NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The consolidated financial statements of Apogee Enterprises, Inc. (we, us, our or the Company) have been prepared in accordance with accounting principles generally accepted in the United States. The information included in this Form 10-Q should be read in conjunction with the Company’s Form 10-K for the year ended
March 4, 2017
. We use the same accounting policies in preparing quarterly and annual financial statements. All adjustments necessary for a fair presentation of quarterly operating results are reflected herein and are of a normal, recurring nature. The results of operations for the
three
-month period ended
June 3, 2017
are not necessarily indicative of the results to be expected for the full year.
In connection with preparing the unaudited consolidated financial statements for the
three
months ended
June 3, 2017
, we evaluated subsequent events for potential recognition and disclosure through the date of this filing. On June 12, 2017, we acquired
100
percent of the stock of EFCO Corporation, a privately-held U.S. manufacturer of architectural aluminum window, curtainwall, storefront and entrance systems for commercial construction projects for
$192 million
in cash, funded through an expansion of our existing committed revolving credit facility, also occurring after the close of the first fiscal quarter (see Note 9). Preliminary purchase accounting will be completed in the second quarter and the acquired company will be included within our Architectural Framing Systems segment. Results of operations for EFCO will be included in our consolidated financial statements from the date of acquisition.
|
|
2.
|
New Accounting Standards
|
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, our fiscal 2019. We are currently undertaking a process to quantify the impact that this standard will have on our consolidated financial statements and will provide further analysis and discussion as we progress in this quantification process. At this time:
|
|
•
|
We are in the process of evaluating the significance of the guidance to our operations and as we proceed, we will finalize our determination of adoption method.
|
|
|
•
|
We expect to have business units that will continue to recognize revenue at the point in time when goods are shipped, as that represents when control is transferred, and business units that will continue to recognize revenue over time, following a cost-to-cost percentage of completion method of revenue recognition. Additionally, we expect that one of our business units in the Architectural Framing Systems segment will change from recognizing revenue at a point in time to recognizing revenue over time, to better reflect transfer of control to the customer in line with the new guidance. This business unit represents approximately 10 percent of our total net sales and will follow a similar cost-to-cost percentage of completion method of revenue recognition, consistent with our other business units using percentage of completion.
|
In February 2016, the FASB issued ASU 2016-02,
Leases
, which provides for comprehensive changes 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, our fiscal year 2020, with a modified retrospective transition. We are currently evaluating whether we will early adopt this standard in our fiscal year 2019 to align with the adoption of the new revenue recognition standard discussed above. The adoption of this standard will result in reflecting assets and liabilities for the value of our leased property and equipment on our consolidated balance sheet but we do not expect this guidance to have a significant impact on our consolidated results of operations
In August 2016, the FASB issued ASU 2016-15,
Statement of Cash Flows
, and in November 2016, it issued 2016-18,
Restricted Cash
. Both standards provide guidance for presentation of certain topics within the statement of cash flows, including presenting restricted cash within cash and cash equivalents, and are intended to improve consistency in presentation. The new classification guidance is effective for fiscal years beginning after December 15, 2017, our fiscal year 2019, and is to be applied retrospectively for comparability across all periods. These standards may be adopted early, and we are considering the timing of adoption, but we do not expect this guidance to have a significant impact on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04,
Simplifying the Test for Goodwill Impairment
, which simplifies the accounting for goodwill impairment by requiring impairment charges to be based on the first step in the current two-step impairment test process. The new guidance eliminates the current requirement to calculate a goodwill impairment charge using step 2. The standard
is applicable to impairment tests performed in periods beginning after December 15, 2019, our fiscal 2021, with early adoption permitted. We are currently evaluating early adoption of this guidance for our future annual goodwill impairment review process.
|
|
3.
|
Share-Based Compensation
|
Total share-based compensation expense included in the results of operations was
$1.4 million
in each of the
three
-month periods ended
June 3, 2017
and
May 28, 2016
.
