UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________________

FORM 10-Q

_________________________________



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~November~~May 30, ~~2019~~2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-6365

_________________________________

APOGEE ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

_________________________________



Minnesota			41-0919654
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

4400 West 78th Street, Suite 520	Minneapolis	Minnesota	55435
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (952) 835-1874

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

_________________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.33 1/3 per share	APOG	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	☐

Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No

As of ~~January~~July 7, 2020, ~~26,507,935~~26,356,670 shares of the registrant’s common stock, par value $0.33 1/3 per share, were outstanding.

APOGEE ENTERPRISES, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

CONSOLIDATED BALANCE SHEETS

(unaudited)


In thousands, except stock data	November 30, 2019			March 2, 2019
(In thousands, except stock data)							May 30, 2020			February 29, 2020
Assets
Current assets
Cash and cash equivalents	$	10,129		$	17,087		$	11,636		$	14,952
Restricted cash	401			12,154
Receivables, net of allowance for doubtful accounts	197,976			192,767			156,304			196,806
Inventories	75,791			78,344			75,285			71,089
Costs and earnings on contracts in excess of billings	72,284			55,095			65,980			73,582
Other current assets	40,335			16,451			21,488			25,481
Total current assets	396,916			371,898			330,693			381,910
Property, plant and equipment, net	326,418			315,823			320,073			324,386
Operating lease right-of-use assets	56,315			—			49,911			52,892
Goodwill	185,776			185,832			190,544			185,516
Intangible assets	142,779			148,235			136,071			140,191
Other non-current assets	41,587			46,380			44,332			44,096
Total assets	$	1,149,791		$	1,068,168		$	1,071,624		$	1,128,991
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	66,557		$	72,219		$	62,369		$	69,056
Accrued payroll and related benefits	33,339			41,119			25,630			40,119
Billings on contracts in excess of costs and earnings	26,366			21,478			15,321			32,696
Operating lease liabilities	9,399			—			10,462			11,272
Current portion of debt	155,400			—			155,400			5,400
Other current liabilities	108,481			92,696			110,348			118,314
Total current liabilities	399,542			227,512			379,530			276,857
Long-term debt	95,856			245,724			55,500			212,500
Non-current operating lease liabilities	48,509			—			40,814			43,163
Non-current self-insurance reserves	25,260			21,433			24,140			22,831
Other non-current liabilities	65,645			77,182			67,496			56,862
Commitments and contingent liabilities (Note 8)
Shareholders’ equity
Common stock of $0.33-1/3 par value; authorized 50,000,000 shares; issued and outstanding 26,552,935 and 27,015,127 respectively	8,851			9,005
Common stock of $0.33-1/3 par value; authorized 50,000,000 shares; issued and outstanding 26,368,864 and 26,443,166 respectively							8,790			8,814
Additional paid-in capital	153,188			151,842			153,862			154,016
Retained earnings	385,032			367,597			382,225			388,010
Common stock held in trust	(675		)	(755		)	(696		)	(685		)
Deferred compensation obligations	675			755			696			685
Accumulated other comprehensive loss	(32,092		)	(32,127		)	(40,733		)	(34,062		)
Total shareholders’ equity	514,979			496,317			504,144			516,778
Total liabilities and shareholders’ equity	$	1,149,791		$	1,068,168		$	1,071,624		$	1,128,991

See accompanying notes to consolidated financial statements.

Table of Contents

CONSOLIDATED RESULTS OF OPERATIONS

(unaudited)


	Three Months Ended				Nine Months Ended				Three Months Ended
In thousands, except per share data	November 30, 2019		December 1, 2018		November 30, 2019		December 1, 2018
(In thousands, except per share data)									May 30, 2020		June 1, 2019
Net sales	$	337,916	$	357,718	$	1,050,340	$	1,056,382	$	289,095	$	355,365
Cost of sales	263,606		273,628		808,856		807,096		228,844		274,398
Gross profit	74,310		84,090		241,484		249,286		60,251		80,967
Selling, general and administrative expenses	52,716		52,682		169,274		167,224		53,782		57,926
Operating income	21,594		31,408		72,210		82,062		6,469		23,041
Interest and other expense, net	1,764		2,787		6,577		6,254		2,463		2,611
Earnings before income taxes	19,830		28,621		65,633		75,808		4,006		20,430
Income tax expense	4,596		6,730		15,677		18,030		1,130		4,987
Net earnings	$	15,234	$	21,891	$	49,956	$	57,778	$	2,876	$	15,443
Earnings per share - basic	$	0.58	$	0.79	$	1.89	$	2.06	$	0.11	$	0.58
Earnings per share - diluted	$	0.57	$	0.78	$	1.87	$	2.04	$	0.11	$	0.58
Weighted average basic shares outstanding	26,432		27,836		26,481		28,030		26,168		26,597
Weighted average diluted shares outstanding	26,750		28,156		26,776		28,304		26,418		26,843

See accompanying notes to consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(unaudited)

Three Months Ended Nine Months Ended
In thousands November 30, 2019 December 1, 2018 November 30,
2019 December 1,
2018
Net earnings $ 15,234
$ 21,891
$ 49,956
$ 57,778
Other comprehensive (loss) earnings:
Unrealized (loss) gain on marketable securities, net of ($11), ($16), $38 and ($25) of tax (benefit) expense, respectively (44 ) (58 ) 145
(90 )
Unrealized gain (loss) on derivative instruments, net of $119, $10, $146 and ($99) of tax expense (benefit), respectively 387
32
476
(327 )
Foreign currency translation adjustments (491 ) (3,621 ) (586 ) (7,518 )
Other comprehensive (loss) earnings (148 ) (3,647 ) 35
(7,935 )
Total comprehensive earnings $ 15,086
$ 18,244
$ 49,991
$ 49,843



	Three Months Ended
(In thousands)	May 30, 2020			June 1, 2019
Net earnings	$	2,876		$	15,443
Other comprehensive (loss) earnings:
Unrealized gain on marketable securities, net of $26 and $47 of tax expense, respectively	97			181
Unrealized (loss) gain on derivative instruments, net of ($189) and $2 of tax (benefit) expense, respectively	(617		)	5
Foreign currency translation adjustments	(6,151		)	(2,560		)
Other comprehensive loss	(6,671		)	(2,374		)
Total comprehensive (loss) earnings	$	(3,795	)	$	13,069

See accompanying notes to consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Nine Months Ended						Three Months Ended
In thousands	November 30, 2019			December 1, 2018
(In thousands)							May 30, 2020			June 1, 2019
Operating Activities
Net earnings	$	49,956		$	57,778		$	2,876		$	15,443
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	34,681			38,378			12,540			11,102
Share-based compensation	4,617			4,724			1,406			1,618
Deferred income taxes	10,088			10,600			(738		)	6,438
Gain on disposal of assets	(623		)	(2,499		)
Proceeds from New Markets Tax Credit transaction, net of deferred costs	—			8,850
Noncash lease expense	1,525			—			2,945			2,902
Other, net	(2,007		)	(799		)	1,039			(1,762		)
Changes in operating assets and liabilities:
Receivables	(5,288		)	9,291			39,650			(16,982		)
Inventories	2,474			4,398			(4,700		)	835
Costs and earnings on contracts in excess of billings	(17,156		)	(54,569		)	7,558			(6,007		)
Accounts payable and accrued expenses	(22,457		)	(20,072		)	(22,334		)	(15,317		)
Billings on contracts in excess of costs and earnings	4,901			14,558			(17,181		)	(1,198		)
Refundable and accrued income taxes	(6,159		)	1,831			2,847			(4,369		)
Operating lease liability							(2,781		)	(1,517		)
Other	(951		)	(1,825		)	849			(928		)
Net cash provided by operating activities	53,601			70,644
Net cash provided (used) by operating activities							23,976			(9,742		)
Investing Activities
Capital expenditures	(41,176		)	(33,867		)	(8,606		)	(11,198		)
Proceeds from sales of property, plant and equipment	591			12,332
Purchases of marketable securities	(4,201		)	(9,006		)
Sales/maturities of marketable securities	4,867			5,813
Other	(1,523		)	(2,209		)	(1,082		)	(824		)
Net cash used by investing activities	(41,442		)	(26,937		)	(9,688		)	(12,022		)
Financing Activities
Borrowings on line of credit	108,000			294,500			139,500			103,000
Proceeds from issuance of term debt	150,000			—
Payments on line of credit	(252,500		)	(278,000		)	(146,500		)	(55,500		)
Repurchase and retirement of common stock	(20,010		)	(23,313		)	(4,731		)	(20,010		)
Dividends paid	(13,808		)	(13,180		)	(4,872		)	(4,598		)
Other	(2,584		)	(1,178		)	(731		)	(1,270		)
Net cash used by financing activities	(30,902		)	(21,171		)
(Decrease) increase in cash and cash equivalents	(18,743		)	22,536
Net cash (used) provided by financing activities							(17,334		)	21,622
Decrease in cash and cash equivalents							(3,046		)	(142		)
Effect of exchange rates on cash	32			(498		)	(270		)	(143		)
Cash, cash equivalents and restricted cash at beginning of year	29,241			19,359			14,952			29,241
Cash, cash equivalents and restricted cash at end of period	$	10,530		$	41,397		$	11,636		$	28,956
Noncash Activity
Capital expenditures in accounts payable	$	1,205		$	5,771		$	1,458		$	1,667

See accompanying notes to consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited)

In thousands Common Shares Outstanding Common Stock Additional Paid-In Capital Retained Earnings Common Stock Held in Trust Deferred Compensation Obligation Accumulated Other Comprehensive (Loss) Income
Balance at March 2, 2019 27,015
$ 9,005
$ 151,842
$ 367,597
$ (755 ) $ 755
$ (32,127 )
Net earnings —
—
—
15,443
—
—
—
Unrealized gain on marketable securities, net of $47 tax expense —
—
—
—
—
—
181
Unrealized gain on foreign currency hedge, net of $2 tax expense —
—
—
—
—
—
5
Foreign currency translation adjustments —
—
—
—
—
—
(2,560 )
Issuance of stock, net of cancellations 79
26
14
—
(12 ) 12
—
Share-based compensation —
—
1,618
—
—
—
—
Share repurchases (532 ) (177 ) (3,051 ) (16,782 ) —
—
—
Other share retirements (32 ) (11 ) (183 ) (1,266 ) —
—
—
Cash dividends —
—
—
(4,598 ) —
—
—
Balance at June 1, 2019 26,530
$ 8,843
$ 150,240
$ 360,394
$ (767 ) $ 767
$ (34,501 )
Net earnings —
—
—
19,279
—
—
—
Unrealized gain on marketable securities, net of $2 tax expense —
—
—
—
—
—
8
Unrealized gain on foreign currency hedge, net of $25 tax expense —
—
—
—
—
—
84
Foreign currency translation adjustments —
—
—
—
—
—
2,465
Issuance of stock, net of cancellations 44
15
27
—
(11 ) 11
—
Share-based compensation —
—
1,582
—
—
—
—
Other share retirements (20 ) (7 ) (114 ) (629 ) —
—
—
Cash dividends —
—
—
(4,605 ) —
—
—
Balance at August 31, 2019 26,554
$ 8,851
$ 151,735
$ 374,439
$ (778 ) $ 778
$ (31,944 )
Net earnings —
—
—
15,234
—
—
—
Unrealized loss on marketable securities, net of $11 tax benefit —
—
—
—
—
—
(44 )
Unrealized gain on foreign currency hedge, net of $119 tax expense —
—
—
—
—
—
387
Foreign currency translation adjustments —
—
—
—
—
—
(491 )
Issuance of stock, net of cancellations (1 ) 1
43
—
103
(103 ) —
Share-based compensation —
—
1,417
—
—
—
—
Other share retirements —
(1 ) (7 ) (36 ) —
—
—
Cash dividends —
—
—
(4,605 ) —
—
—
Balance at November 30, 2019 26,553
$ 8,851
$ 153,188
$ 385,032
$ (675 ) $ 675
$ (32,092 )

