View Filing Data

Print Document View Excel Document

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Sep. 01, 2018	Oct. 08, 2018
Document and Entity Information [Abstract]
Entity Registrant Name	APOGEE ENTERPRISES, INC.
Entity Central Index Key	0000006845
Document Type	10-Q
Document Period End Date	Sep. 01, 2018
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--03-02
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		28,182,387

Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands	Sep. 01, 2018	Mar. 03, 2018
Current assets
Cash and cash equivalents	$ 18,113	$ 19,359
Receivables, net of allowance for doubtful accounts	200,770	211,852
Inventories	81,933	80,908
Refundable income taxes	44,585	4,120
Other current assets	15,792	20,039
Total current assets	361,193	336,278
Property, plant and equipment, net	308,314	304,063
Restricted cash	17,852	0
Goodwill	186,522	180,956
Intangible assets	157,991	167,349
Other assets	41,745	33,674
Total assets	1,073,617	1,022,320
Current liabilities
Accounts payable	75,630	68,416
Accrued payroll and related benefits	32,254	36,646
Accrued self-insurance reserves	6,718	10,933
Other current liabilities	69,707	79,696
Billings in excess of costs and earnings on uncompleted contracts	24,907	12,461
Total current liabilities	209,216	208,152
Long-term debt	224,881	215,860
Long-term self-insurance reserves	18,918	16,307
Other non-current liabilities	81,746	70,646
Commitments and contingent liabilities (Note 13)
Shareholders' equity
Common stock of $0.33-1/3 par value; authorized 50,000,000 shares; issued and outstanding 28,996,209 and 28,958,119, respectively	9,420	9,386
Additional paid-in capital	155,898	152,763
Retained earnings	402,619	373,259
Common stock held in trust	(842)	(922)
Deferred compensation obligations	842	922
Accumulated other comprehensive loss	(29,081)	(24,053)
Total shareholders’ equity	538,856	511,355
Total liabilities and shareholders' equity	$ 1,073,617	$ 1,022,320

Consolidated Balance Sheets (unaudited) (Parenthetical) - $ / shares	Sep. 01, 2018	Mar. 03, 2018
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.33	$ 0.33
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	28,260,214	28,158,042
Common stock, shares outstanding	28,260,214	28,158,042

Consolidated Results of Operations (unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 01, 2018	Sep. 02, 2017	Sep. 01, 2018	Sep. 02, 2017
Income Statement [Abstract]
Net sales	$ 362,133	$ 343,907	$ 698,664	$ 616,214
Cost of sales	277,667	257,906	533,468	459,919
Gross profit	84,466	86,001	165,196	156,295
Selling, general and administrative expenses	55,806	58,227	114,542	104,415
Operating income	28,660	27,774	50,654	51,880
Interest income	680	117	910	284
Interest expense	2,624	1,650	4,573	2,095
Other income (expense), net	217	77	196	256
Earnings before income taxes	26,933	26,318	47,187	50,325
Income tax expense (benefit)	6,420	8,909	11,300	16,813
Net earnings	$ 20,513	$ 17,409	$ 35,887	$ 33,512
Earnings per share - basic
Net earnings	$ 0.73	$ 0.60	$ 1.28	$ 1.16
Earnings per share - diluted
Net earnings	$ 0.72	$ 0.60	$ 1.26	$ 1.16
Weighted average basic shares outstanding	28,128	28,850	28,127	28,850
Weighted average diluted shares outstanding	28,379	28,908	28,377	28,885

Consolidated Statements of Comprehensive Earnings (unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 01, 2018	Sep. 02, 2017	Sep. 01, 2018	Sep. 02, 2017
Statement of Comprehensive Income [Abstract]
Net earnings	$ 20,513	$ 17,409	$ 35,887	$ 33,512
Other comprehensive earnings:
Unrealized (loss) gain on marketable securities, net of ($11), $17, ($9) and $50 of tax (benefit) expense, respectively	(42)	30	(32)	92
Unrealized loss on foreign currency hedge, net of $17, $-, $109 and $- of tax benefit, respectively	(55)	0	(359)	0
Foreign currency translation adjustments	(3,383)	15,207	(3,900)	14,490
Other comprehensive earnings (loss)	(3,480)	15,237	(4,291)	14,582
Total comprehensive earnings	$ 17,033	$ 32,646	$ 31,596	$ 48,094

Consolidated Statements of Comprehensive Earnings (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 01, 2018	Sep. 02, 2017	Sep. 01, 2018	Sep. 02, 2017
Statement of Comprehensive Income [Abstract]
Tax expense (benefit) on marketable securities	$ (11)	$ 17	$ (9)	$ 50
Tax benefit on foreign currency hedge	$ 17	$ 0	$ 109	$ 0

Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	6 Months Ended
	Sep. 01, 2018	Sep. 02, 2017
Operating Activities
Net earnings	$ 35,887	$ 33,512
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization	26,457	25,062
Stock-based compensation	3,119	3,063
Deferred income taxes	6,061	(751)
Gain on disposal of assets	815	37
Proceeds from New Markets Tax Credit transaction, net of deferred costs	6,052	0
Other, net	(682)	(1,168)
Changes in operating assets and liabilities:
Receivables	10,598	8,683
Inventories	2,747	(7,072)
Costs and earnings on contracts in excess of billings	(39,191)	235
Accounts payable and accrued expenses	(15,409)	(33,982)
Billings in excess of costs and earnings on uncompleted contracts	12,449	4,819
Refundable and accrued income taxes	2,130	7,079
Other, net	(1,474)	1,366
Net cash provided by (used in) operating activities	47,929	40,809
Investing Activities
Capital expenditures	(24,241)	(26,825)
Proceeds from sales of property, plant and equipment	774	64
Acquisition of business, net of cash acquired	0	184,826
Purchases of marketable securities	(9,066)	(5,436)
Sales/maturities of marketable securities	4,943	4,271
Other, net	(2,209)	1,099
Net cash provided by (used in) investing activities	(29,799)	(211,653)
Financing Activities
Borrowings on line of credit	205,000	284,200
Payments on line of credit	196,500	94,000
Shares withheld for taxes, net of stock issued to employees	(1,431)	(1,612)
Repurchase and retirement of common stock	0	10,833
Dividends paid	(8,823)	(7,994)
Proceeds from (Payments for) Other Financing Activities	496	1,759
Net cash provided by (used in) financing activities	(1,258)	171,520
Decrease in cash and cash equivalents	16,872	676
Effect of exchange rates on cash	(266)	1,555
Cash, cash equivalents and restricted cash at beginning of year	19,359	27,297
Cash, cash equivalents and restricted cash at end of period	35,965	29,528
Noncash Activity
Capital expenditures in accounts payable	$ 1,756	$ 1,196

Consolidated Statement of Shareholders Equity (unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Common Stock Held In Trust [Member]	Deferred Compensation Obligation [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Beginning balance (in shares) at Mar. 04, 2017	28,680
Beginning balance at Mar. 04, 2017		$ 9,560	$ 150,111	$ 341,996	$ (875)	$ 875	$ (31,090)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings	$ 33,512			33,512
Unrealized gain on marketable securities, net of tax expense	92						92
Unrealized loss on foreign currency hedge, net of $17, $-, $109 and $- of tax benefit, respectively	$ 0
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax, Portion Attributable to Parent						0	14,490
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures	107
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures		36	83		(22)	22
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition			3,063
Outstanding shares awards exercised	100
Stock Issued During Period, Value, Stock Options Exercised		34	801
Share repurchases (in shares)	(200)
Share repurchases		(67)	(1,091)	(9,675)
Stock Repurchased and Retired During Period, Shares	(45)
Stock Repurchased and Retired During Period, Value		(15)	(256)	(2,216)
Dividends, Common Stock, Cash				(7,994)
Ending balance (in shares) at Sep. 02, 2017	28,642
Ending balance at Sep. 02, 2017		9,548	152,711	355,623	(897)	897	(16,508)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect adjustment (see Note 1)		0	0	2,999	0	0	0
Beginning balance (in shares) at Mar. 03, 2018	28,158
Beginning balance at Mar. 03, 2018	$ 511,355	9,386	152,763	373,259	(922)	922	(24,053)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reclassification of tax effects (see Note 1)		0	0	737	0	0	(737)
Net earnings	35,887			35,887
Unrealized gain on marketable securities, net of tax expense	(32)						(32)
Unrealized loss on foreign currency hedge, net of $17, $-, $109 and $- of tax benefit, respectively	$ (359)	0	0	0	0	0	(359)
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax, Portion Attributable to Parent						0	(3,900)
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures	125
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures		42	72		80	(80)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition			3,119
Outstanding shares awards exercised	19
Stock Issued During Period, Value, Stock Options Exercised		6	177
Stock Repurchased and Retired During Period, Shares	(42)
Stock Repurchased and Retired During Period, Value		(14)	(233)	(1,440)
Dividends, Common Stock, Cash				(8,823)
Ending balance (in shares) at Sep. 01, 2018	28,260
Ending balance at Sep. 01, 2018	$ 538,856	$ 9,420	$ 155,898	$ 402,619	$ (842)	$ 842	$ (29,081)

Consolidated Statement of Shareholders Equity (unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 01, 2018	Sep. 02, 2017	Sep. 01, 2018	Sep. 02, 2017
Statement of Stockholders' Equity [Abstract]
Tax expense on marketable securities	$ (11)	$ 17	$ (9)	$ 50
Tax benefit on foreign currency hedge	17	0	109	0
Unrealized gain on marketable securities, net of tax expense	$ (42)	$ 30	$ (32)	$ 92

Acquisition

6 Months Ended

Sep. 01, 2018

Business Combinations [Abstract]

Acquisition

EFCO

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. The acquisition was funded through our committed revolving credit facility, with $7.5 million of the purchase price payable in equal installments over the subsequent three years. EFCO's results of operations have been included in our consolidated financial statements and within the Architectural Framing Systems segment since the date of acquisition.