Stock Options and SARs
There were no stock options or SARs issued in months of either period presented. Activity for the current period is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options and SARs
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Contractual Life
|
|
Aggregate Intrinsic Value
|
Outstanding at March 4, 2017
|
|
229,901
|
|
|
$
|
9.90
|
|
|
|
|
|
Awards exercised
|
|
(100,000
|
)
|
|
8.34
|
|
|
|
|
|
Outstanding and exercisable at June 3, 2017
|
|
129,901
|
|
|
$
|
11.10
|
|
|
3.5 Years
|
|
$
|
5,830,913
|
|
Cash proceeds from the exercise of stock options were
$0.8 million
and
$0.1 million
for the
three
months ended
June 3, 2017
and
May 28, 2016
, 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
$4.8 million
during the
three
months ended
June 3, 2017
and
$0.3 million
during the prior-year period.
Nonvested Shares and Share Units
Nonvested share activity for the current period is summarized as follows:
|
|
|
|
|
|
|
|
|
Nonvested Shares and Units
|
|
Number of Shares and Units
|
|
Weighted Average Grant Date Fair Value
|
Nonvested at March 4, 2017
|
|
279,204
|
|
|
$
|
44.80
|
|
Granted
|
|
50,686
|
|
|
54.50
|
|
Vested
|
|
(110,744
|
)
|
|
45.45
|
|
Nonvested at June 3, 2017
|
|
219,146
|
|
|
$
|
46.70
|
|
At
June 3, 2017
, there was
$8.0 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
24
months. The total fair value of shares vested during the
three
months ended
June 3, 2017
was
$6.0 million
.
The following table presents a reconciliation of the share amounts used in the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
Three Months Ended
|
(In thousands)
|
June 3, 2017
|
|
May 28, 2016
|
Basic earnings per share – weighted average common shares outstanding
|
28,851
|
|
|
28,702
|
|
Weighted average effect of nonvested share grants and assumed exercise of stock options
|
10
|
|
|
193
|
|
Diluted earnings per share – weighted average common shares and potential common shares outstanding
|
28,861
|
|
|
28,895
|
|
There were no anti-dilutive stock options excluded from the calculation of earnings per share for any of the periods presented, as the average market price exceeded the exercise price of options outstanding.
|
|
|
|
|
|
|
|
|
(In thousands)
|
June 3, 2017
|
|
March 4, 2017
|
Raw materials
|
$
|
25,380
|
|
|
$
|
22,761
|
|
Work-in-process
|
19,514
|
|
|
16,154
|
|
Finished goods
|
31,471
|
|
|
29,372
|
|
Costs and earnings in excess of billings on uncompleted contracts
|
4,718
|
|
|
5,122
|
|
Total inventories
|
$
|
81,083
|
|
|
$
|
73,409
|
|
Marketable securities are classified as available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated
Fair Value
|
June 3, 2017
|
|
|
|
|
|
|
|
Municipal bonds
|
7,888
|
|
|
145
|
|
|
(57
|
)
|
|
7,976
|
|
March 4, 2017
|
|
|
|
|
|
|
|
Municipal bonds
|
9,595
|
|
|
91
|
|
|
(97
|
)
|
|
9,589
|
|
We have a wholly-owned insurance subsidiary, Prism Assurance, Ltd. (Prism), which holds 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.
As of
June 3, 2017
, marketable securities with a fair value of
$1.2 million
have been in a continuous unrealized loss position for more than 12 months with unrea
lized losses of
$0.1 million
. We consider these unrealized losses 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. Gross realized gains and losses were
not significant
during the first
three
months of fiscal
2018
or fiscal
2017
.
The amortized cost and estimated fair values of municipal bonds at
June 3, 2017
, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities, as borrowers may have the right to call or prepay obligations with or without penalty.
|
|
|
|
|
|
|
|
|
(In thousands)
|
Amortized Cost
|
|
Estimated Fair Value
|
Due within one year
|
$
|
425
|
|
|
$
|
425
|
|
Due after one year through five years
|
2,656
|
|
|
2,696
|
|
Due after five years through 10 years
|
3,316
|
|
|
3,419
|
|
Due after 10 years through 15 years
|
1,291
|
|
|
1,236
|
|
Due beyond 15 years
|
200
|
|
|
200
|
|
Total
|
$
|
7,888
|
|
|
$
|
7,976
|
|
|
|
7.