~~See accompanying notes to consolidated financial statements.~~

~~Table of Contents~~

~~CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY~~

~~(unaudited)~~



(In thousands)	Common Shares Outstanding		Common Stock			Additional Paid-In Capital			Retained Earnings			Common Stock Held in Trust			Deferred Compensation Obligation		Accumulated Other Comprehensive (Loss) Income			Total Shareholders' Equity
Balance at February 29, 2020	26,443		$	8,814		$	154,016		$	388,010		$	(685	)	$	685	$	(34,062	)	$	516,778
Net earnings	—		—			—			2,876			—			—		—			2,876
Unrealized gain on marketable securities, net of $26 tax expense	—		—			—			—			—			—		97			97
Unrealized loss on foreign currency hedge, net of $189 tax benefit	—		—			—			—			—			—		(617		)	(617		)
Foreign currency translation adjustments	—		—			—			—			—			—		(6,151		)	(6,151		)
Issuance of stock, net of cancellations	183		62			(39		)	—			(11		)	11		—			23
Share-based compensation	—		—			1,406			—			—			—		—			1,406
Share repurchases	(231	)	(77		)	(1,370		)	(3,284		)	—			—		—			(4,731		)
Other share retirements	(26	)	(9		)	(151		)	(505		)	—			—		—			(665		)
Cash dividends	—		—			—			(4,872		)	—			—		—			(4,872		)
Balance at May 30, 2020	26,369		$	8,790		$	153,862		$	382,225		$	(696	)	$	696	$	(40,733	)	$	504,144


In thousands	Common Shares Outstanding		Common Stock			Additional Paid-In Capital			Retained Earnings			Common Stock Held in Trust			Deferred Compensation Obligation			Accumulated Other Comprehensive (Loss) Income
Balance at March 3, 2018	28,158		$	9,386		$	152,763		$	373,259		$	(922	)	$	922		$	(24,053	)
Cumulative effect adjustment	—		—			—			2,999			—			—			—
Reclassification of tax effects	—		—			—			737			—			—			(737		)
(In thousands)																					Common Shares Outstanding		Common Stock			Additional Paid-In Capital			Retained Earnings			Common Stock Held in Trust			Deferred Compensation Obligation		Accumulated Other Comprehensive (Loss) Income			Total Shareholders' Equity
Balance at March 2, 2019																					27,015		$	9,005		$	151,842		$	367,597		$	(755	)	$	755	$	(32,127	)	$	496,317
Net earnings	—		—			—			15,373			—			—			—			—		—			—			15,443			—			—		—			15,443
Unrealized gain on marketable securities, net of $2 tax expense	—		—			—			—			—			—			10
Unrealized loss on foreign currency hedge, net of $92 tax benefit	—		—			—			—			—			—			(304		)
Foreign currency translation adjustments	—		—			—			—			—			—			(517		)
Issuance of stock, net of cancellations	90		30			35			—			91			(91		)	—
Share-based compensation	—		—			1,514			—			—			—			—
Exercise of stock options	19		6			177			—			—			—			—
Other share retirements	(41	)	(13		)	(228		)	(1,440		)	—			—			—
Cash dividends	—		—			—			(4,410		)	—			—			—
Balance at June 2, 2018	28,226		$	9,409		$	154,261		$	386,518		$	(831	)	$	831		$	(25,601	)
Net earnings	—		—			—			20,514			—			—			—
Unrealized loss on marketable securities, net of $11 tax benefit	—		—			—			—			—			—			(42		)
Unrealized loss on foreign currency hedge, net of $17 tax benefit	—		—			—			—			—			—			(55		)
Foreign currency translation adjustments	—		—			—			—			—			—			(3,383		)
Issuance of stock, net of cancellations	35		12			37			—			(11		)	11			—
Share-based compensation	—		—			1,605			—			—			—			—
Other share retirements	(1	)	(1		)	(5		)	—			—			—			—
Cash dividends	—		—			—			(4,413		)	—			—			—
Balance at September 1, 2018	28,260		$	9,420		$	155,898		$	402,619		$	(842	)	$	842		$	(29,081	)
Net earnings	—		—			—			21,891			—			—			—
Unrealized loss on marketable securities, net of $16 tax benefit	—		—			—			—			—			—			(58		)
Unrealized gain on foreign currency hedge, net of $10 tax expense	—		—			—			—			—			—			32
Unrealized gain on marketable securities, net of $47 tax expense																					—		—			—			—			—			—		181			181
Unrealized gain on foreign currency hedge, net of $2 tax expense																					—		—			—			—			—			—		5			5
Foreign currency translation adjustments	—		—			—			—			—			—			(3,622		)	—		—			—			—			—			—		(2,560		)	(2,560		)
Issuance of stock, net of cancellations	—		—			54			—			97			(97		)	—			79		26			14			—			(12		)	12		—			40
Share-based compensation	—		—			1,605			—			—			—			—			—		—			1,618			—			—			—		—			1,618
Share repurchases	(600	)	(200		)	(3,436		)	(19,677		)	—			—			—			(532	)	(177		)	(3,051		)	(16,782		)	—			—		—			(20,010		)
Other share retirements	(4	)	(1		)	(26		)	(187		)	—			—			—			(32	)	(11		)	(183		)	(1,266		)	—			—		—			(1,460		)
Cash dividends	—		—			—			(4,357		)	—			—			—			—		—			—			(4,598		)	—			—		—			(4,598		)
Balance at December 1, 2018	27,656		$	9,219		$	154,095		$	400,289		$	(745	)	$	745		$	(32,729	)
Balance at June 1, 2019																					26,530		$	8,843		$	150,240		$	360,394		$	(767	)	$	767	$	(34,501	)	$	484,976

See accompanying notes to consolidated financial statements.

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


1.	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 2, 2019~~February 29, 2020. 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 ~~nine~~three-month period ended ~~November~~May 30, ~~2019~~2020 are not necessarily indicative of the results to be expected for the full year.

COVID-19 considerations

The ongoing COVID-19 pandemic continues to cause volatility and uncertainty in global markets impacting worldwide economic activity. We have experienced some delays in commercial construction projects and orders as a result of COVID-19. In our Architectural Glass and Architectural Framing segments, orders have been delayed or have slowed, as customers and end markets face some uncertainty and delays in timing of work. In our Architectural Services segment, some construction site closures or project delays have occurred, and job sites have had to adjust to increased physical distancing and health-related precautions. Within our LSO segment, temporary closure of many retail locations resulted in the shutdown of our factories for most of the first quarter, in response to governmental “stay at home” directives. We have also been impacted by quarantine-related absenteeism among our workforce, resulting in labor and capacity constraints at some of our facilities. The extent to which COVID-19 will impact our business will depend on future developments and public health advancements, which are highly uncertain and cannot be predicted with confidence. However, towards the end of our first quarter and into the second quarter, we began to see some early signs of improvement, including the gradual reopening of retailers, moderating project delays and fewer workforce absences.

Furthermore, in response to COVID-19, we have implemented a variety of countermeasures to promote the health and safety of our employees during this pandemic, including health screening, physical distancing practices, enhanced cleaning, use of personal protective equipment, business travel restrictions, and remote work capabilities, in addition to quarantine-related paid leave and other employee assistance programs.

Adoption of new accounting standards

AtIn the ~~beginning of fiscal 2020,~~current quarter, we adopted the guidance in ~~ASC 842,~~ ~~Leases~~, following a modified retrospective approach and elected not to restate prior periods. Adoption of the new standard resulted in recording operating lease assets and liabilities of approximately $50 million as of March 3, 2019 and did not materially impact our consolidated net earnings and cash flows. Refer to additional information in Note 7.

~~Accounting standards not yet adopted~~

~~In June 2016, the FASB issued~~ ASU 2016-13, Measurement of Credit Losses on Financial ~~Instruments~~Instruments.~~, which revises~~ The guidance provides for ~~the accounting for credit losses~~a new impairment model on financial instruments ~~within its scope. The new standard introduces an approach~~which is based on expected ~~losses, to estimate~~ credit losses, ~~on certain types of financial instruments and modifies~~which was applied following a modified retrospective approach. Additionally, the new guidance makes targeted improvements to the impairment model for certain available-for-sale debt ~~securities. This ASU is effective for our fiscal year 2021. Entities are required to apply~~securities, including eliminating the ~~standard's provisions as a cumulative-effect adjustment to retained earnings as~~concept of "other than temporary" from that model. The portion of the ~~beginning of the first reporting period in which the~~ guidance ~~is adopted. We do not expect the~~related to available-for-sale debt securities was adopted following a prospective approach. The adoption of this ASU todid not have a significant impact on ~~our consolidated~~earnings or financial ~~statements.~~condition. Refer to additional disclosures in Notes 2 and 4.

Subsequent events

We have evaluated subsequent events for potential recognition and disclosure through the date of this filing and determined that there were no subsequent events that required recognition or disclosure in the consolidated financial ~~statements.~~statements other than as described in Note 8.