The assets and liabilities of EFCO were recorded in our consolidated balance sheet as of the acquisition date, at their respective fair values. Fair value is estimated based on one or a combination of income, cost and/or market approaches, as determined based on the nature of the asset or liability, and the level of inputs available. With respect to assets and liabilities, the determination of fair value requires management to make subjective judgments as to projections of future operating performance, the appropriate discount rate to apply, long-term growth rates, etc. (i.e. - unobservable inputs classified as Level 3 inputs under the fair value hierarchy described in Note 5), which affect the amounts recorded in the purchase price allocation. The excess of the consideration transferred over the fair value of the identifiable assets, net of liabilities, is recorded as goodwill, which is indicative of the expected continued growth and development of EFCO. The purchase price allocation that follows is based on the estimated fair values of assets acquired and liabilities assumed, which was finalized in the first quarter of fiscal 2019:



In thousands
Net working capital	$	1,422
Property, plant and equipment	44,641
Goodwill	90,429
Other intangible assets	71,500
Less: Long-term liabilities acquired, net	17,643
Net assets acquired	$	190,349

Other intangible assets reflect the following:



In thousands	Estimated fair value		Estimated useful life (in years)
Customer relationships	$	34,800	16
Tradename	32,400		Indefinite
Backlog	4,300		1.5
	$	71,500

The following table sets forth certain unaudited pro forma consolidated data for the second quarter and six-month periods of fiscal 2019 and 2018, as if the EFCO acquisition had been consummated pursuant to its same terms at the beginning of the fiscal year preceding the acquisition date.



	Three Months Ended				Six Months Ended
In thousands, except per share data	September 1, 2018		September 2, 2017		September 1, 2018		September 2, 2017
Net sales	$	362,133	$	351,988	$	698,664	$	696,039
Net earnings	21,069		20,312		36,639		37,528
Earnings per share
Basic	0.75		0.70		1.30		1.30
Diluted	0.74		0.70		1.29		1.30

We have provided this unaudited pro forma information for comparative purposes only. This information does not necessarily reflect what the combined results of operations actually would have been had the acquisitions occurred at the beginning of fiscal year 2017. The information does not reflect the effect of any synergies or integration costs that we expect to result from the acquisition.

Summary of Significant Accounting Policies

6 Months Ended

Sep. 01, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Significant Accounting Policies

Basis of presentation

The consolidated financial statements of Apogee Enterprises, Inc. (we, us, our or the Company) have been prepared in accordance with accounting principles generally accepted in the United States. The information included in this Form 10-Q should be read in conjunction with the Company’s Form 10-K for the year ended March 3, 2018. 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 six-month period ended September 1, 2018 are not necessarily indicative of the results to be expected for the full year.

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the consolidated results of operations.

Significant accounting policies update

Our significant accounting policies are included in Note 1 "Summary of Significant Accounting Policies and Related Data" of our Annual Report on Form 10-K for the year ended March 3, 2018. On March 4, 2018, we adopted ASC 606, Revenue from Contracts with Customers, and as a result, made updates to our significant accounting policy for 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. Due to the diverse nature of our operations and various types of contracts with customers, we have businesses that recognize revenue over time and businesses that recognize revenue at a point in time.

In the current year-to-date period, approximately 46 percent of our total revenue is recognized at the time products are shipped from our manufacturing facilities, which is when control is transferred to our customer, consistent with past practices. These businesses do not generate contract-related assets or liabilities. Variable consideration associated with these contracts and orders, generally related to early pay discounts or volume rebates, is not considered significant.

We also have three businesses which operate under long-term, fixed-price contracts, representing approximately 34 percent of our total revenue in the current year. This includes one business which changed revenue recognition practices due to the adoption of the new guidance, moving from recognizing revenue at shipment to an over-time method of revenue recognition. 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. The customer obtains control of this combined output, generally integrated window systems or installed window and curtainwall systems, over time. We measure progress on these contracts following an input method, by comparing total costs incurred to-date to the total estimated costs for the contract, and record that proportion of the total contract price as revenue in the period. Contract costs include materials, labor and other direct costs related to contract performance. We believe this method of recognizing revenue is consistent with our progress in satisfying our contract obligations.

Due to the nature of the work required under these long-term contracts, the estimation of total revenue and costs incurred throughout a project is subject to many variables and requires significant judgment. It is common for these contracts to contain potential bonuses or penalties which are generally awarded or charged upon certain project milestones or cost or timing targets, and can be based on customer discretion. We estimate variable consideration at the most likely amount to which we expect to be entitled. We include estimated amounts in the transaction price to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on our assessments of anticipated performance and all information (historical, current and forecasted) that is reasonably available to us.

