|
|
29.6%
|
In fiscal 2015, the Company recognized approximately
$6.4 million
of tax benefit from an energy-efficient investment credit under Section 48C of the U.S. Internal Revenue Code, upon successful start-up and commercial production of coatings on our new architectural glass coater. The tax credit was awarded in 2011 by the U.S. Internal Revenue Service (IRS) in cooperation with the Department of Energy as part of the American Reinvestment and Recovery Act to incent energy-efficient investments throughout the U.S.
In fiscal
2016
,
2015
and
2014
, tax benefits associated with stock-based incentive plans were
$3.9 million
,
$3.3 million
and
$2.6 million
, respectively. These benefits impacted additional paid-in capital directly and were not reflected in the determination of income tax expense or benefit.
Deferred tax assets and deferred tax liabilities at
February 27, 2016
and
February 28, 2015
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
(In thousands)
|
Current
|
|
Noncurrent
|
|
Current
|
|
Noncurrent
|
Accounts receivable
|
$
|
825
|
|
|
$
|
—
|
|
|
$
|
1,022
|
|
|
$
|
—
|
|
Other accruals
|
2,968
|
|
|
1,281
|
|
|
2,872
|
|
|
1,212
|
|
Deferred compensation
|
554
|
|
|
12,594
|
|
|
419
|
|
|
11,250
|
|
Goodwill and other intangibles
|
18
|
|
|
(7,615
|
)
|
|
21
|
|
|
(7,994
|
)
|
Depreciation
|
—
|
|
|
(17,354
|
)
|
|
(853
|
)
|
|
(20,544
|
)
|
Liability for unrecognized tax benefits
|
—
|
|
|
2,797
|
|
|
—
|
|
|
2,784
|
|
Net operating losses
|
—
|
|
|
2,945
|
|
|
—
|
|
|
3,084
|
|
Valuation allowance on net operating losses
|
(2,194
|
)
|
|
(306
|
)
|
|
(2,149
|
)
|
|
(442
|
)
|
Other
|
(351
|
)
|
|
686
|
|
|
27
|
|
|
(2
|
)
|
Deferred tax assets (liabilities)
|
$
|
1,820
|
|
|
$
|
(4,972
|
)
|
|
$
|
1,359
|
|
|
$
|
(10,652
|
)
|
The Company has net operating loss carryforwards in certain U.S. state jurisdictions with a tax effect of
$3.5 million
. A valuation allowance of
$2.5 million
has been established for these net operating loss carryforwards due to the uncertainty of our ability to use the tax benefits in future periods.
The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions, Canada, Brazil and other international jurisdictions. The Company is no longer subject to U.S. federal tax examinations for years prior to fiscal 2013, or state and local income tax examinations for years prior to fiscal 2009. The Company is not currently under U.S. federal examination for years subsequent to fiscal 2012, and there is very limited audit activity of the Company’s income tax returns in U.S. state jurisdictions or international jurisdictions.
The Company considers the earnings of its non-U.S. subsidiaries to be indefinitely invested outside of the U.S. on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and specific plans for
reinvestment of those subsidiary earnings. Should the Company decide to repatriate the foreign earnings, it would need to adjust the income tax provision in the period during which it was determined that the earnings will no longer be indefinitely invested outside the U.S.
If we were to prevail on all unrecognized tax benefits recorded,
$2.7 million
for fiscal
2016
and
$2.6 million
for each of fiscal
2015
and fiscal 2014 would benefit the effective tax rate. Also included in the balance of unrecognized tax benefits for fiscal
2016
,
2015
and
2014
, are
$1.8 million
,
$1.9 million
and
$1.8 million
, respectively, of tax benefits that, if recognized, would result in adjustments to deferred taxes.
Penalties and interest related to unrecognized tax benefits are recorded in income tax expense. During fiscal 2016, our accrual of
$0.5 million
for penalties and interest related to unrecognized tax benefits was consistent with the prior year. During fiscal 2015 and 2014, respectively, we reduced our accrual for penalties and interest by
$0.3 million
and
$0.5 million
, resulting in reserve balances of
$0.5 million
and
$0.8 million
at the end of fiscal
2015
and fiscal
2014
, respectively.