2.	Revenue, Receivables and Contract Assets and Liabilities

Revenue

The following table disaggregates total revenue by timing of recognition (see Note 1312 for disclosure of revenue by segment):


	Three Months Ended				Nine Months Ended				Three Months Ended
In thousands	November 30, 2019		December 1, 2018		November 30, 2019		December 1, 2018
(In thousands)									May 30, 2020		June 1, 2019
Recognized at shipment	$	153,093	$	158,164	$	472,695	$	481,565	$	116,163	$	155,265
Recognized over time	184,823		199,554		577,645		574,817		172,932		200,100
Total	$	337,916	$	357,718	$	1,050,340	$	1,056,382	$	289,095	$	355,365

Receivables

~~Trade and construction accounts receivable consist of amounts billed and due from customers. The amounts due are stated at their estimated~~Receivables reflected in the financial statements represent the net ~~realizable value. We maintain an~~amount expected to be collected. An allowance for ~~doubtful~~credit losses is established based on expected losses. Expected losses are estimated by reviewing individual accounts, ~~to provide for~~considering aging, financial condition of the ~~estimated amount~~debtor, recent payment history, current and forecast economic conditions and other relevant factors. Upon billing, aging of receivables is monitored until collection. An account is considered current when it is within agreed upon payment terms. An account is written off when it is determined that ~~will not be collected. This allowance~~the asset is ~~based on an assessment of customer creditworthiness, historical payment experience and the age of outstanding receivables.~~no longer collectible. 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	November 30, 2019			March 2, 2019
(In thousands)							May 30, 2020			February 29, 2020
Trade accounts	$	141,448		$	145,693		$	122,092		$	141,126
Construction contracts	23,096			19,050			12,630			20,808
Contract retainage	35,287			32,396			23,778			37,341
Total receivables	199,831			197,139			158,500			199,275
Less: allowance for doubtful accounts	(1,855		)	(4,372		)
Less: allowance for credit losses							(2,196		)	(2,469		)
Net receivables	$	197,976		$	192,767		$	156,304		$	196,806

The following table summarizes the activity in the allowance for credit losses:



(In thousands)	May 30, 2020
Beginning balance	$	2,469
Additions charged to costs and expenses	69
Deductions from allowance, net of recoveries	(274		)
Other changes ⁽¹⁾	(68		)
Ending balance	$	2,196
⁽¹⁾Result of foreign currency effects

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	November 30, 2019		March 2, 2019
(In thousands)					May 30, 2020		February 29, 2020
Contract assets	$	107,571	$	87,491	$	89,757	$	110,923
Contract liabilities	28,863		24,083		18,209		35,954

The ~~increase~~decrease in contract assets was mainly due to ~~timing of costs incurred~~a reduction in ~~advance of billings, primarily on a legacy EFCO project.~~contract retainage. The change in contract liabilities was due to timing of project activity within our businesses that operate under long-term contracts.


Other contract-related disclosures	Three Months Ended				Nine Months Ended				Three Months Ended
In thousands	November 30, 2019		December 1, 2018		November 30, 2019		December 1, 2018
(In thousands)									May 30, 2020		June 1, 2019
Revenue recognized related to contract liabilities from prior year-end	$	4,589	$	—	$	22,044	$	10,398	$	13,011	$	14,194
Revenue recognized related to prior satisfaction of performance obligations	1,776		1,470		5,298		3,798		2,877		1,949

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 ~~November~~May 30, ~~2019,~~2020, the transaction price associated with unsatisfied performance obligations was approximately ~~$896.7~~$995.9 million. The performance obligations are expected to be satisfied, and the corresponding revenue to be recognized, over the following estimated time periods:


In thousands	November 30, 2019
(In thousands)			May 30, 2020
Within one year	$	480,803	$	434,077
Within two years	344,827		417,457
Beyond	71,044		144,325
Total	$	896,674	$	995,859


3.	Supplemental Balance Sheet Information

Inventories


In thousands	November 30, 2019		March 2, 2019
(In thousands)					May 30, 2020		February 29, 2020
Raw materials	$	39,746	$	43,890	$	38,502	$	36,611
Work-in-process	19,255		15,533		17,221		17,520
Finished goods	16,790		18,921		19,562		16,958
Total inventories	$	75,791	$	78,344	$	75,285	$	71,089

Other current ~~assets~~

In thousands November 30, 2019 March 2, 2019
Prepaid assets $ 11,662
$ 11,682
Insurance receivable 15,000
—
Refundable income taxes 4,278
—
Other 9,395
4,769
Total other current assets $ 40,335
$ 16,451

~~Other current~~ liabilities


In thousands	November 30, 2019		March 2, 2019
(In thousands)					May 30, 2020		February 29, 2020
Warranties	$	10,601	$	12,475	$	12,421	$	12,822
Accrued project losses	47,562		37,085		48,054		48,962
Property and other taxes	7,156		8,026		6,315		5,952
Accrued self-insurance reserves	9,297		9,537		7,343		8,307
Other	33,865		25,573		36,215		42,271
Total other current liabilities	$	108,481	$	92,696	$	110,348	$	118,314

Other non-current liabilities


In thousands	November 30, 2019		March 2, 2019
(In thousands)					May 30, 2020		February 29, 2020
Deferred benefit from New Market Tax Credit transactions	$	15,717	$	26,458	$	15,717	$	15,717
Retirement plan obligations	7,633		7,633		8,242		8,294
Deferred compensation plan	11,743		10,408		8,298		8,452
Deferred tax liabilities					13,915		7,940
Other	30,552		32,683		21,324		16,459
Total other non-current liabilities	$	65,645	$	77,182	$	67,496	$	56,862


4.	Financial Instruments

Marketable securities

Through our wholly-owned insurance subsidiary, Prism Assurance, Ltd. (Prism), 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
November 30, 2019 $ 11,750
$ 152
$ 18
$ 11,884
March 2, 2019 12,481
59
108
12,432



(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
May 30, 2020	$	12,595	$	403	$	5	$	12,993
February 29, 2020	11,692		275		—		11,967

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 for the purpose of providing collateral for Prism’s obligations under the reinsurance agreements.

The amortized cost and estimated fair values of these bonds at ~~November~~May 30, ~~2019~~,2020, 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
(In thousands)					Amortized Cost		Estimated Fair Value
Due within one year	$	835	$	837	$	898	$	911
Due after one year through five years	8,581		8,710		7,017		7,255
Due after five years through 10 years	2,259		2,262		3,880		4,019
Due after 10 years through 15 years	—		—
Due beyond 15 years	75		75		800		808
Total	$	11,750	$	11,884	$	12,595	$	12,993

Derivative instruments

In August 2019, we entered into an interest rate swap to hedge exposure to variability in cash flows from interest payments on our floating-rate revolving credit facility. As of ~~November~~May 30, ~~2019,~~2020, the interest rate swap contract had a notional value of ~~$85~~$65 million.

We periodically enter into forward purchase foreign currency cash flow hedge contracts, generally with an original maturity date of less than one year, to hedge foreign currency exchange rate risk. As of ~~November~~May 30, ~~2019,~~2020, we held foreign exchange

forward contracts with a U.S. dollar notional value of ~~$24.7~~$34.3 million, with the objective of reducing the exposure to fluctuations in the Canadian dollar and the Euro.

These derivative instruments are recorded within our consolidated balance sheets within other current assets and liabilities. Gains or losses associated with these instruments are recorded as a component of accumulated other comprehensive income.

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
November 30, 2019
(In thousands)							Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Total Fair Value
May 30, 2020
Assets:
Money market funds	$	2,680	$	—	$	2,680	$	3,689	$	—	$	3,689
Commercial paper	—		500		500		—		500		500
Municipal and corporate bonds	—		12,384		12,384		—		12,993		12,993
Cash surrender value of life insurance							—		15,777		15,777
Liabilities:
Deferred compensation							—		13,889		13,889
Foreign currency forward/option contract	—		69		69		—		239		239
Interest rate swap contract	—		16		16		—		1,085		1,085

March 2, 2019
February 29, 2020
Assets:
Money market funds	$	2,015	$	—	$	2,015	$	2,689	$	—	$	2,689
Commercial paper	—		300		300		—		1,500		1,500
Municipal and corporate bonds	—		12,432		12,432		—		11,967		11,967
Cash surrender value of life insurance							—		16,560		16,560
Liabilities:
Deferred compensation							—		14,042		14,042
Foreign currency forward/option contract	—		470		470		—		340		340
Interest rate swap contract							—		561		561

Money market funds and commercial paper

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. These assets are included within cash and cash equivalents on our consolidated balance sheets.

Municipal and corporate bonds

Municipal and corporate bonds were measured at fair value based on market prices from recent trades of similar securities and are classified within our consolidated balance sheets as other current or other non-current assets based on maturity date.

Cash surrender value of life insurance and deferred compensation

Contracts insuring the lives of certain employees who are eligible to participate in certain non-qualified pension and deferred compensation plans are held in trust. Cash surrender value of the contracts is based on performance measurement funds that shadow the deferral investment allocations made by participants in certain deferred compensation plans. Changes in cash surrender value are recorded in other expense. The deferred compensation liability balances are valued based on amounts allocated by participants to the underlying performance measurement funds.

Derivative instruments

The interest rate swap is measured at fair value using ~~unobservable~~other observable market inputs, based off of benchmark interest rates. Forward foreign exchange contracts are measured at fair value using ~~unobservable~~other observable market inputs, such as quotations on forward foreign exchange points and foreign currency exchange rates. Derivative positions are primarily valued using standard calculations and models that use as their basis readily observable market parameters. Industry standard data providers are our primary source for forward and spot rate information for both interest and currency rates.

Nonrecurring fair value measurements

Certain assets are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances. These include certain long-lived assets that are written down to estimated fair value when they are determined to be impaired, utilizing a valuation approach incorporating Level 3 inputs.


5.	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 3, 2018 $ 143,308
$ 25,971
$ 1,120
$ 10,557
$ 180,956
Goodwill adjustments for purchase accounting

6,267
—
—
—
6,267
Foreign currency translation (1,129 ) (262 ) —
—
(1,391 )
Balance at March 2, 2019 148,446
25,709
1,120
10,557
185,832
Foreign currency translation 47
(103 ) —
—
(56 )
Balance at November 30, 2019 $ 148,493
$ 25,606
$ 1,120
$ 10,557
$ 185,776



(In thousands)	Architectural Framing Systems			Architectural Glass			Architectural Services		Large-Scale Optical		Total
Balance at March 2, 2019	$	148,446		$	25,709		$	1,120	$	10,557	$	185,832
Foreign currency translation	(263		)	(53		)	—		—		(316		)
Balance at February 29, 2020	148,183			25,656			1,120		10,557		185,516
Adjustment ⁽¹⁾	6,315			—			—		—		6,315
Foreign currency translation	(955		)	(332		)	—		—		(1,287		)
Balance at May 30, 2020	$	153,543		$	25,324		$	1,120	$	10,557	$	190,544

⁽¹⁾ During the quarter ended May 30, 2020, we recorded a $6.3 million increase to goodwill and corresponding increase to deferred tax liabilities to correct an immaterial error related to prior periods. The error was not material to any previously reported annual or interim consolidated financial statements.