Long-term contracts are often modified to account for changes in contract specifications and requirements of work to be performed. 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. In many cases, these contract modifications are for goods or services that are not distinct from the existing contract, due to the significant integration service provided in the context of the contract. Therefore, these modifications are accounted for as part of the existing contract. The effect of a contract modification on the transaction price and our measure of progress is recognized as an adjustment to revenue, generally on a cumulative catch-up basis.

Typically, under these fixed-price contracts, we bill our customers following an agreed-upon schedule based on work performed. Because the progress billings do not generally correspond to our measurement of revenue on a contract, we generate contract assets when we have recognized revenue in excess of the amount billed to the customer. We generate contract liabilities when we have billed the customer in excess of revenue recognized on a contract.

Finally, we have one business, making up approximately 20 percent of our total revenue in the current year, that recognizes revenue following an over-time output method based upon units produced. The customer is considered to have control over the products at the time of production, as the products are highly customized with no alternative use, and we have an enforceable right to payment for performance completed over the production period. We believe this over-time output method of recognizing revenue reasonably depicts the fulfillment of our performance obligations under our contracts. Previously, this business recognized revenue at the time of shipment. Billings still occur upon shipment. Therefore, contract assets are generated for the unbilled amounts on contracts when production is complete. Variable consideration associated with these orders, generally related to early pay discounts, is not considered significant.

As outlined within the new accounting guidance, we elected several practical expedients in our transition to ASC 606:


•	We have made an accounting policy election to account for shipping and handling activities that occur after control of the related goods transfers to the customer as fulfillment activities, instead of assessing such activities as performance obligations.


•	We have made an accounting policy election to exclude from the transaction price all sales taxes related to revenue-producing transactions that are collected from the customer for a government authority.


•	We generally expense incremental costs of obtaining a contract when incurred because the amortization period would be less than one year. These costs primarily relate to sales commissions and are included in selling, general and administrative expenses.


•	We have not adjusted contract price for a significant financing component, as we expect the period between when our goods and services are transferred to the customer and when the customer pays for those goods and services to be less than a year.

Adoption of new accounting standards

We adopted the new guidance in ASC 606 using the modified retrospective transition method applied to those contracts which were not complete as of March 4, 2018. Prior period amounts were not adjusted and therefore continue to be reported in accordance with the accounting guidance and our accounting policies in effect for those periods.

Representing the cumulative effect of adopting ASC 606, we recorded a $3.0 million increase to the opening balance of retained earnings as of March 4, 2018. For the quarter and six month periods ending September 1, 2018, the application of the new accounting guidance had the following impact on our consolidated financial statements:



	Three Months Ended September 1, 2018				Six Months Ended September 1, 2018
In thousands	As reported		Without adoption of ASC 606		As reported		Without adoption of ASC 606
Net sales	$	362,133	$	359,584	$	698,664	$	686,835
Cost of sales	277,667		276,058		533,468		524,715
Gross profit	84,466		83,526		165,196		162,120
Selling, general and administrative expenses	55,806		55,481		114,542		113,868
Operating income	$	28,660	$	28,045	$	50,654	$	48,252

Income tax expense	$	6,420	$	6,274	$	11,300	$	10,726
Net earnings	20,513		20,044		35,887		34,059

					September 1, 2018
					As reported		Without adoption of ASC 606
Inventories					$	81,933	$	90,006
Costs and earnings on contracts in excess of billings					44,585		16,943
Billings on contracts in excess of costs and earnings					24,907		23,657
Other current liabilities					69,707		68,373
Retained earnings					402,619		407,446

These changes are primarily a result of the transition of certain of our businesses from recognizing revenue at the time of shipment to over-time methods of revenue recognition.

In the first quarter of fiscal 2019, we elected to early adopt ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This standard permits a company to reclassify the disproportionate income tax effects of the 2017 Tax Cuts and Jobs Act on items within accumulated other comprehensive income ("AOCI") to retained earnings. The FASB refers to these amounts as “stranded tax effects.” As a result of this adoption, we reclassified income tax effects of $0.7 million resulting from tax reform from AOCI to retained earnings following a portfolio approach. These stranded tax effects are derived from the deferred tax balances on our pension obligations as a result of the lower U.S. federal corporate tax rate.

Accounting standards not yet adopted

In February 2016, the FASB issued ASU 2016-02, Leases, which provides for comprehensive changes to lease accounting. The 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. In July 2018, the FASB issued an additional update which allows an entity the option to adopt the guidance on a modified retrospective basis. Under the modified retrospective approach, which we plan to adopt in implementing the new guidance, an entity would recognize a cumulative effect adjustment of initially applying the guidance to the opening balance of retained earnings in the period of adoption. Prior period amounts will not be adjusted.

We are in the process of analyzing our lease arrangements and we have begun evaluating potential changes to our business processes, systems and controls that are needed to support recognition and disclosure under this new standard. We expect that the adoption of this standard will result in reflecting a material right-of-use asset and lease liability on our consolidated balance sheet. We do not currently expect this standard to have a significant impact on our consolidated results of operations.

