APOGEE ENTERPRISES, INC.

Apogee Enterprises, Inc. is a leading provider of architectural building products and services, as well as high-performance coated materials used in a variety of applications. The company operates in the North American non-residential construction industry, which is cyclical in nature and impacted by macroeconomic trends such as availability of credit, employment levels, consumer confidence, interest rates, and commodity prices. A significant portion of the Performance Surfaces Segment depends on the strength of the U.S. retail custom picture framing industry, which is heavily influenced by consumer confidence and the conditions of the U.S. economy.

The North American non-residential construction market is highly fragmented. Competitive factors include price, product quality, product attributes and performance, reliable service, on-time delivery, lead-time, warranties, and the ability to provide project management, technical engineering and design services. The Architectural Metals Segment competes against several national, regional, and local aluminum window and storefront manufacturers, as well as regional finishing companies. The Architectural Services Segment competes against international, national and regional glass installation companies. The Architectural Glass Segment competes with regional glass fabricators and international competitors. The Performance Surfaces Segment competes primarily with European, U.S., and Asia Pacific providers of both basic and value-added glass and acrylic, and other high-performance coated substrates.

The company generates revenue from the design, engineering and fabrication of architectural glass, curtainwall, window, storefront and entrance systems, and from installing those products on non-residential buildings. It also manufactures value-added glass, acrylic and industrial flooring products. Approximately 46% of fiscal 2026 revenue was recognized at the time products were shipped from manufacturing facilities. Approximately 35% of fiscal 2026 revenue was from fixed-price contracts, following an over-time input method. Approximately 19% of fiscal 2026 revenue was recognized following an over-time output method based upon units produced. Customers are mainly glazing subcontractors and general contractors, with project design being influenced by architects and building owners.

The Architectural Metals Segment designs, engineers, fabricates and finishes aluminum window, curtainwall, storefront and entrance systems used primarily in non-residential construction. In fiscal 2026, this segment accounted for approximately 36% of net sales. The segment sells products and services under the Tubelite, EFCO, Wausau and Linetec brands in the U.S. and under Alumicor in Canada. The Architectural Services Segment integrates technical services, project management, and field installation services to design, engineer, fabricate, and install architectural curtainwall and other facade-related systems used primarily in non-residential construction. In fiscal 2026, this segment accounted for approximately 31% of net sales. The segment sells products and services under the Harmon brand.

The Architectural Glass Segment cuts, treats, coats and fabricates high-performance glass used in custom window and wall systems used primarily in non-residential buildings. In fiscal 2026, this segment accounted for approximately 19% of net sales. The segment sells products primarily under the Viracon and GlassecViracon brands. The Performance Surfaces Segment develops and manufactures high-performance coated materials for a variety of applications, including wall decor, museums, graphic design, digital displays, architectural interiors, and industrial flooring. In fiscal 2026, this segment accounted for approximately 14% of net sales. The segment sells products under the Tru Vue, ResinDEK, ChromaLuxe, RDC Coatings, and Unisub brands.

During the third quarter of fiscal 2025, the company acquired UW Solutions for $240.9 million ¹. UW Solutions is a U.S. based, vertically integrated manufacturer of high-performance coated substrates. The Performance Surfaces Segment successfully integrated the acquisition and the business delivered upon the first-year financial targets of $100 million in revenue and adjusted EBITDA margin of at least 20% ². In the first quarter of fiscal 2026, the company announced Project Fortify Phase 2 to drive cost efficiencies. The actions of Phase 2 resulted in $27.4 million of pre-tax charges and are expected to deliver annualized pre-tax cost savings of approximately $26 million ³. The company paid the final arbitration award, including accrued post-judgment interest, in the amount of $24.7 million, on April 7, 2025 ⁴. As a result of the judgment, the company recorded expense of $9.4 million in the fourth quarter of fiscal 2025 ⁵. The company repurchased 388,582 shares under the share repurchase program during fiscal 2026, for a total cost of $15.0 million ⁶.

Consolidated net sales were $1,404,733,000 ⁷ compared to $1,360,994,000 ⁸ in the prior year, an increase of 3.2% ⁹. Net earnings were $54,131,000 ¹⁰ compared to $85,052,000 ¹¹ in the prior year. Diluted earnings per share was $2.52 ¹² compared to $3.89 ¹³ in the prior year. Gross margin decreased to 22.7% ¹⁴ of net sales, compared to 26.4% ¹⁵ in the prior year. Operating income was $84,474,000 ¹⁶ and operating margin declined to 6.0% ¹⁷, compared to 8.7% ¹⁸ in the prior year. Net cash provided by operating activities was $122,465,000 ¹⁹ compared to $125,162,000 ²⁰ in the prior year.