We evaluate goodwill for impairment annually at our year-end, or more frequently if events or changes in circumstances indicate the carrying value of the goodwill may not be recoverable. During the first quarter of fiscal 2021, we identified qualitative indicators of impairment, including a significant decline in our stock price and market capitalization, along with concerns resulting from the COVID-19 pandemic at four of our nine identified reporting units. Therefore, we performed a quantitative goodwill impairment evaluation as of May 30, 2020 at these four reporting units, EFCO Corporation ("EFCO"), Alumicor Limited ("Alumicor"), Sotawall Limited ("Sotawall") and Viracon, Inc ("Viracon").

We base our determination of fair value on a discounted cash flow methodology that involves significant judgment and projections of future performance. We also consider a market approach in our analysis by reviewing available data from recent transactions of comparable public companies when available. Assumptions about future revenues and expenses, capital expenditures and changes in working capital are based on the annual operating plan and long-term business plan for each reporting unit. These plans take into consideration numerous factors, including historical experience, current and future operational plans, anticipated future economic conditions and growth expectations for the industries and end markets in which we participate. These plans also take into consideration our assessment of risks inherent in our projections of future cash flows. Due to the inherent uncertainties involved in making estimates and assumptions, actual results may differ from those assumed in the forecasts. Inputs used to estimate these fair values included significant unobservable inputs that reflect the Company's assumptions about the inputs that market participants would use and, therefore, the fair value assessments are classified within Level 3 of the fair value hierarchy. We derived the discount rates using a capital asset pricing model and analyzing published rates for industries relevant to the reporting units to estimate the cost of equity financing. We used discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in the internally developed forecasts, updated for recent events.

Based on the results of the interim quantitative goodwill impairment analysis, the estimated fair value of each reporting unit exceeded its carrying value and, therefore, goodwill impairment was not indicated as of May 30, 2020. We utilized a discount rate of 11.0 percent in determining the discounted cash flows for EFCO and Alumicor, and a discount rate of 10.4 percent in determining the discounted cash flows for Sotawall and Viracon. We utilized a long-term growth rate of 3.0 percent in our fair value analysis for all reporting units. While these discount rates have increased from the time of our annual goodwill impairment evaluation at year-end, impairment is not indicated at this time due to the long-term future performance expectations for these businesses.

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


In thousands	Gross Carrying Amount		Accumulated Amortization			Impairment			Foreign Currency Translation			Net
November 30, 2019
(In thousands)														Gross Carrying Amount		Accumulated Amortization			Foreign Currency Translation			Net
May 30, 2020
Definite-lived intangible assets:
Customer relationships	$	120,238	$	(31,566	)	$	—		$	(20	)	$	88,652	$	119,647	$	(34,136	)	$	(2,304	)	$	83,207
Other intangibles	41,033		(32,274		)	—			(74		)	8,685		41,095		(32,271		)	(824		)	8,000
Total definite-lived intangible assets	161,271		(63,840		)	—			(94		)	97,337		160,742		(66,407		)	(3,128		)	91,207
Indefinite-lived intangible assets:
Trademarks	45,421		—			—			21			45,442		45,300		—			(436		)	44,864
Total intangible assets	$	206,692	$	(63,840	)	$	—		$	(73	)	$	142,779	$	206,042	$	(66,407	)	$	(3,564	)	$	136,071
March 2, 2019
February 29, 2020
Definite-lived intangible assets:
Customer relationships	$	122,816	$	(26,637	)	$	—		$	(2,578	)	$	93,601	$	120,239	$	(33,121	)	$	(592	)	$	86,526
Other intangibles	41,697		(31,634		)	—			(850		)	9,213		41,069		(32,516		)	(189		)	8,364
Total definite-lived intangible assets	164,513		(58,271		)	—			(3,428		)	102,814		161,308		(65,637		)	(781		)	94,890
Indefinite-lived intangible assets:
Trademarks	49,078		—			(3,141		)	(516		)	45,421		45,421		—			(120		)	45,301
Total intangible assets	$	213,591	$	(58,271	)	$	(3,141	)	$	(3,944	)	$	148,235	$	206,729	$	(65,637	)	$	(901	)	$	140,191

We hold intangible assets for certain acquired trade names and trademarks which are determined to have indefinite useful lives. We evaluate the reasonableness of the useful life and test indefinite-lived intangible assets for impairment annually at our year-end, or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. During the first quarter of fiscal 2021, we identified qualitative indicators of impairment, including deteriorating macroeconomic conditions resulting from the COVID-19 pandemic. Therefore, we performed an interim impairment evaluation on indefinite-lived intangible assets as of May 30, 2020. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. If an impairment loss is recognized, the adjusted carrying amount becomes the asset's new accounting basis.

Fair value is measured using the relief-from-royalty method. This method assumes the trade name or trademark has value to the

extent that the owner is relieved of the obligation to pay royalties for the benefits received from the asset. This method requires

us to estimate the future revenue from the related asset, the appropriate royalty rate, and the weighted average cost of capital. The assessment of fair value involves significant judgment and projections about future performance. In determining the discounted future revenue in our fair value analysis, we utilized a discount rate of 11.5 percent for EFCO and Alumicor and a discount rate

of 10.9 percent for Sotawall. A royalty rate of 1.5 percent was utilized for Alumicor and EFCO and a royalty rate of 2.0 percent was utilized for Sotawall. We utilized a long-term growth rate of 3.0 percent in the fair value analysis for all reporting units. Based on our analysis, the fair value of each of our trade names and trademarks exceeded its carrying amount and impairment was not indicated. We continue to conclude that the useful life of our indefinite-lived intangible assets is appropriate. If future revenue were to fall below forecasted levels or if market conditions were to decline in a material or sustained manner, due to COVID-19 or otherwise, impairment could be indicated on one or more of our indefinite-lived intangible assets.

Amortization expense on definite-lived intangible assets was ~~$5.7~~$1.8 million and ~~$10.5~~$1.9 million for the ~~nine-month~~three-month periods ended ~~November~~May 30, ~~2019~~2020 and ~~December~~June 1, ~~2018~~,2019, respectively. Amortization expense of other identifiable intangible assets is included in selling, general and administrative expenses. At ~~November~~May 30, ~~2019~~,2020, the estimated future amortization expense for definite-lived intangible assets was:


In thousands	Remainder of Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024
(In thousands)											Remainder of Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Fiscal 2025
Estimated amortization expense	$	1,982	$	7,921	$	7,915	$	7,750	$	7,563	$	5,858	$	7,807	$	7,716	$	7,039	$	7,111


6.	Debt

As of ~~November~~May 30, ~~2019,~~2020, we had a committed revolving credit facility with maximum borrowings of up to $235 million, maturing in June 2024, and a $150 million term loan maturing in April 2021. As of May 30, 2020, our total debt outstanding was ~~$251.3~~$210.9 million, compared to ~~$245.8~~$217.9 million as of March 2, 2019. During the second quarter of fiscal 2020, we amended the borrowing capacity of our prior credit facility to $235 million with a maturity of June 2024 and we established a $150 million term loan with a maturity of JuneFebruary 29, 2020. Outstanding borrowings under the revolving credit facility were ~~$80.5~~$40.5 million, as of ~~November~~May 30, ~~2019,~~2020, and ~~$225.0~~$47.5 million, as of ~~March 2, 2019.~~February 29, 2020.

Our revolving credit facility and term loan ~~contains~~contain 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 ~~November~~May 30, ~~2019,~~2020, we were in compliance with both financial covenants. Additionally, at ~~November~~May 30, ~~2019,~~2020, we had a total of $24.7 million of ongoing letters of credit related to industrial revenue bonds,

construction contracts and insurance collateral that expire in fiscal years 2021 to 2032 and reduce borrowing capacity under the revolving credit facility.

At ~~November~~May 30, ~~2019,~~2020, debt included $20.4 million of industrial revenue bonds that mature in fiscal years 2021 through ~~2043 and $0.4 million of long-term debt in Canada.~~2043. The fair value of the industrial revenue bonds approximated carrying value at ~~November~~May 30, ~~2019,~~2020, 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 4.

We also maintain two Canadian ~~demand~~committed, revolving credit facilities totaling ~~$12.0~~$25.0 million ~~Canadian dollars.~~(USD). As of ~~November~~May 30, ~~2019~~2020 and ~~March 2, 2019,~~February 29, 2020, 0 borrowings were outstanding under the facilities. ~~Borrowings under these facilities are made available at the sole discretion of the lenders and are payable on demand.~~

Interest payments were $~~7.3~~1.4 million and ~~$7.2~~$2.4 million for the ~~nine~~three months ended ~~November~~May 30, ~~2019~~2020 and ~~December~~June 1, ~~2018~~2019, respectively.

7. Leases

We lease certain of the buildings and equipment used in our operations. We determine if an arrangement contains a lease at inception. Currently, all of our lease arrangements are classified as operating leases. We elected the package of practical expedients permitted under the transition guidance in adopting ASC 842, which among other things, allowed us to carry forward our historical lease classification. Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term and lease expense is recognized on a straight-line basis over the lease term. Our leases have remaining lease terms of one to ten years, some of which include renewal options that can extend the lease for up to an additional ten years at our sole discretion. We have made an accounting policy election not to record leases with an original term of 12 months or less on our consolidated balance sheet and such leases are expensed on a straight-line basis over the lease term.

In determining lease asset value, we consider fixed or variable payment terms, prepayments, incentives, and options to extend, terminate or purchase. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. We use a discount rate for each lease based upon an estimated incremental borrowing rate over a similar term. We have elected the practical expedient to account for lease and nonlease components (e.g., common-area maintenance costs) as a single lease component. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We are not a lessor in any transactions.

The components of lease expense were as follows:


	Three Months Ended		Nine Months Ended		Three Months Ended
In thousands	November 30, 2019		November 30, 2019
(In thousands)					May 30, 2020		June 1, 2019
Operating lease cost	$	3,445	$	10,308	$	3,561	$	3,373
Short-term lease cost	427		1,606		470		682
Variable lease cost	843		2,223		747		713
Total lease cost	$	4,715	$	14,137	$	4,778	$	4,768

Other supplemental information related to leases was as follows:


	Nine Months Ended			Three Months Ended
In thousands except weighted-average data	November 30, 2019
(In thousands except weighted-average data)				May 30, 2020			June 1, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	10,335		$	3,327		$	3,300
Lease assets obtained in exchange for new operating lease liabilities	$	15,948		$	158		$	706
Weighted-average remaining lease term - operating leases	5.9 years			5.8 years			5.5 years
Weighted-average discount rate - operating leases	3.57		%	3.60		%	3.74		%

Future maturities of lease liabilities are as follows:


In thousands	November 30, 2019
Remainder of Fiscal 2020	$	3,366
Fiscal 2021	12,880
(In thousands)				May 30, 2020
Remainder of Fiscal 2021				$	9,168
Fiscal 2022	11,256			10,933
Fiscal 2023	10,307			10,070
Fiscal 2024	8,147			8,090
Fiscal 2025	6,290			6,256
Fiscal 2026				5,008
Thereafter	12,357			6,378
Total lease payments	64,603			55,903
Less: Amounts representing interest	(6,695		)	(4,627		)
Present value of lease liabilities	$	57,908		$	51,276

As of ~~November~~May 30, ~~2019,~~2020, we have no$5.7 million additional future operating lease commitments for leases that have not yet commenced.