Subsequent events

We have evaluated subsequent events for potential recognition and disclosure through the date of this filing. Subsequent to the end of the quarter, in October 2018, we purchased 200,000 shares of stock under our authorized share repurchase program, at a total cost of $8.3 million. Also in October 2018, the Board of Directors increased our repurchase authorization by 2,000,000 shares, bringing the total remaining repurchase authority under this program to 3,040,068 shares.

Revenue, Receivables and Contract Assets and Liabilities

6 Months Ended

Sep. 01, 2018

Revenue from Contract with Customer [Abstract]

Revenue, Receivables and Contract Assets and Liabilities

Revenue

The following table disaggregates total revenue by timing of recognition (see Note 13 for disclosure of revenue by segment):



	Three Months Ended		Six Months Ended
In thousands	September 1, 2018		September 1, 2018
Recognized at shipment	$	166,534	$	323,401
Recognized over time	195,599		375,263
Total	$	362,133	$	698,664

Receivables

Trade and construction accounts receivable consist of amounts billed and due from customers. The amounts due are stated at their estimated net realizable value. We maintain an allowance for doubtful accounts to provide for the estimated amount of receivables that will not be collected. This allowance is based on an assessment of customer creditworthiness, historical payment experience and the age of outstanding receivables. Retainage on construction contracts represents amounts withheld by our customers on long-term projects until the project reaches a level of completion where amounts are released.



In thousands	September 1, 2018			March 3, 2018
Trade accounts	$	153,220		$	157,562
Construction contracts	17,462			26,545
Construction contracts - retainage	31,819			26,388
Other receivables	—			2,887
Total receivables	202,501			213,382
Less: allowance for doubtful accounts	(1,731		)	(1,530		)
Net receivables	$	200,770		$	211,852

Contract assets and liabilities

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

The time period between when performance obligations are complete and when payment is due is not significant. In certain of our businesses that recognize revenue over time, progress billings follow an agreed-upon schedule of values, and retainage is withheld by the customer until the project reaches a level of completion where amounts are released.



In thousands	September 1, 2018		March 3, 2018
Contract assets	$	76,404	$	30,508
Contract liabilities	31,623		20,120

The increase in contract assets was due to additional businesses recognizing revenue in advance of billings, as a result of changing accounting policies for revenue recognition upon adoption of ASC 606. The increase in contract liabilities was due to timing of project activity within our businesses that operate under long-term contracts.

In the first six months of fiscal 2019, we recognized revenue of $10.4 million related to contract liabilities at March 4, 2018, and revenue of $3.8 million related to performance obligations satisfied in previous periods due to changes in contract estimates. For the second quarter of fiscal 2019, we recognized revenue of $1.3 million related to contract liabilities at March 4, 2018, and revenue of $1.5 million related to performance obligations satisfied in previous periods due to changes in contract estimates.

Some of our contracts have an expected duration of longer than a year, with performance obligations extending over that timeframe. Generally these contracts are in our businesses with long-term contracts which recognize revenue over time. As of September 1, 2018, the transaction price associated with unsatisfied performance obligations was approximately $695.1 million. The performance obligations are expected to be satisfied, and the corresponding revenue to be recognized, over the following estimated time periods:



In thousands	September 1, 2018
Within one year	$	462,097
Within two years	222,677
Beyond	10,313
Total	$	695,087

Supplemental Balance Sheet Information

6 Months Ended

Sep. 01, 2018

Inventory Disclosure [Abstract]

Supplemental Balance Sheet Information

Inventories



In thousands	September 1, 2018		March 3, 2018
Raw materials	$	42,629	$	35,049
Work-in-process	18,263		17,406
Finished goods	21,041		28,453
Total inventories	$	81,933	$	80,908

Other current liabilities



In thousands	September 1, 2018		March 3, 2018
Warranties	$	15,058	$	18,110
Acquired contract liabilities	21,269		26,422
Deferred revenue	7,310		7,659
Other	26,070		27,505
Total other current liabilities	$	69,707	$	79,696

Other non-current liabilities



In thousands	September 1, 2018		March 3, 2018
Deferred benefit from New Market Tax Credit transactions	$	23,260	$	16,708
Retirement plan obligations	8,997		8,997
Deferred compensation plan	12,003		10,730
Other	37,486		34,211
Total other non-current liabilities	$	81,746	$	70,646

Financial Instruments

6 Months Ended

Sep. 01, 2018

Marketable Securities [Abstract]

Financial Instruments

Marketable securities

We hold the following available-for-sale marketable securities, made up of municipal and corporate bonds:



In thousands	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses		Estimated Fair Value
September 1, 2018	13,368	15	(186	)	13,197
March 3, 2018	9,183	8	(138	)	9,053

We have a wholly-owned insurance subsidiary, Prism Assurance, Ltd. (Prism), which holds these municipal and corporate 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 and corporate bonds, for the purpose of providing collateral for Prism’s obligations under the reinsurance agreements.