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Quoted Prices in
Active Markets
(Level 1)
|
|
Other Observable Inputs (Level 2)
|
|
Total Fair Value
|
June 3, 2017
|
|
|
|
|
|
Cash equivalents
|
|
|
|
|
|
Money market funds
|
$
|
4,138
|
|
|
$
|
—
|
|
|
$
|
4,138
|
|
Commercial paper
|
—
|
|
|
1,400
|
|
|
1,400
|
|
Total cash equivalents
|
4,138
|
|
|
1,400
|
|
|
5,538
|
|
Short-term securities
|
|
|
|
|
|
Municipal bonds
|
—
|
|
|
425
|
|
|
425
|
|
Long-term securities
|
|
|
|
|
|
Municipal bonds
|
—
|
|
|
7,551
|
|
|
7,551
|
|
Total assets at fair value
|
$
|
4,138
|
|
|
$
|
9,376
|
|
|
$
|
13,514
|
|
March 4, 2017
|
|
|
|
|
|
Cash equivalents
|
|
|
|
|
|
Money market funds
|
$
|
4,423
|
|
|
$
|
—
|
|
|
$
|
4,423
|
|
Commercial paper
|
—
|
|
|
5,500
|
|
|
5,500
|
|
Total cash equivalents
|
4,423
|
|
|
5,500
|
|
|
9,923
|
|
Short-term securities
|
|
|
|
|
|
Municipal bonds
|
—
|
|
|
548
|
|
|
548
|
|
Long-term securities
|
|
|
|
|
|
Municipal bonds
|
—
|
|
|
9,041
|
|
|
9,041
|
|
Total assets at fair value
|
$
|
4,423
|
|
|
$
|
15,089
|
|
|
$
|
19,512
|
|
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
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.
On December 14, 2016, we acquired substantially all the assets of Sotawall, Inc. (now operating under the name Sotawall Limited or "Sotawall"). Sotawall specializes in the design, engineering, fabrication, assembly and installation of unitized curtainwall systems for industrial, commercial and institutional buildings, primarily serving the Canadian and northeastern U.S. geographic regions and is included within our Architectural Framing Systems segment. Sotawall's results of operations have been included in the consolidated financial statements and within the Architectural Framing Systems segment since the date of acquisition.
The assets and liabilities of Sotawall were recorded in the consolidated balance sheet as of the acquisition date, at their respective fair values. The purchase price allocation was completed in the current quarter reflecting subsequent working capital adjustments and final intangible asset values as follows:
|
|
|
|
|
(In thousands)
|
|
Net working capital
|
$
|
10,682
|
|
Property, plant and equipment
|
7,993
|
|
Goodwill
|
21,380
|
|
Other intangible assets
|
94,630
|
|
Net assets acquired
|
$
|
134,685
|
|
No significant adjustments were made to our consolidated results of operations as a result of the completion of purchase accounting.
The following unaudited pro forma information provides the results of operations for the quarter ended May 28, 2016, as if the acquisition had been completed at the beginning of fiscal year 2017:
|
|
|
|
|
|
Pro forma
|
In thousands, except per share data
|
May 28, 2016
|
Net sales
|
$
|
272,816
|
|
Net earnings
|
21,466
|
|
Earnings per share
|
|
Basic
|
0.75
|
|
Diluted
|
0.74
|
|
Unaudited pro forma information has been provided for comparative purposes only and the information does not necessarily reflect what the combined company's results of operations would have been had the acquisition occurred at the beginning of fiscal year 2017. The information does not reflect the effect of any synergies or integration costs that may result from the acquisition.
|
|
9.