~~Aggregate annual future rental commitments under operating leases with noncancellable terms of more than one year at March 2, 2019 were reported under previous lease accounting standards as follows:~~

In thousands 2020 2021 2022 2023 2024 Thereafter Total
Total minimum payments $ 14,888
11,787
9,669
8,772
6,735
16,806
$ 68,657


8.	Commitments and Contingent Liabilities

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 ~~November~~May 30, ~~2019, $833.9 million~~2020, $1.0 billion of these types of bonds were outstanding, of which ~~$432.6~~$582.3 million is onin our backlog. These bonds do not have stated expiration dates. We have never been required to make payments under surety or performance bonds with respect to our existing businesses.

Warranty and project-related contingencies

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:


	Nine Months Ended						Three Months Ended
In thousands	November 30, 2019			December 1, 2018
(In thousands)							May 30, 2020			June 1, 2019
Balance at beginning of period	$	16,737		$	22,517		$	15,629		$	16,737
Additional accruals	5,996			3,437			511			1,787
Claims paid	(7,807		)	(8,398		)	(939		)	(2,771		)
Balance at end of period	$	14,926		$	17,556		$	15,201		$	15,753

Additionally, we are subject to project management and installation-related contingencies as a result of our fixed-price material supply and installation service contracts, primarily in our Architectural Services segment and certain of our Architectural Framing Systems businesses. We manage the risk of these exposures through contract negotiations, proactive project management and insurance coverages. ~~We have recorded an estimated~~The liability for these types of project-related contingencies was $48.1 million and $49.0 million as of May 30, 2020 and February 29, 2020, respectively. Subsequent to the end of the quarter, in June 2020, we settled contract claims related to a majority of these project-related contingencies on a legacy EFCO project ~~of $47.6 million and $42.8 million as of November~~for an amount equal to the contingency recorded at May 30, ~~2019 and March 2, 2019, respectively. This includes approximately~~ ~~$14.7 million~~ recorded in the third quarter for estimated costs associated with project dispute resolution and other additional project costs. In the third quarter, upon confirmation of coverage by an insurer, we also recorded an insurance receivable of ~~$15.0 million, included within other current assets on the consolidated balance sheets and within cost of sales on the consolidated results of operations. We received this payment subsequent to quarter-end.~~2020.

Letters of credit

At ~~November~~May 30, ~~2019,~~2020, we had $24.7 million of ongoing letters of credit, all of which have been issued under our committed revolving credit facility, as discussed in Note 6. Subsequent to the end of the quarter, in connection with the settlement of contract claims related to a legacy EFCO project referenced above, the original project performance and payment bond was replaced, which required a $25.0 million letter of credit. The letter of credit for the replacement bond was issued outside of our committed revolving credit facility, with no impact on our borrowing capacity and debt covenants.

Purchase obligations

Purchase obligations for raw material commitments and capital expenditures totaled ~~$146.0~~$177.2 million as of ~~November~~May 30, ~~2019.~~2020.

New Markets Tax Credit (NMTC) transactions

We have entered into four separate NMTC programs to support our operational ~~expansion, including two transactions completed in fiscal 2019.~~expansion. Proceeds received from investors on these transactions are included within other current and non-current liabilities on our consolidated balance sheets. The NMTC arrangements are subject to 100 percent tax recapture for a period of seven years from the date of each respective transaction. Therefore, upon the termination of each arrangement, these proceeds will be recognized in earnings in exchange for the transfer of tax credits. The direct and incremental costs incurred in structuring these arrangements have been deferred and are included in other current and non-current assets on our consolidated balance sheets. These costs will be recognized in conjunction with the recognition of the related proceeds on each arrangement. During the construction phase, we are required to hold cash dedicated to fund each capital project which is classified as restricted cash on our consolidated balance sheets. Variable-interest entities, which have been included within our consolidated financial statements, have been created as a result of the structure of these transactions, as investors in the programs do not have a material interest in their underlying economics.

The table below provides a summary of our outstanding NMTC transactions (in millions):


Inception date	Termination date	Proceeds received		Deferred costs		Net benefit		Termination date	Proceeds received		Deferred costs		Net benefit
November 2013	October 2020	$	10.7	$	3.0	$	7.7	October 2020	$	10.7	$	3.3	$	7.4
June 2016	May 2023	6.0		0.9		5.1		May 2023	6.0		1.2		4.8
August 2018	July 2025	6.6		0.9		5.7		July 2025	6.6		1.3		5.3
September 2018	August 2025	3.2		0.8		2.4		August 2025	3.2		1.0		2.2
Total		$	26.5	$	5.6	$	20.9		$	26.5	$	6.8	$	19.7

Litigation

On November 5, 2018, a shareholder filed a purported securities class action against the Company and certain named executive officers. On ~~April 26, 2019,~~March 25, 2020, the new lead plaintiff filed an amended complaint, alleging that, during the purported class period of May 1, 2017 to April 10, 2019, the Company and the named executive officers made materially false or misleading statements or omissions aboutDistrict Court granted the Company's ~~acquisition of EFCO Corporation on June 12, 2017, and about~~motion to dismiss without prejudice this matter. On May 5, 2020, the ~~Company's Architectural Glass business segment, in violation of the federal securities laws. We intend~~District Court entered final judgment. Plaintiffs’ have waived their right to ~~vigorously defend~~appeal. The Company views this ~~matter.~~matter as closed.

On December 17, 2018, a different shareholder filed a derivative lawsuit, purportedly on behalf of the Company, against certain of our executive officers and directors claiming breaches of fiduciary duty, waste of corporate assets and unjust enrichment. ~~This complaint alleges that~~On May 29, 2020, the ~~officers~~parties filed a joint stipulation and directors allegedly made materially false or misleading statements or omissions about the Company's business, operations and prospects, particularly with respect to our Architectural Glass business segment, during the period between June 28, 2018 and September 17, 2018. Thisorder dismissing this matter ~~has been stayed, pending resolution of a motion to dismiss the foregoing matter. We intend to vigorously defend~~without prejudice. The Company views this ~~matter.~~matter as closed.

In addition to the foregoing, the Company is a party to various legal proceedings incidental to its normal operating activities. In particular, like others in the construction supply and services industry, the Company is routinely involved in various disputes and claims arising out of construction projects, sometimes involving significant monetary damages or product replacement. The Company is also subject to litigation arising out of areas such as employment practices, workers compensation and general liability matters. Although it is very difficult to accurately predict the outcome of any such proceedings, facts currently available indicate that no matters will result in losses that would have a material adverse effect on the results of operations, cash flows or financial condition of the Company.


9.	Share-Based Compensation

Total share-based compensation expense included in the results of operations was ~~$4.6~~$1.4 million for the ~~nine-month~~three-month period ended ~~November~~May 30, ~~2019~~2020 and ~~$4.7~~$1.6 million for the ~~nine-month~~three-month period ended ~~December~~June 1, ~~2018~~.2019.

Stock options and SARs

Stock option and SAR activity for the current ~~nine-month~~three-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		Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at March 2, 2019	100,341	$	8.34
Outstanding at February 29, 2020							100,341	$	8.34
Awards exercised	—	—					—	—
Outstanding and exercisable at November 30, 2019	100,341	8.34		1.8 years	$	3,000,196
Outstanding and exercisable at May 30, 2020							100,341	$	8.34	1.3 years	$	1,235,198

No awards were issued or exercised ~~for~~during the ~~nine-months~~three-months ended ~~November~~May 30, ~~2019. For the nine-months ended December~~2020 and June 1, 2018, cash proceeds from the exercise of stock options were $0.2 million and 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.2019, respectively.

Nonvested shares and share units

Nonvested share activity for the current ~~nine-month~~three-month period is summarized as follows:


Nonvested shares and units	Number of Shares and Units		Weighted Average Grant Date Fair Value		Number of Shares and Units		Weighted Average Grant Date Fair Value
Nonvested at March 2, 2019	286,613		$	47.00
Nonvested at February 29, 2020					309,259		$	40.58
Granted	125,571		39.53		182,693		18.86
Vested	(128,333	)	49.00		(61,318	)	43.61
Canceled	(3,000	)	43.08
Nonvested at November 30, 2019	280,851		42.78
Nonvested at May 30, 2020					430,634		$	30.93

At ~~November~~May 30, ~~2019~~,2020, there was ~~$6.9~~$2.7 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 2026 months. The total fair value of shares vested during the ~~nine~~three months ended ~~November~~May 30, ~~2019~~2020 was ~~$5.1~~$1.3 million.


10.	~~Employee Benefit Plans~~

The Company sponsors 2 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 Nine Months Ended
In thousands November 30, 2019 December 1, 2018 November 30,
2019 December 1,
2018
Interest cost $ 123
$ 127
$ 369
$ 381
Expected return on assets (46 ) (10 ) (138 ) (30 )
Amortization of unrecognized net loss 55
57
165
171
Net periodic benefit cost $ 132
$ 174
$ 396
$ 522


~~11.~~	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 2017, 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 2016, and there is 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 was ~~approximately $5.2~~$4.1 million at ~~November~~May 30, ~~2019~~2020 and ~~$5.1 million~~ at ~~March 2, 2019.~~February 29, 2020. 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 $0.4 million during the next 12 months due to lapsing of statutes.


~~12.~~11.	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		Nine Months Ended		Three Months Ended
In thousands	November 30, 2019	December 1, 2018	November 30, 2019	December 1, 2018
(In thousands)					May 30, 2020	June 1, 2019
Basic earnings per share – weighted average common shares outstanding	26,432	27,836	26,481	28,030	26,168	26,597
Weighted average effect of nonvested share grants and assumed exercise of stock options	318	320	295	274	250	246
Diluted earnings per share – weighted average common shares and potential common shares outstanding	26,750	28,156	26,776	28,304	26,418	26,843
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)	152	170	152	92	150	104


~~13.~~12.	Segment Information

The Company has 4 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 6 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						Nine Months Ended						Three Months Ended
In thousands	November 30, 2019			December 1, 2018			November 30, 2019			December 1, 2018
(In thousands)													May 30, 2020			June 1, 2019
Net sales from operations
Architectural Framing Systems	$	165,517		$	181,306		$	533,432		$	550,193		$	150,164		$	180,522
Architectural Glass	89,433			98,524			288,862			263,533			76,911			100,291
Architectural Services	69,043			72,828			195,787			220,051			63,551			65,147
Large-Scale Optical	24,405			23,377			66,449			64,522			6,312			21,259
Intersegment eliminations	(10,482		)	(18,317		)	(34,190		)	(41,917		)	(7,843		)	(11,854		)
Net sales	$	337,916		$	357,718		$	1,050,340		$	1,056,382		$	289,095		$	355,365
Operating income (loss) from operations
Architectural Framing Systems	$	6,345		$	12,903		$	34,141		$	43,554		$	7,296		$	12,273
Architectural Glass	4,092			5,851			16,951			9,168			(494		)	6,399
Architectural Services	6,533			8,659			15,082			21,435			5,343			4,573
Large-Scale Optical	6,754			6,628			15,561			15,845			(3,132		)	4,177
Corporate and other	(2,130		)	(2,633		)	(9,525		)	(7,940		)	(2,544		)	(4,381		)
Operating income	$	21,594		$	31,408		$	72,210		$	82,062		$	6,469		$	23,041

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.