The following table provides a reconciliation of the total amounts of gross unrecognized tax benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
Gross unrecognized tax benefits at beginning of year
|
$
|
4,491
|
|
|
$
|
4,431
|
|
|
$
|
5,516
|
|
Gross increases in tax positions for prior years
|
60
|
|
|
261
|
|
|
44
|
|
Gross decreases in tax positions for prior years
|
(158
|
)
|
|
(276
|
)
|
|
(616
|
)
|
Gross increases based on tax positions related to the current year
|
526
|
|
|
508
|
|
|
326
|
|
Gross decreases based on tax positions related to the current year
|
(33
|
)
|
|
(21
|
)
|
|
(40
|
)
|
Settlements
|
—
|
|
|
(93
|
)
|
|
(84
|
)
|
Statute of limitations expiration
|
(374
|
)
|
|
(319
|
)
|
|
(809
|
)
|
Unrecognized tax benefits acquired
|
—
|
|
|
—
|
|
|
94
|
|
Gross unrecognized tax benefits at end of year
|
$
|
4,512
|
|
|
$
|
4,491
|
|
|
$
|
4,431
|
|
The total liability for unrecognized tax benefits is expected to decrease by approximately
$0.9 million
during fiscal 2017 due to audit settlements and lapsing of statutes.
Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding, including the dilutive effects of stock options, SARs and nonvested shares. The following table presents a reconciliation of the share amounts used in the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
Basic earnings per share - weighted average common shares outstanding
|
29,058
|
|
|
28,763
|
|
|
28,483
|
|
Weighted average effect of nonvested share grants and assumed exercise of stock options
|
317
|
|
|
611
|
|
|
891
|
|
Diluted earnings per share - weighted average common shares and potential common shares outstanding
|
29,375
|
|
|
29,374
|
|
|
29,374
|
|
Stock options excluded from the calculation of earnings per share because the exercise price was greater than the average market price of the common shares
|
—
|
|
|
—
|
|
|
—
|
|
15.
Business Segment Data
We have
four
reporting segments:
|
|
•
|
The
Architectural Glass
segment fabricates coated, high-performance glass used in customized window and wall systems comprising the outside skin of commercial, institutional and high-end multi-family residential buildings.
|
|
|
•
|
The
Architectural Services
segment designs, engineers, fabricates and installs the walls of glass, windows and other curtainwall products making up the outside skin of commercial and institutional buildings.
|
|
|
•
|
The
Architectural Framing Systems
segment designs, engineers, fabricates and finishes the aluminum frames used in customized aluminum and glass window, curtainwall, storefront and entrance systems comprising the outside skin and entrances of commercial, institutional and high-end multi-family residential buildings. We have aggregated four operating segments into this reporting segment based on their similar products, customers, distribution methods, production processes and economic characteristics.
|
|
|
•
|
The
Large-Scale Optical Technologies
(LSO) segment manufactures value-added glass and acrylic products for the custom picture framing and fine art markets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
Net Sales
|
|
|
|
|
|
Architectural glass
|
$
|
377,713
|
|
|
$
|
346,471
|
|
|
$
|
293,810
|
|
Architectural services
|
245,935
|
|
|
230,650
|
|
|
203,351
|
|
Architectural framing systems
|
308,593
|
|
|
298,395
|
|
|
216,059
|
|
Large-scale optical
|
88,541
|
|
|
87,693
|
|
|
81,127
|
|
Intersegment elimination
|
(39,593
|
)
|
|
(29,273
|
)
|
|
(22,902
|
)
|
Total
|
$
|
981,189
|
|
|
$
|
933,936
|
|
|
$
|
771,445
|
|
Operating Income (Loss)
|
|
|
|
|
|
Architectural glass
|
$
|
35,504
|
|
|
$
|
16,431
|
|
|
$
|
3,861
|
|
Architectural services
|
11,687
|
|
|
7,442
|
|
|
4,479
|
|
Architectural framing systems
|
31,911
|
|
|
21,808
|
|
|
14,930
|
|
Large-scale optical
|
22,963
|
|
|
21,954
|
|
|
21,252
|
|
Corporate and other
|
(4,672
|
)
|
|
(4,050
|
)
|
|
(4,237
|
)
|
Total
|
$
|
97,393
|
|
|
$
|
63,585
|
|
|
$
|
40,285
|
|
Depreciation and Amortization
|
|
|
|
|
|
Architectural glass
|
$
|
14,397
|
|
|
$
|
12,897
|
|
|
$
|
11,624
|
|
Architectural services
|
1,274
|
|
|
1,375
|
|
|
1,421
|
|
Architectural framing systems
|
8,019
|
|
|
8,001
|
|
|
6,436
|
|
Large-scale optical
|
4,998
|
|
|
4,817
|
|
|
4,861
|
|
Corporate and other
|
2,560
|
|
|
2,333
|
|
|
2,208
|
|
Total
|
$
|
31,248
|
|
|
$
|
29,423
|
|
|
$
|
26,550
|
|
Capital Expenditures
|
|
|
|
|
|
Architectural glass
|
$
|
17,701
|
|
|
$
|
12,307
|
|
|
$
|
31,568
|
|
Architectural services
|
929
|
|
|
595
|
|
|
1,195
|
|
Architectural framing systems
|
19,166
|
|
|
9,238
|
|
|
7,008
|
|
Large-scale optical
|
1,962
|
|
|
3,500
|
|
|
546
|
|
Corporate and other
|
2,279
|
|
|
1,580
|
|
|
1,535
|
|
Total
|
$
|
42,037
|
|
|
$
|
27,220
|
|
|
$
|
41,852
|
|
Identifiable Assets
|
|
|
|
|
|
Architectural glass
|
$
|
215,571
|
|
|
$
|
223,525
|
|
|
$
|
209,102
|
|
Architectural services
|
81,574
|
|
|
68,930
|
|
|
66,567
|
|
Architectural framing systems
|
193,823
|
|
|
190,106
|
|
|
186,520
|
|
Large-scale optical
|
57,369
|
|
|
60,356
|
|
|
58,102
|
|
Corporate and other
|
109,103
|
|
|
69,140
|
|
|
49,704
|
|
Total
|
$
|
657,440
|
|
|
$
|
612,057
|
|
|
$
|
569,995
|
|
Due to the varying combinations and integration of individual window, storefront and curtainwall systems, the Company has determined that it is impractical to report product revenues generated by class of product beyond the segment revenues currently reported.