|
Goodwill and Other Identifiable Intangible Assets
|
The carrying amount of goodwill attributable to each reporting segment was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Architectural Glass
|
|
Architectural Framing Systems
|
|
Architectural Services
|
|
Large-Scale
Optical
|
|
Total
|
Balance at February 27, 2016
|
$
|
25,639
|
|
|
$
|
36,680
|
|
|
$
|
1,120
|
|
|
$
|
10,557
|
|
|
$
|
73,996
|
|
Goodwill acquired
|
—
|
|
|
27,444
|
|
|
—
|
|
|
—
|
|
|
27,444
|
|
Foreign currency translation
|
317
|
|
|
(423
|
)
|
|
—
|
|
|
—
|
|
|
(106
|
)
|
Balance at March 4, 2017
|
25,956
|
|
|
63,701
|
|
|
1,120
|
|
|
10,557
|
|
|
101,334
|
|
Goodwill adjustment for purchase accounting
|
—
|
|
|
(5,860
|
)
|
|
—
|
|
|
—
|
|
|
(5,860
|
)
|
Foreign currency translation
|
50
|
|
|
(313
|
)
|
|
—
|
|
|
—
|
|
|
(263
|
)
|
Balance at June 3, 2017
|
$
|
26,006
|
|
|
$
|
57,528
|
|
|
$
|
1,120
|
|
|
$
|
10,557
|
|
|
$
|
95,211
|
|
Purchase accounting related to the acquisition of Sotawall was finalized during the current quarter (see Note 8).
The gross carrying amount of other intangible assets and related accumulated amortization was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Foreign
Currency
Translation
|
|
Net
|
June 3, 2017
|
|
|
|
|
|
|
|
|
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
|
Debt issue costs
|
|
$
|
4,066
|
|
|
$
|
(3,013
|
)
|
|
$
|
—
|
|
|
$
|
1,053
|
|
Non-compete agreements
|
|
6,286
|
|
|
(6,111
|
)
|
|
10
|
|
|
185
|
|
Customer relationships
|
|
85,296
|
|
|
(15,263
|
)
|
|
(465
|
)
|
|
69,568
|
|
Trademarks and other intangibles
|
|
25,950
|
|
|
(7,261
|
)
|
|
(103
|
)
|
|
18,586
|
|
Total definite-lived intangible assets
|
|
$
|
121,598
|
|
|
$
|
(31,648
|
)
|
|
$
|
(558
|
)
|
|
$
|
89,392
|
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
Trademarks
|
|
16,061
|
|
|
—
|
|
|
(123
|
)
|
|
15,938
|
|
Total intangible assets
|
|
$
|
137,659
|
|
|
$
|
(31,648
|
)
|
|
$
|
(681
|
)
|
|
$
|
105,330
|
|
March 4, 2017
|
|
|
|
|
|
|
|
|
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
|
Debt issue costs
|
|
$
|
4,066
|
|
|
$
|
(2,960
|
)
|
|
$
|
—
|
|
|
$
|
1,106
|
|
Non-compete agreements
|
|
6,286
|
|
|
(6,025
|
)
|
|
(65
|
)
|
|
196
|
|
Customer relationships
|
|
82,479
|
|
|
(14,013
|
)
|
|
(145
|
)
|
|
68,321
|
|
Trademarks and other intangibles
|
|
25,950
|
|
|
(4,917
|
)
|
|
(31
|
)
|
|
21,002
|
|
Total definite-lived intangible assets
|
|
$
|
118,781
|
|
|
$
|
(27,915
|
)
|
|
$
|
(241
|
)
|
|
$
|
90,625
|
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
Trademarks
|
|
16,022
|
|
|
—
|
|
|
39
|
|
|
16,061
|
|
Total intangible assets
|
|
$
|
134,803
|
|
|
$
|
(27,915
|
)
|
|
$
|
(202
|
)
|
|
$
|
106,686
|
|
Amortization expense on definite-lived intangible assets was
$3.4 million
and
$0.4 million
for the
three
-month periods ended
June 3, 2017
and
May 28, 2016
, respectively. The amortization expense associated with debt issue costs is included in interest expense while the remainder is in selling, general and administrative expenses in the consolidated results of operations. At
June 3, 2017
, the estimated future amortization expense for definite-lived intangible assets was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Remainder of Fiscal 2018
|
|
Fiscal 2019
|
|
Fiscal 2020
|
|
Fiscal 2021
|
|
Fiscal 2022
|
Estimated amortization expense
|
$
|
10,380
|
|
|
$
|
8,093
|
|
|
$
|
5,592
|
|
|
$
|
5,579
|
|
|
$
|
5,307
|
|
Debt, at
June 3, 2017
, included
$20.4 million
of industrial revenue bonds that mature in fiscal years 2021 through 2043. The fair value of the industrial revenue bonds approximated carrying value at
June 3, 2017
, due to the variable interest rates on these instruments. The bonds would be classified as Level 2 within the fair value hierarchy described in Note 7.