The amortized cost and estimated fair values of municipal bonds at September 1, 2018, 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	$	543	$	539
Due after one year through five years	7,897		7,797
Due after five years through 10 years	3,811		3,751
Due after 10 years through 15 years	200		200
Due beyond 15 years	917		910
Total	$	13,368	$	13,197

Fair value measurements

Financial assets and liabilities are classified in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement: Level 1 (unadjusted quoted prices in active markets for identical assets or liabilities); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data). We do not have any Level 3 financial assets or liabilities.



In thousands	Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Total Fair Value
September 1, 2018
Cash equivalents
Money market funds	$	3,168	$	—	$	3,168
Commercial paper	—		800		800
Total cash equivalents	3,168		800		3,968
Short-term securities
Municipal and corporate bonds	—		539		539
Long-term securities
Municipal and corporate bonds	—		12,658		12,658
Total assets at fair value	$	3,168	$	13,997	$	17,165
March 3, 2018
Cash equivalents
Money market funds	$	2,901	$	—	$	2,901
Commercial paper	—		400		400
Total cash equivalents	2,901		400		3,301
Short-term securities
Municipal and corporate bonds	—		423		423
Long-term securities
Municipal and corporate bonds	—		8,630		8,630
Total assets at fair value	$	2,901	$	9,453	$	12,354

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 and corporate 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.

Foreign currency instruments

We periodically enter into forward purchase foreign currency contracts, generally with an original maturity date of less than one year, to hedge foreign currency exchange rate risk. As of September 1, 2018, we held foreign exchange forward contracts with a U.S. dollar notional value of $25.0 million, with the objective of reducing the exposure to fluctuations in the Canadian dollar and the Euro. The fair value of these contracts was a liability of $0.2 million as of September 1, 2018. These forward contracts are measured at fair value using unobservable market inputs, such as quotations on forward foreign exchange points and foreign currency exchange rates, and would be classified as Level 2 within the fair value hierarchy above.

Goodwill and Other Identifiable Intangible Assets

6 Months Ended

Sep. 01, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Identifiable Intangible Assets

The carrying amount of goodwill attributable to each reporting segment was:



In thousands	Architectural Framing Systems			Architectural Glass			Architectural Services		Large-Scale Optical		Total
Balance at March 4, 2017	$	63,701		$	25,956		$	1,120	$	10,557	$	101,334
Goodwill acquired	84,162			—			—		—		84,162
Goodwill adjustments for purchase accounting	(5,859		)	—			—		—		(5,859		)
Foreign currency translation	1,304			15			—		—		1,319
Balance at March 3, 2018	143,308			25,971			1,120		10,557		180,956
Goodwill adjustments for purchase accounting	6,267			—			—		—		6,267
Foreign currency translation	(442		)	(259		)	—		—		(701		)
Balance at September 1, 2018	$	149,133		$	25,712		$	1,120	$	10,557	$	186,522

The gross carrying amount of other intangible assets and related accumulated amortization was:



In thousands	Gross Carrying Amount		Accumulated Amortization			Foreign Currency Translation			Net
September 1, 2018
Definite-lived intangible assets:
Customer relationships	$	122,816	$	(23,472	)	$	(1,184	)	$	98,160
Other intangibles	41,697		(30,258		)	(483		)	10,956
Total definite-lived intangible assets	164,513		(53,730		)	(1,667		)	109,116
Indefinite-lived intangible assets:
Trademarks	49,077		—			(202		)	48,875
Total intangible assets	$	213,590	$	(53,730	)	$	(1,869	)	$	157,991
March 3, 2018
Definite-lived intangible assets:
Customer relationships	$	122,816	$	(20,277	)	$	(56	)	$	102,483
Other intangibles	41,697		(25,879		)	(30		)	15,788
Total definite-lived intangible assets	164,513		(46,156		)	(86		)	118,271
Indefinite-lived intangible assets:
Trademarks	48,461		—			617			49,078
Total intangible assets	$	212,974	$	(46,156	)	$	531		$	167,349

Amortization expense on definite-lived intangible assets was $7.9 million in each of the six-month periods ended September 1, 2018 and September 2, 2017. 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 September 1, 2018, the estimated future amortization expense for definite-lived intangible assets was:



In thousands	Remainder of Fiscal 2019		Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023
Estimated amortization expense	$	5,028	$	8,111	$	8,104	$	7,948	$	7,560