Segment operating income is equal to net sales less cost of sales and operating expenses. Operating income does not include interest expense or a provision for income taxes. Corporate and other includes miscellaneous corporate activity not allocable to our segments. Identifiable assets for Corporate and other include all short- and long-term available-for-sale securities.
The following table presents net sales, based on the location in which the sale originated, and long-lived assets, representing property, plant and equipment, net of related depreciation, by geographic region.
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
Net Sales
|
|
|
|
|
|
United States
|
$
|
923,018
|
|
|
$
|
847,887
|
|
|
$
|
718,881
|
|
Canada
|
39,324
|
|
|
50,807
|
|
|
15,850
|
|
Brazil
|
18,847
|
|
|
35,242
|
|
|
36,714
|
|
Total
|
$
|
981,189
|
|
|
$
|
933,936
|
|
|
$
|
771,445
|
|
Long-Lived Assets
|
|
|
|
|
|
United States
|
$
|
189,624
|
|
|
$
|
178,048
|
|
|
$
|
177,378
|
|
Canada
|
7,162
|
|
|
8,214
|
|
|
9,031
|
|
Brazil
|
5,676
|
|
|
7,278
|
|
|
7,537
|
|
Total
|
$
|
202,462
|
|
|
$
|
193,540
|
|
|
$
|
193,946
|
|
Apogee's export net sales from U.S. operations of
$79.5 million
for fiscal
2016
were approximately
8 percent
of consolidated net sales; export net sales of
$72.7 million
for fiscal
2015
were approximately
8 percent
of consolidated net sales; and export sales of
$52.5 million
for fiscal
2014
were approximately
7 percent
of consolidated net sales. All sales from Canada and Brazil were to customers outside the U.S.
|
|
16.
|
Quarterly Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
(In thousands, except per share data)
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Total
|
Fiscal 2016
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
239,962
|
|
|
$
|
240,754
|
|
|
$
|
238,324
|
|
|
$
|
262,149
|
|
|
$
|
981,189
|
|
Gross profit
|
55,588
|
|
|
56,699
|
|
|
62,426
|
|
|
68,857
|
|
|
243,570
|
|
Net earnings
|
12,126
|
|
|
14,760
|
|
|
18,521
|
|
|
19,935
|
|
|
65,342
|
|
Earnings per share - basic
|
0.42
|
|
|
0.51
|
|
|
0.64
|
|
|
0.69
|
|
|
2.25
|
|
Earnings per share - diluted
|
0.41
|
|
|
0.50
|
|
|
0.63
|
|
|
0.69
|
|
|
2.22
|
|
Fiscal 2015
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
210,883
|
|
|
$
|
231,945
|
|
|
$
|
244,410
|
|
|
$
|
246,698
|
|
|
$
|
933,936
|
|
Gross profit
|
41,438
|
|
|
49,321
|
|
|
56,653
|
|
|
61,132
|
|
|
208,544
|
|
Net earnings
|
6,102
|
|
|
16,791
|
|
|
13,736
|
|
|
13,887
|
|
|
50,516
|
|
Earnings per share - basic
|
0.21
|
|
|
0.59
|
|
|
0.47
|
|
|
0.49
|
|
|
1.76
|
|
Earnings per share - diluted
|
0.21
|
|
|
0.57
|
|
|
0.47
|
|
|
0.47
|
|
|
1.72
|
|
Note: Per share amounts are computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of changes in average quarterly shares outstanding, and all other quarterly amounts may not equal the total year due to rounding.