As of June 3, 2017, we maintained a
$175.0 million
committed revolving credit facility that matures in
November 2021
. Outstanding borrowing was
$51.0 million
as of
June 3, 2017
and
$45.0 million
as of
March 4, 2017
. We have two financial covenants that require us to stay below a maximum debt-to-EBITDA ratio and maintain a minimum ratio of interest expense-to-EBITDA. Both ratios are computed quarterly, with EBITDA calculated on a rolling four-quarter basis. At
June 3, 2017
, we were in compliance with both financial covenants. Additionally, at
June 3, 2017
, we had a total of
$23.5 million
of ongoing letters of credit related to industrial revenue bonds and construction contracts that expire in fiscal 2018 and reduce availability of funds under our committed credit facility. Subsequent to the end of the quarter, and in connection with our subsequent acquisition of EFCO, on June 9, 2017, we expanded this committed revolving credit facility to
$335.0 million
. There were no significant changes to terms associated with this expansion.
We also maintain two Canadian revolving demand facilities totaling $
12.0 million
Canadian dollars. No borrowings were outstanding under these facilities as of
June 3, 2017
or
March 4, 2017
. Borrowings under these facilities are made available at the sole discretion of the lenders and are payable on demand.
Interest payments were
$0.5 million
and
$0.1 million
for the
three
months ended
June 3, 2017
and
May 28, 2016
, respectively.
|
|
11.
|
Employee Benefit Plans
|
The Company sponsors two frozen defined-benefit pension plans: an unfunded Officers’ Supplemental Executive Retirement Plan and the Tubelite Inc. Hourly Employees’ Pension Plan. Components of net periodic benefit cost were:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(In thousands)
|
June 3, 2017
|
|
May 28, 2016
|
Interest cost
|
$
|
133
|
|
|
$
|
139
|
|
Expected return on assets
|
(10
|
)
|
|
(10
|
)
|
Amortization of unrecognized net loss
|
57
|
|
|
56
|
|
Net periodic benefit cost
|
$
|
180
|
|
|
$
|
185
|
|
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 2014, or U.S. state and local income tax examinations for years prior to fiscal 2011. The Company is not currently under U.S. federal examination for years subsequent to fiscal year 2013, and there is very limited audit activity of the Company’s income tax returns in U.S. state jurisdictions or international jurisdictions.
The total liability for unrecognized tax benefits at
June 3, 2017
and
March 4, 2017
was approximately
$4.8 million
and
$4.5 million
, respectively. Penalties and interest related to unrecognized tax benefits are recorded in income tax expense. The total liability for unrecognized tax benefits is expected to decrease by approximately
$0.5 million
during the next 12 months due to lapsing of statutes.
|
|
13.
|
Other Non-Current Liabilities
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
June 3, 2017
|
|
March 4, 2017
|
Deferred benefit from New Market Tax Credit transactions
|
$
|
16,708
|
|
|
$
|
16,708
|
|
Retirement plan obligations
|
9,635
|
|
|
9,635
|
|
Deferred compensation plan
|
9,526
|
|
|
7,463
|
|
Other
|
7,046
|
|
|
11,981
|
|
Total other non-current liabilities
|
$
|
42,915
|
|
|
$
|
45,787
|
|
14.
Commitments and Contingent Liabilities
Operating lease commitments.