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking statements

This discussion contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “should” and similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All forecasts and projections in this document are “forward-looking statements,” and are based on management’s current expectations or beliefs of the Company’s near-term results, based on current information available pertaining to the Company, including the risk factors noted under Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended ~~March 2, 2019~~February 29, 2020. From time to time, we may also provide oral and written forward-looking statements in other materials we release to the public, such as press releases, presentations to securities analysts or investors, or other communications by the Company. Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results.

Accordingly, we wish to caution investors that any forward-looking statements made by or on behalf of the Company are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other risk factors include, but are not limited to, the risks and uncertainties set forth under Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended ~~March 2, 2019~~February 29, 2020.

We also wish to caution investors that other factors might in the future prove to be important in affecting the Company’s results of operations. New factors emerge from time to time; it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are a ~~world~~ leader in certain technologies involving the design and development of value-added glass and metal products and services for enclosing commercial buildings and framing and displays. Our four reporting segments are: Architectural Framing Systems, Architectural Glass, Architectural Services and Large-Scale Optical (LSO).

The following selected financial data should be read in conjunction with the Company’s Form 10-K for the year ended ~~March 2, 2019~~February 29, 2020 and the consolidated financial statements, including the notes to consolidated financial statements, included therein.

Highlights of ~~Third~~First Quarter ~~and First Nine Months~~ of Fiscal ~~2020~~2021 Compared to ~~Third~~First Quarter ~~and First Nine Months~~ of Fiscal ~~2019~~2020

Net sales

Consolidated net sales ~~decreased 5.5~~were $289.1 million, a decrease of 18.6 percent, or ~~$19.8~~$66.3 million, for the ~~third~~first quarter ended ~~November~~May 30, ~~2019, and decreased 0.6 percent, or $6.0 million, for the nine-month period,~~2020, compared to ~~the same periods~~net sales of $355.4 million in the prior ~~year. In~~year period, reflecting COVID-19 related volume declines in each of the quarter, the decrease in sales was driven by three of our four segments, primarily a result of lower volumes in the Architectural Framing Systems segment, due to customer-driven schedule delays, and in the Architectural Glass segment, resulting from increased foreign competition. The Architectural Services segment also contributed to the decline in sales, as a result of timing of project activity, as expected. For the nine-month period, the decrease in sales was driven by expected project timing-related declines within the Architectural Services segment and by lower volumes as a result of customer-driven schedule delays within the Architectural Framing Systems segment, partially offset by improved volume in the Architectural Glass segment.company's segments.

The relationship between various components of operations, as a percentage of net sales, is presented below:


	Three Months Ended				Nine Months Ended				Three Months Ended
	November 30, 2019		December 1, 2018		November 30, 2019		December 1, 2018		May 30, 2020		June 1, 2019
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	78.0		76.5		77.0		76.4		79.2		77.2
Gross profit	22.0		23.5		23.0		23.6		20.8		22.8
Selling, general and administrative expenses	15.6		14.7		16.1		15.8		18.6		16.3
Operating income	6.4		8.8		6.9		7.8		2.2		6.5
Interest and other expense, net	0.5		0.8		0.6		0.6		0.9		0.7
Earnings before income taxes	5.9		8.0		6.3		7.2		1.4		5.7
Income tax expense	1.4		1.9		1.5		1.7		0.4		1.4
Net earnings	4.5	%	6.1	%	4.8	%	5.5	%	1.0	%	4.3	%
Effective tax rate	23.2	%	23.5	%	23.9	%	23.8	%	28.2	%	24.4	%

Gross profit

Gross profit as a percent of sales was ~~22.0 percent and 23.0~~20.8 percent for the ~~three- and nine-month periods~~three-month period ended ~~November~~May 30, ~~2019, respectively,~~2020, compared to ~~23.5 percent and 23.6~~22.8 percent for the ~~three- and nine-month periods~~three-month period ended ~~December~~June 1, ~~2018, respectively. The~~2019. This decrease ~~in the current quarter~~ was largely driven by ~~higher manufacturing costs and operational difficulties that we are addressing in some of the businesses in the Architectural Framing Systems segment, as well as reduced operating leverage on~~ lower volumes in the Architectural Services segment. In the nine-month period, gross profit improvements in Architectural Glass were offset by the operational difficulties in the Architectural Framing Systems segment, as well as reduced operating leverage in the Architectural Services segment. Additionally, in the current fiscal year, start-up costs relatedfirst quarter due to the new manufacturing facility for the small projects initiative within the Architectural Glass segment negatively impacted margin by 40 basis points in the quarter and 20 basis points in the year-to-date period.COVID-19-related project delays.

Selling, general and administrative (SG&A) expenses

SG&A expenses as a percent of sales were ~~15.6 percent and 16.1~~18.6 percent for the ~~three- and nine-month periods~~three-month period ended ~~November~~May 30, ~~2019, respectively,~~2020, compared to ~~14.7 percent and 15.8~~16.3 percent in the prior year ~~three- and nine-month periods, respectively. In both current year periods,~~three-month period. SG&A increased as a percent of sales compared to the same period in the prior year, ~~primarily~~ due to ~~costs for outside advisors and legal fees, some of which were~~leverage on lower sales, partially offset by ~~net recoveries related~~the impact of cost cutting measures put in place by the Company in response to ~~acquired project matters. These matters are included within~~ the ~~Corporate and other category within Note 13, Segment Information.~~current COVID-19 environment.

Income tax expense

The effective tax rate in the ~~third~~first quarter of fiscal ~~2020~~2021 was ~~23.2~~28.2 percent, compared to ~~23.5~~24.4 percent in the ~~same period last~~prior year ~~and 23.9 percent~~period. The increase in the tax rate was primarily driven by discrete tax expense relative to earnings for the first nine months of fiscal 2020, compared to 23.8 percent in the prior-year period. The small changes in tax rate were driven by the mix of foreign income and the impact of state taxes for both the three- and nine-month periods of the current year, compared to the same periods of the prior year.quarter.

Segment Analysis

Architectural Framing Systems


	Three Months Ended								Nine Months Ended								Three Months Ended
In thousands	November 30, 2019			December 1, 2018			% Change		November 30, 2019			December 1, 2018			% Change
(In thousands)																	May 30, 2020			June 1, 2019			% Change
Net sales	$	165,517		$	181,306		(8.7	)%	$	533,432		$	550,193		(3.0	)%	$	150,164		$	180,522		(16.8	)%
Operating income	6,345			12,903			(50.8	)%	34,141			43,554			(21.6	)%	7,296			12,273			(40.6	)%
Operating margin	3.8		%	7.1		%			6.4		%	7.9		%			4.9		%	6.8		%

Architectural Framing Systems net sales declined ~~$15.8~~$30.4 million, or ~~8.7 percent, and $16.8 million, or 3.0~~16.8 percent, for the ~~three- and nine-month periods~~three-month period ended ~~November~~May 30, ~~2019, respectively,~~2020, compared to the prior-year ~~periods. In both periods, the declines are~~period, reflecting lower volume due to ~~lower volumes as a result of customer-driven schedule~~several COVID-19 related project delays and ~~operational difficulties.~~

disruptions, particularly in regions with more state and local government restrictions on construction activity.

Operating margin decreased ~~330 and 150~~190 basis points for the ~~three- and nine-month periods~~three-month period of the current year, ~~respectively,~~ compared to the same ~~periods~~period in the prior year, reflecting the lower ~~volumes due to customer-driven schedule delays, as well as higher manufacturing costs and operational difficulties in two~~volume, partially offset by the impact of the segment's businesses, which have been identified and are being addressed. Last year's third quarter and year-to-date periods also included $0.7 million and $4.7 million, respectively, of expense for the amortization of short-lived acquired intangible assets.cost reduction actions.

As of ~~November~~May 30, ~~2019,~~2020, segment backlog was approximately ~~$375~~$421 million, compared to approximately ~~$385~~$430 million last quarter.

Backlog represents the dollar amount of signed contracts or firm orders, generally as a result of a competitive bidding process, which ismay be expected to be recognized as ~~revenue.~~revenue in the future. Backlog is not a term defined under U.S. GAAP and is not a measure of contract profitability. ~~Backlog should not be used as the sole indicator of future segment revenue because~~In addition to backlog, we have a substantial amount of projects with short lead times that book-and-bill within the same reporting period and are not included in backlog. We have strong visibility beyond backlog, as projects awarded, verbal commitments and bidding activities are ~~monitored separately and~~ not included in backlog. ~~We use backlog as one of the metrics to evaluate sales trends in our long lead-time segments.~~

Architectural Glass


	Three Months Ended								Nine Months Ended								Three Months Ended
In thousands	November 30, 2019			December 1, 2018			% Change		November 30, 2019			December 1, 2018			% Change
(In thousands)																	May 30, 2020			June 1, 2019			% Change
Net sales	$	89,433		$	98,524		(9.2	)%	$	288,862		$	263,533		9.6	%	$	76,911		$	100,291		(23.3	)%
Operating income	4,092			5,851			(30.1	)%	16,951			9,168			84.9	%	(494		)	6,399			N/M
Operating margin	4.6		%	5.9		%			5.9		%	3.5		%			(0.6		)%	6.4		%

Net sales decreased ~~$9.1~~$23.4 million, or ~~9.2 percent, and increased $25.3 million, or 9.6~~23.3 percent, for the ~~three- and nine-month periods~~three-month period ended ~~November~~May 30, ~~2019, respectively,~~2020, compared to the same ~~periods~~period in the prior year. The decrease ~~in the third quarter of fiscal 2020 compared to the third quarter of fiscal 2019 is primarily~~reflects lower volumes due to project timing and delays and significant production disruptions caused by COVID-19 related workforce absences at its largest facility.