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details

Debt	6 Months Ended
Debt	Sep. 01, 2018
Debt Disclosure [Abstract]
Debt	Debt We maintain a committed revolving credit facility with maximum borrowings of up to $335.0 million, maturing in November 2021. Outstanding borrowings under our committed revolving credit facility were $203.5 million, as of September 1, 2018, and $195.0 million, as of March 3, 2018. Under this facility, we are subject to 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 September 1, 2018, we were in compliance with both financial covenants. Additionally, at September 1, 2018, 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 2020 and reduce availability of funds under our committed credit facility. At September 1, 2018, our debt also included $20.4 million of industrial revenue bonds that mature in fiscal years 2021 through 2043 and $0.5 million of long-term debt in Canada. The fair value of the industrial revenue bonds approximated carrying value at September 1, 2018, due to the variable interest rates on these instruments. All debt would be classified as Level 2 within the fair value hierarchy described in Note 5. We also maintain two Canadian revolving demand credit facilities totaling $12.0 million Canadian dollars. As of September 1, 2018, $0.5 million was outstanding under these facilities, and no borrowings were outstanding as of March 3, 2018. Borrowings under these facilities are made available at the sole discretion of the lenders and are payable on demand. The Company classifies any outstanding balances under these demand facilities as long-term debt, as outstanding amounts can be refinanced through our committed revolving credit facility. Interest payments were $4.3 million and $1.9 million for the six months ended September 1, 2018 and September 2, 2017, respectively.

Commitments and Contingent Liabilities

6 Months Ended

Sep. 01, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingent Liabilities

Operating lease commitments

As of September 1, 2018, 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 2019		Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Thereafter		Total
Total minimum payments	$	7,497	$	13,182	$	9,990	$	7,802	$	6,886	$	17,630	$	62,987

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 September 1, 2018, $246.2 million of our backlog was bonded by these types of bonds with a face value of $538.4 million. These bonds do not have stated expiration dates, as we are generally released from the bonds upon completion of the contract. We have not been required to make any payments under these bonds with respect to our existing businesses.

Warranties

We reserve estimated exposures on known claims, as well as on a portion of anticipated claims, for product warranty and rework cost, 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, changes in product mix and any significant changes in sales volume. A warranty rollforward follows:



	Six Months Ended
In thousands	September 1, 2018			September 2, 2017
Balance at beginning of period	$	22,517		$	21,933
Additional accruals	2,087			2,588
Claims paid	(4,580		)	(6,800		)
Acquired reserves	—			5,571
Balance at end of period	$	20,024		$	23,292

Letters of credit

At September 1, 2018, we had $23.5 million of ongoing letters of credit, all of which have been issued under our committed revolving credit facility, as discussed in Note 7.

Purchase obligations

Purchase obligations for raw material commitments and capital expenditures totaled $183.1 million as of September 1, 2018.

New Markets Tax Credit transaction

In August 2018, we entered into a transaction with a subsidiary of Wells Fargo (WF) under a qualified New Markets Tax Credit (NMTC) program related to an investment in plant and equipment within our Architectural Glass segment (the Project). The NMTC transaction is subject to 100 percent tax credit recapture for a period of seven years. Therefore, upon the termination of our arrangement at the end of the seven year period (our fiscal 2026), proceeds received from WF will be recognized in earnings in exchange for the transfer of the tax credits.

WF contributed $6.6 million to the Project, which is included in other non-current liabilities on our consolidated balance sheets. Direct and incremental costs incurred in structuring the arrangement have been deferred and will be recognized in conjunction with the recognition of the related profits. These costs amount to $0.5 million and are included in other non-current assets on our consolidated balance sheets. Variable-interest entities have been created as a result of the transaction structure, which have been included within our consolidated financial statements as WF does not have a material interest in the underlying economics of the Project.

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.

Share-Based Compensation

6 Months Ended

Sep. 01, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Total share-based compensation expense included in the results of operations was $3.1 million for each of the six-month periods ended September 1, 2018 and September 2, 2017.

Stock options and SARs

Stock option and SAR activity for the current six-month 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 3, 2018	129,901		$	11.10
Awards exercised	(29,560	)	20.43
Outstanding and exercisable at September 1, 2018	100,341		8.34		3.0 years	$	4,101,940

Cash proceeds from the exercise of stock options were $0.2 million and $0.8 million for the six months ended September 1, 2018 and September 2, 2017, 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 $0.6 million during the six months ended September 1, 2018 and $4.8 million during the prior-year period.

Nonvested shares and share units

Nonvested share activity for the current six-month period is summarized as follows:



Nonvested shares and units	Number of Shares and Units		Weighted Average Grant Date Fair Value
Nonvested at March 3, 2018	266,180		$	49.22
Granted	148,219		43.54
Vested	(116,266	)	46.57
Canceled	(15,359	)	48.12
Nonvested at September 1, 2018	282,774		47.36

At September 1, 2018, there was $9.5 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 22 months. The total fair value of shares vested during the six months ended September 1, 2018 was $4.9 million.