The company intends to enhance its position in targeted end markets by differentiating through deep customer focus and insight, using an informed understanding of customer needs to shape offerings and delivery models. By aligning capabilities, investments, and operating approach around this customer-focused strategy, management believes the company will be better positioned to differentiate, compete effectively, and strengthen its position in the markets served.

The company seeks to grow and strengthen its portfolio through disciplined organic and inorganic investments in differentiated solutions that align with evolving customer needs. By prioritizing opportunities that enhance competitive positioning and directly address customer challenges, the company will reinforce its disciplined approach to portfolio growth and improvement. The company continually analyzes its portfolio of products, services, and capabilities to identify the best areas for future profitable growth and evaluates inorganic investment opportunities where it can deploy capital to acquire businesses that will be accretive to its long-term growth rate and operating margins.

The company expects to advance core capabilities by fostering a culture of continuous improvement grounded in operational excellence, talent development, and disciplined process execution. Through targeted investments in people, systems, and technology, the company will strengthen its ability to deliver consistent performance and enhance the customer experience across the organization. The Apogee Management System continued to drive improvements across the manufacturing footprint including enabling progress improving outcomes for customers in the Architectural Metals Segment through full value-stream redesign, supported by a new product and manufacturing site. These enhancements drove higher service levels and shorter lead times while reducing cost of quality.

The company actively managed its cost structure and manufacturing footprint through Project Fortify 2 to mitigate portions of direct and indirect tariffs while driving efficiencies across the organization. The actions of Phase 2 resulted in $27.4 million of pre-tax charges and are expected to deliver annualized pre-tax cost savings of approximately $26 million ²¹. The actions associated with Phase 2 were substantially completed in the fourth quarter of fiscal 2026.

Capital expenditures were $27,308,000 ²² in fiscal 2026, compared to $35,593,000 ²³ in fiscal 2025. The company repurchased 388,582 shares under the share repurchase program during fiscal 2026, for a total cost of $15.0 million ²⁴. The company has remaining authority to repurchase 1,798,211 shares under this program, which has no expiration date ²⁵. Cash dividends paid were $22,216,000 ($1.05 per share) in fiscal 2026 ²⁶, compared to $21,737,000 ($1.01 per share) in fiscal 2025 ²⁷.

The company faces headwinds from changes in trade policies and tariffs. The impact of geopolitical tensions, including the effects of changing trade policies and tariffs in the U.S. or countries where the company sells products and services or procures products, could have a material adverse effect on the business. Political or trade disputes, or future phases of trade negotiations with Canada that could lead to the imposition of tariffs or other trade actions could require the company to take further action to mitigate those effects. The company may be unable to pass through additional tariff costs to customers through price increases, and may be unable to secure adequate alternative sources of supply.

Rising interest rates, inflation, and higher input costs could reduce the demand for the company's products and services and impact profitability. Higher interest rates make it more expensive for customers to finance construction projects, and as a result, may reduce the number of projects available and the demand for products and services, and also increase the interest expenses associated with borrowings. Cost inflation, including significant cost increases for freight, aluminum, glass, paint, wood-based and other materials used in operations, has impacted, and could continue to impact, profitability.

The company faces material risks from changes in trade policies and tariffs, particularly with Canada, which could require further action to mitigate effects and may result in an inability to pass through additional tariff costs to customers, adversely impacting operating results and profitability. The company is exposed to rising interest rates, inflation, and higher input costs, which could reduce demand for products and services and increase interest expenses; in some segments, the company bears part or all of the risk of inflation on materials costs and installation services, and the ability to recover cost increases through price increases may lag. The company is subject to product liability and warranty claims, including certain legal claims related to a commercial sealant product formerly incorporated into products, and in December 2022, the claimant in an arbitration of one such claim was awarded $20 million ²⁸ by an arbitration panel, with the company ultimately paying $24.7 million ²⁹ including accrued post-judgment interest. The company could be unable to effectively manage and implement its enterprise strategy, which includes accelerating leadership in target markets, growing and strengthening the portfolio, and advancing core capabilities, and execution of this strategy requires additional investments of time and resources and could fail to achieve desired results.

Management's message emphasizes that fiscal 2026 was a year of disciplined execution as the company navigated a difficult economic environment while continuing to strengthen its operating foundation. The company executed its priorities including the successful integration of UW Solutions, which delivered upon the first-year financial targets of $100 million in revenue and adjusted EBITDA margin of at least 20% ³⁰. The company actively managed its cost structure and manufacturing footprint through Project Fortify 2 to mitigate portions of direct and indirect tariffs while driving efficiencies across the organization. Management expressed confidence that the actions taken will further position Apogee to successfully navigate market headwinds into the future. The company also delivered meaningful gains in safety, service, and productivity, and generated solid cash flow. The strategic priorities emphasized for the period ahead are: accelerate leadership in target markets, grow and strengthen the portfolio, and advance core capabilities.