The segment had an operating loss of $0.5 million and operating margin was (0.6) percent, down from operating income of $6.4 million and margin of 6.4 percent in last year's first quarter, due to leverage on the lower ~~volumes as a result~~volume and the impact of ~~increased foreign competition leveraging~~COVID-19 related costs.

Architectural Services



	Three Months Ended
(In thousands)	May 30, 2020			June 1, 2019			% Change
Net sales	$	63,551		$	65,147		(2.4	)%
Operating income	5,343			4,573			16.8	%
Operating margin	8.4		%	7.0		%

Architectural Services net sales declined $1.6 million, or 2.4 percent, for the ~~strength of the U.S. dollar. For the nine-month~~three-month period ~~the increase in sales compared to~~ended May 30, 2020, over the same period ~~last year is due to improved volume and mix on strong customer demand~~ in the ~~first half of our current fiscal year.~~prior year, reflecting certain COVID-19 related project delays.

Operating margin ~~decreased 130~~increased 140 basis points for the three-month period of the current year, ~~and increased 240 basis points for the nine-month period of the current year, respectively,~~ compared to the same periods in the prior year. The decrease in the current quarter was due to start-up costs related to the new small projects initiative, as well as decreased volumes, somewhat offset by improved factory productivity. The margin increase in the nine-month of the current year period relates to operating leverage on higher volume and improved price and mix. Start-up costs related to the small projects initiative had a negative impact on margin of approximately 160 basis points and 100 basis points for the three- and nine-month periods of the current year, respectively.

~~Architectural Services~~

Three Months Ended Nine Months Ended
In thousands November 30, 2019 December 1, 2018 % Change November 30,
2019 December 1,
2018
%
Change
Net sales $ 69,043
$ 72,828
(5.2 )% $ 195,787
$ 220,051
(11.0 )%
Operating income 6,533
8,659
(24.6 )% 15,082
21,435
(29.6 )%
Operating margin 9.5 % 11.9 % 7.7 % 9.7 %

As expected, Architectural Services net sales declined $3.8 million, or 5.2 percent, and $24.3 million, or 11.0 percent, for the three- and nine-month periods ended November 30, 2019, over the same periods in the prior year, ~~on lower volume due to timing of~~driven by strong project ~~activity.~~

~~Operating margin decreased 240~~execution, disciplined project selection, and ~~200 basis points for the three- and nine-month periods of the current year, compared to the same periods in the prior year, due to reduced leverage on the lower project volume.~~effective cost management.

As of ~~November~~May 30, ~~2019,~~2020, segment backlog was approximately ~~$607~~$685 million, compared to approximately ~~$502~~$660 million last quarter. Backlog is defined within the Architectural Framing Systems discussion above.

Large-Scale Optical (LSO)


	Three Months Ended								Nine Months Ended								Three Months Ended
In thousands	November 30, 2019			December 1, 2018			% Change		November 30, 2019			December 1, 2018			% Change
(In thousands)																	May 30, 2020			June 1, 2019			% Change
Net sales	$	24,405		$	23,377		4.4	%	$	66,449		$	64,522		3.0	%	$	6,312		$	21,259		(70.3	)%
Operating income	6,754			6,628			1.9	%	15,561			15,845			(1.8	)%	(3,132		)	4,177			N/M
Operating margin	27.7		%	28.4		%			23.4		%	24.6		%			(49.6		)%	19.6		%

LSO net sales ~~increased 4.4 percent and 3.0~~decreased $14.9 million or 70.3 percent for the ~~three- and nine-month periods~~three-month period ended ~~November~~May 30, ~~2019,~~2020, over the same ~~periods~~period in the prior year, ~~due~~as most of the segment's retail customers were closed for a large part of the quarter to ~~improved sales mix. Operating~~comply with various state and local government directives. In response to the lower demand, and to comply with state government directives, the segment closed its two manufacturing locations in March 2020, through the remainder of the first quarter. These facilities are expected to resume operations late in the second quarter.

The segment had an operating loss of $3.1 million and operating margin ~~decreased 70 and 120 basis points~~of (49.6) percent for the ~~three- and nine-month periods~~three-month period ended ~~November~~May 30, ~~2019,~~2020, compared to operating income of $4.2 million and operating margin of 19.6 percent in last year's first quarter, reflecting the ~~same periods in~~impact of the ~~prior year, driven by reduced operating leverage.~~lower volume.

Liquidity and Capital Resources


Selected cash flow data	Nine Months Ended						Three Months Ended
In thousands	November 30, 2019			December 1, 2018
(In thousands)							May 30, 2020			June 1, 2019
Operating Activities
Net cash provided by operating activities	$	53,601		$	70,644		$	23,976		$	(9,742	)
Investing Activities
Capital expenditures	(41,176		)	(33,867		)	(8,606		)	(11,198		)
Financing Activities
Borrowings on line of credit	108,000			294,500			139,500			103,000
Proceeds from issuance of term debt	150,000			—
Payments on line of credit	(252,500		)	(278,000		)	(146,500		)	(55,500		)
Repurchase and retirement of common stock	(20,010		)	(23,313		)	(4,731		)	(20,010		)
Dividends paid	(13,808		)	(13,180		)	(4,872		)	(4,598		)

Operating Activities. Cash provided by operating activities was ~~$53.6~~$24.0 million for the first ~~nine~~three months of fiscal ~~2020, a decrease~~2021, an increase of ~~$17.0~~$33.7 million compared to the prior-year period, primarily due to ~~reduced net earnings and increased~~strong working capital ~~requirements related to a legacy EFCO project, as well as timing of other working capital needs.~~management.

Investing Activities. Net cash used in investing activities was ~~$41.4~~$9.7 million for the first ~~nine~~three months of fiscal ~~2020,~~2021, primarily due to capital expenditures of ~~$41.2~~$8.6 million, while in the first ~~nine~~three months of the prior year, net cash used by investing activities was ~~$26.9~~$12.0 million, primarily due to capital expenditures of $33.9 million and net purchases of marketable securities of $3.2 million, offset by $12.3 million of proceeds from sales of property, plant and equipment. We estimate fiscal 2020 capital expenditures to be approximately $55 million, as we continue to make investments to drive growth and productivity improvements.$11.2 million.

Financing Activities. Net cash used in financing activities was ~~$30.9~~$17.3 million for the first ~~nine~~three months of fiscal ~~2020,~~2021, compared to ~~$21.2~~net cash provided by financing activities of $21.6 million for the prior-year period, primarily due to ~~reduced~~$7.0 million of net ~~borrowings~~payments on the line of credit in the current ~~year.~~year compared to net borrowings of $47.5 million in the prior year period. During April 2020, the Company extended the maturity of its $150 million term loan to April 2021. At ~~November~~May 30, ~~2019,~~2020, we were in compliance with the financial covenants in our credit ~~facility.~~facility and term loan.

We paid dividends totaling ~~$13.8~~$4.9 million ($~~0.525~~0.1875 per share) in the first ~~nine~~three months of fiscal ~~2020~~2021 compared to ~~$13.2~~$4.6 million ($~~0.4725~~0.175 per share) in the comparable prior-year period. In March 2020, we repurchased 231,492 shares under our authorized share repurchase program, for a total cost of $4.7 million. We have since temporarily suspended share repurchases. In the first ~~nine~~three months of fiscal 2020, we repurchased 531,997 shares under our authorized share repurchase program, ~~all during the first quarter,~~ for a total cost of $20.0 million. ~~In the first nine months of fiscal 2019, we repurchased 600,000 shares under our authorized share repurchase program, for a total cost of $23.3 million, all during the third quarter.~~ We have purchased a total of ~~5,799,912~~6,186,404 shares, at a total cost of ~~$169.3~~$179.1 million, since the fiscal 2004 inception of this

program. We currently have remaining authority to repurchase an additional ~~1,450,088~~2,063,596 shares under this program. We will continue to evaluate making future share repurchases, considering our cash flow and debt levels, market conditions, including the continuing effects of the COVID-19 pandemic, and other potential uses of cash.

Other Financing Activities. The following summarizes our significant contractual obligations that impact our liquidity as of ~~November~~May 30, ~~2019~~:2020:


	Payments Due by Fiscal Period														Payments Due by Fiscal Period
In thousands	Remainder of Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Thereafter		Total
(In thousands)															Remainder of Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Fiscal 2025		Thereafter		Total
Debt obligations	$	—	$	155,400	$	82,770	$	1,085	$	—	$	12,000	$	251,255	$	5,400	$	152,000	$	1,000	$	—	$	40,500	$	12,000	$	210,900
Operating leases (undiscounted)	3,366		12,880		11,256		10,307		8,147		18,647		64,603		9,168		10,933		10,070		8,090		6,256		11,386		55,903
Purchase obligations	59,463		84,960		1,306		127		127		—		145,983		146,927		29,868		277		127		—		—		177,199
Total cash obligations	$	62,829	$	253,240	$	95,332	$	11,519	$	8,274	$	30,647	$	461,841	$	161,495	$	192,801	$	11,347	$	8,217	$	46,756	$	23,386	$	444,002

We acquire the use of certain assets through operating leases, such as property, manufacturing equipment, vehicles and other equipment. Purchase obligations in the table above relate to raw material commitments and capital expenditures.

We expect to make contributions of $0.7 million to our defined-benefit pension plans in fiscal ~~2020,~~2021, which will equal or exceed our minimum funding requirements.

As of ~~November~~May 30, ~~2019,~~2020, we had reserves of ~~$5.2~~$4.1 million and $0.9 million for unrecognized tax benefits and environmental liabilities, respectively. We currently expect approximately $0.4 million of the unrecognized tax benefits to lapse during the next 12 months. We are unable to reasonably estimate in which future periods the remaining unrecognized tax benefits and environmental liabilities will ultimately be settled.

We are required, in the ordinary course of business, to provide surety or performance bonds that commit payments to our customers for any non-performance. At ~~November~~May 30, ~~2019, $833.9 million~~2020, $1.0 billion of these types of bonds were outstanding, of which ~~$432.6~~$582.3 million is onin our backlog. These bonds do not have stated expiration dates. We have never been required to make payments under surety or performance bonds with respect to our existing businesses.

Due to our ability to generate strong cash from operations and our borrowing capability under our committed revolving credit facility, we believe that our sources of liquidity will continue to be adequate to fund our working capital requirements, planned capital expenditures and dividend payments for at least the next 12 months.