As of
June 3, 2017
, the Company was obligated under non-cancelable operating leases for buildings and equipment. Certain leases provide for increased rental payments based upon increases in real estate taxes or operating costs. Future minimum rental payments under non-cancelable operating leases are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Remainder of Fiscal 2018
|
|
Fiscal 2019
|
|
Fiscal 2020
|
|
Fiscal 2021
|
|
Fiscal 2022
|
|
Thereafter
|
|
Total
|
Total minimum payments
|
$
|
9,047
|
|
|
$
|
10,821
|
|
|
$
|
9,259
|
|
|
$
|
6,297
|
|
|
$
|
5,604
|
|
|
$
|
8,823
|
|
|
$
|
49,851
|
|
Bond commitments.
In the ordinary course of business, predominantly in our Architectural Services and Architectural Framing Systems segments, we are required to provide surety or performance bonds that commit payments to our customers for any non-performance. At
June 3, 2017
,
$66.0 million
of our backlog was bonded by performance bonds with a face value of
$329.7 million
. Performance bonds do not have stated expiration dates, as we are released from the bonds upon completion of the contract. We have never been required to make any payments related to these performance bonds with respect to any of our current portfolio of businesses.
Warranties.
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. 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 follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(In thousands)
|
June 3, 2017
|
|
May 28, 2016
|
Balance at beginning of period
|
$
|
21,933
|
|
|
$
|
16,340
|
|
Additional accruals
|
1,240
|
|
|
1,463
|
|
Claims paid
|
(973
|
)
|
|
(1,129
|
)
|
Balance at end of period
|
$
|
22,200
|
|
|
$
|
16,674
|
|
Letters of credit.
At
June 3, 2017
, 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
June 3, 2017
was approximately
$23.5 million
, all of which have been issued under our committed revolving credit facility. Availability under this credit facility is reduced by borrowings under the facility and also by letters of credit issued under the facility.
Purchase obligations.
Purchase obligations for raw material commitments and capital expenditures totaled
$115.5 million
as of
June 3, 2017
.
Litigation.
We are a party to various legal proceedings incidental to our normal operating activities. In particular, like others in the construction supply and services industry, our businesses are routinely involved in various disputes and claims arising out of construction projects, sometimes involving significant monetary damages or product replacement. We are also 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 our results of operations, cash flows or financial condition.
The Company has
four
reporting segments: Architectural Glass, Architectural Framing Systems, Architectural Services and Large-Scale Optical (LSO).
|
|
•
|
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 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. The Company has aggregated
five
operating segments into this reporting segment based on their similar products, customers, distribution methods, production processes and economic characteristics.
|
|
|
•
|
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 LSO segment manufactures value-added glass and acrylic products primarily for framing and display applications.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(In thousands)
|
June 3, 2017
|
|
May 28, 2016
|
Net sales from operations
|
|
|
|
Architectural Glass
|
$
|
97,735
|
|
|
$
|
93,360
|
|
Architectural Framing Systems
|
110,492
|
|
|
81,132
|
|
Architectural Services
|
50,150
|
|
|
62,820
|
|
Large-Scale Optical
|
18,603
|
|
|
20,028
|
|
Intersegment eliminations
|
(4,673
|
)
|
|
(9,460
|
)
|
Net sales
|
$
|
272,307
|
|
|
$
|
247,880
|
|
Operating income (loss) from operations
|
|
|
|
Architectural Glass
|
$
|
9,322
|
|
|
$
|
9,531
|
|
Architectural Framing Systems
|
11,964
|
|
|
10,232
|
|
Architectural Services
|
782
|
|
|
3,181
|
|
Large-Scale Optical
|
4,050
|
|
|
4,652
|
|
Corporate and other
|
(2,012
|
)
|
|
(1,347
|
)
|
Operating income
|
$
|
24,106
|
|
|
$
|
26,249
|
|
Due to the varying combinations and integration of individual window, storefront and curtainwall systems, it is impractical to report product revenues generated by class of product, beyond the segment revenues currently reported.