Employee Benefit Plans

6 Months Ended

Sep. 01, 2018

Retirement Benefits [Abstract]

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						Six Months Ended
In thousands	September 1, 2018			September 2, 2017			September 1, 2018			September 2, 2017
Interest cost	$	127		$	133		$	254		$	266
Expected return on assets	(10		)	(10		)	(20		)	(20		)
Amortization of unrecognized net loss	57			57			114			114
Net periodic benefit cost	$	174		$	180		$	348		$	360

Income Taxes	6 Months Ended
Income Taxes	Sep. 01, 2018
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes 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 2015, or state and local income tax examinations for years prior to fiscal 2013. The Company is not currently under U.S. federal examination for years subsequent to fiscal year 2014, 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 September 1, 2018 and March 3, 2018 was approximately $5.1 million in both periods. 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 $0.6 million during the next 12 months due to lapsing of statutes. The Tax Cuts and Jobs Act (the Act) was enacted in December 2017. Among other provisions, the Act created a new tax on certain foreign sourced earnings under the Global Intangible Low-Taxed Income (“GILTI”) provision. Companies are allowed to make an accounting policy election of either treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred or factoring such amounts into the measurement of deferred taxes. We have completed our analysis of the GILTI provisions and are making an accounting policy election to recognize the tax expense on future U.S. inclusions of GILTI income, if any, as a current period expense when incurred.

Earnings per Share

6 Months Ended

Sep. 01, 2018

Earnings Per Share [Abstract]

Earnings Per Share

Earnings per Share

The following table presents a reconciliation of the share amounts used in the computation of basic and diluted earnings per share:



	Three Months Ended		Six Months Ended
In thousands	September 1, 2018	September 2, 2017	September 1, 2018	September 2, 2017
Basic earnings per share – weighted average common shares outstanding	28,128	28,850	28,127	28,850
Weighted average effect of nonvested share grants and assumed exercise of stock options	251	58	250	35
Diluted earnings per share – weighted average common shares and potential common shares outstanding	28,379	28,908	28,377	28,885
Stock awards excluded from the calculation of earnings per share because the effect was anti-dilutive (award price greater than average market price of the shares)	106	—	108	—

Segment Information

6 Months Ended

Sep. 01, 2018

Segment Reporting [Abstract]

Segment Information

The Company has four reporting segments: Architectural Framing Systems, Architectural Glass, Architectural Services and Large-Scale Optical (LSO).

•

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 six operating segments into this reporting segment based on their similar products, customers, distribution methods, production processes and economic characteristics.


•	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 LSO segment manufactures value-added glass and acrylic products primarily for framing and display applications.



	Three Months Ended						Six Months Ended
In thousands	September 1, 2018			September 2, 2017			September 1, 2018			September 2, 2017
Net sales from operations
Architectural Framing Systems	$	189,850		$	189,023		$	368,887		$	299,515
Architectural Glass	88,084			97,351			165,009			195,086
Architectural Services	76,496			46,829			147,223			96,979
Large-Scale Optical	20,383			20,291			41,145			38,894
Intersegment eliminations	(12,680		)	(9,587		)	(23,600		)	(14,260		)
Net sales	$	362,133		$	343,907		$	698,664		$	616,214
Operating income (loss) from operations
Architectural Framing Systems	$	18,312		$	16,542		$	30,650		$	28,506
Architectural Glass	1,739			10,258			3,317			19,581
Architectural Services	7,621			774			12,775			1,555
Large-Scale Optical	4,236			4,248			9,218			8,298
Corporate and other	(3,248		)	(4,048		)	(5,306		)	(6,060		)
Operating income	$	28,660		$	27,774		$	50,654		$	51,880

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.

Acquisition (Tables)

6 Months Ended

Sep. 01, 2018

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired

The purchase price allocation that follows is based on the estimated fair values of assets acquired and liabilities assumed, which was finalized in the first quarter of fiscal 2019:



In thousands
Net working capital	$	1,422
Property, plant and equipment	44,641
Goodwill	90,429
Other intangible assets	71,500
Less: Long-term liabilities acquired, net	17,643
Net assets acquired	$	190,349

Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination

Other intangible assets reflect the following:



In thousands	Estimated fair value		Estimated useful life (in years)
Customer relationships	$	34,800	16
Tradename	32,400		Indefinite
Backlog	4,300		1.5
	$	71,500

Business Acquisition, Pro Forma Information



	Three Months Ended				Six Months Ended
In thousands, except per share data	September 1, 2018		September 2, 2017		September 1, 2018		September 2, 2017
Net sales	$	362,133	$	351,988	$	698,664	$	696,039
Net earnings	21,069		20,312		36,639		37,528
Earnings per share
Basic	0.75		0.70		1.30		1.30
Diluted	0.74		0.70		1.29		1.30

Summary of Significant Accounting Policies (Tables)

6 Months Ended

Sep. 01, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Impact of new accounting guidance

For the quarter and six month periods ending September 1, 2018, the application of the new accounting guidance had the following impact on our consolidated financial statements:



	Three Months Ended September 1, 2018				Six Months Ended September 1, 2018
In thousands	As reported		Without adoption of ASC 606		As reported		Without adoption of ASC 606
Net sales	$	362,133	$	359,584	$	698,664	$	686,835
Cost of sales	277,667		276,058		533,468		524,715
Gross profit	84,466		83,526		165,196		162,120
Selling, general and administrative expenses	55,806		55,481		114,542		113,868
Operating income	$	28,660	$	28,045	$	50,654	$	48,252

Income tax expense	$	6,420