~~Outlook~~

~~The following statements reflect~~COVID-19 Consideration. While we believe we have adequate sources of liquidity to continue to fund our ~~expectations~~business for ~~full-year fiscal 2020 results. These statements~~at least the next 12 months, the extent to which the ongoing COVID-19 situation may impact our results of operations or liquidity is uncertain. To date, we have experienced some delays in commercial construction projects and orders due to COVID-19. While the construction and construction-related industries are ~~forward-looking,~~considered an "essential business or service" in most jurisdictions in which we operate, site closures or project and ~~actual~~order delays have occurred and increased social distancing and health-related precautions are required on many work sites, which may cause additional project delays and additional costs to be incurred. Within the LSO segment, we have also experienced the temporary closure of many of our customer's retail locations and we temporarily shut down our factories in this segment. We expect this global pandemic to have an impact on our revenue and our results ~~may differ materially.~~

~~Revenue flat~~of operations, the size and duration of which we are currently unable to ~~down 1 percent over fiscal 2019.~~

~~Earnings per diluted share~~predict. At this time, we do not expect that the impact from the coronavirus outbreak will have a significant effect on our liquidity. As demonstrated in the ~~range of $2.15 to 2.30.~~

~~Capital expenditures of approximately $55 million.~~

~~Additionally,~~first quarter, we are ~~implementing an integration~~proactively taking steps to increase available cash on hand including, but not limited to, active working capital management and ~~cost reduction plan~~targeted reductions in discretionary operating expenses and capital expenditures. Given the speed and frequency of continuously evolving developments with respect to this pandemic, we cannot reasonably estimate the magnitude of the impact to our results of operations, liquidity or financial position. To the extent that our customers and suppliers are ~~identifying procurement cost savings across~~adversely impacted by the ~~Company,~~coronavirus outbreak, this could reduce the availability, or result in delays, of materials or supplies, or delays in customer payments, which ~~are expected to generate savings largely~~ in ~~fiscal 2021 and beyond.~~turn could materially interrupt our business operations and/or impact our liquidity.

Related Party Transactions

~~In the third quarter of fiscal 2020, Sotawall's principal facility, that had been leased from a company owned by an officer of Sotawall, was sold to an unrelated third party.~~ No ~~other significant~~material changes have occurred in the disclosure with respect to our related party transactions as set forth in our Annual Report on Form 10-K for the fiscal year ended ~~March 2, 2019.~~February 29, 2020.

Critical Accounting Policies

~~Refer to an update to our critical accounting policies included within Item 1, Notes to the Consolidated Financial Statements (Note 1).~~ No ~~other~~material changes have occurred toin the disclosure of our critical accounting policies set forth in our Annual Report on Form 10-K for the fiscal year ended ~~March 2, 2019.~~February 29, 2020, other than as described below.

Goodwill and indefinite-lived intangible asset impairment

Goodwill

We evaluate goodwill for impairment annually at our year-end, or more frequently if events or changes in circumstances indicate the carrying value of the goodwill may not be recoverable. During the first quarter of fiscal 2021, we identified qualitative indicators of impairment, including a significant decline in our stock price and market capitalization, along with concerns resulting from the COVID-19 pandemic at four of our nine identified reporting units. Therefore, we performed an interim goodwill impairment evaluation as of May 30, 2020. If the fair value of a reporting unit exceeds the carrying value, goodwill impairment is not indicated. Our accounting policy related to goodwill has not changed from that disclosed in our Annual Report on Form 10-K.

Based on the results of the interim quantitative goodwill impairment analysis, the estimated fair value of each reporting unit exceeded its carrying value and, therefore, goodwill impairment was not indicated as of May 30, 2020. However, the estimated fair value did not exceed carrying value by a significant margin at two reporting units within the Architectural Framing Systems segment, EFCO and Sotawall, which had goodwill balances of $90.4 million and $26.7 million, respectively, at May 30, 2020. We utilized a discount rate of 11.0 percent in determining the discounted cash flows for EFCO and a discount rate of 10.4 percent in determining the discounted cash flows for Sotawall. We utilized a long-term growth rate of 3.0 percent in our fair value analysis for all reporting units. If our discount rates were to increase by 100 basis points at Sotawall and EFCO, the fair value of these reporting units would fall below carrying value, which would indicate impairment of the goodwill. Additionally, this discounted cash flow analysis is dependent upon achieving forecasted levels of revenue and profitability. If revenue or profitability were to fall below forecasted levels, or if market conditions were to decline in a material or sustained manner, impairment could be indicated at these reporting units, and potentially at other reporting units. If the impacts that we have experienced from COVID-19 continue at the current or worsening levels, this will likely have a negative impact on our forecasted revenue and profitability and this could result in an indication of goodwill impairment in future periods.

Indefinite-lived intangible assets

We hold intangible assets for certain acquired trade names and trademarks which are determined to have indefinite useful lives. We evaluate the reasonableness of the useful life and test indefinite-lived intangible assets for impairment annually at our year-end, or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. During the first quarter of fiscal 2021, we identified qualitative indicators of impairment, including deteriorating macroeconomic conditions resulting from the COVID-19 pandemic. Therefore, the Company performed a quantitative indefinite-lived intangible asset impairment evaluation as of May 30, 2020. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. If an impairment loss is recognized, the adjusted carrying amount becomes the asset's new accounting basis. Our accounting policy for indefinite-lived intangible assets has not changed from that disclosed in our Annual Report on Form 10-K.

Fair value is measured using the relief-from-royalty method. This method assumes the trade name or trademark has value to the extent that the owner is relieved of the obligation to pay royalties for the benefits received from the asset. This method requires us to estimate the future revenue from the related asset, the appropriate royalty rate, and the weighted average cost of capital. The assessment of fair value involves significant judgment and projections about future performance. In determining the discounted future revenue in our fair value analysis, we used discount rates that are appropriate with the risks and uncertainties inherent in the respective businesses in the range of 10.9 percent to 11.5 percent, royalty rates of 1.5 to 2.0 percent, and a long-term growth rate of 3.0 percent. Based on our analysis, the fair value of each of our trade names exceeded its carrying amount and impairment was not indicated. We continue to conclude that the useful life of our indefinite-lived intangible assets is appropriate. If future revenue were to fall below forecasted levels or if market conditions were to decline in a material or sustained manner, due to COVID-19 or otherwise, impairment could be indicated on one or more of our indefinite-lived intangible assets.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

No material changes have occurred to the disclosures of quantitative and qualitative market risk set forth in our Annual Report on Form 10-K for the fiscal year ended ~~March 2, 2019.~~February 29, 2020.


Item 4.	Controls and Procedures

Evaluation of disclosure controls and procedures: As of the end of the period covered by this report (the Evaluation Date), we carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in applicable rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.


b)	Changes in internal controls: There was no change in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended ~~November~~May 30, ~~2019~~2020, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION


Item 1.	Legal Proceedings

Murray Mayer v. Apogee Enterprises, Inc., et al

On November 5, 2018, Murray Mayer, individually and on behalf of all others similarly situated, filed a purported securities class action lawsuit against the Company and our Chief Executive Officer and our Chief Financial Officer in the United States District Court for the District of Minnesota. On February 26, 2019, the Court appointed as lead plaintiffs the City of Cape Coral Municipal Firefighters’ Retirement Plan and the City of Cape Coral Municipal Police Officers’ Retirement Plan. On ~~April 26, 2019,~~March 25, 2020, the lead plaintiffs filed an amended complaint. The amended complaint alleges that, during the purported class period of May 1, 2017 to April 10, 2019, the Company and the named executive officers made materially false and/or misleading statements or omissions aboutDistrict Court granted the Company's ~~acquisition of EFCO Corporation on June 12, 2017, and about~~motion to dismiss without prejudice this matter. On May 5, 2020, the ~~Company's Architectural Glass business segment in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.~~District Court entered final judgment. Plaintiffs have waived their right to appeal. The ~~amended complaint seeks an unspecified amount of damages, attorney's fees and costs. We intend to vigorously defend~~Company views this ~~matter.~~matter as closed.

Justin Buley v. Apogee Enterprises, Inc. et al

On December 17, 2018, Justin Buley filed a derivative lawsuit, purportedly on behalf of the Company, against our Chief Executive Officer, our Chief Financial Officer and eight of the nine non-executive members of our Board of Directors, in the Fourth Judicial District of the State of Minnesota. The complaint ~~alleges~~alleged claims for breach of fiduciary duty, waste of corporate assets and unjust ~~enrichment, due to~~enrichment. On May 29, 2020, the ~~named executive officers~~parties filed a joint stipulation and board members allegedly making materially false and/or misleading statements or omissions about the Company's business, operations, and prospects, particularly with respect to our Architectural Glass business segment, during the period between June 28, 2018 and September 17, 2018.order dismissing this matter without prejudice. The ~~complaint seeks an unspecified amount of damages and equitable relief, including requiring the~~ Company ~~to offer our shareholders the opportunity to vote for certain amendments to our Bylaws or Articles of Incorporation purporting to improve identified corporate governance practices. This~~views this matter ~~has been stayed pending resolution of a Motion to Dismiss in the Mayer action described above. We intend to vigorously defend this matter.~~as closed.

Other Matters


Item 1A.	Risk Factors

There have been no material changes or additions to our risk factors discussed in our Annual Report on Form 10-K for the fiscal year ended ~~March 2, 2019~~.February 29, 2020, except as noted below.

The novel coronavirus (COVID-19) pandemic, efforts to mitigate the pandemic, and the related weakening economic conditions, have impacted our business and could have a significant negative impact on our operations, liquidity, financial condition and financial results

In the last quarter of our fiscal 2020, a novel strain of coronavirus, COVID-19, started to impact the global economic environment causing extreme volatility and uncertainty in global markets. In March 2020, the World Health Organization declared COVID-19 to be a global pandemic and we started to see certain impacts to our business. This contagious disease outbreak, which has continued to spread, and the related adverse public health developments, and government orders to "stay in place" have adversely affected work forces, economies and financial markets globally. Quarantines and "stay in place" orders, the timing and length of containment and eradication solutions, travel restrictions, absenteeism by infected workers, labor shortages or other disruptions to our supply chain or our customers, have adversely impacted our sales and operating results and have resulted in some project delays. In

addition, the pandemic has resulted in an economic downturn that could affect the ability of our customers to obtain financing for projects and therefore impact demand for our products and services. Order lead times could be extended or delayed and our pricing or pricing of suppliers for needed materials could increase. Some critical materials, products or services may become unavailable if the regional or global spread were significant enough to prevent alternative sourcing. Accordingly, we are considering alternative product sourcing in the event that material supply becomes problematic.

To date, we have experienced some delays in commercial construction projects due to COVID-19. While the construction and construction-related industries are considered an "essential business or service" in most jurisdictions in which we operate, site closures or project delays have occurred and increased social distancing and health-related precautions are required on many work sites, which may cause additional project delays and additional costs to be incurred. Within the LSO segment, we also experienced the temporary closure of many of our customer's retail locations and we temporarily shut down our factories in this segment to comply with government "stay in place" orders. We expect this global pandemic to have an impact on our revenue and our results of operations, the size and duration of which we are currently unable to predict. The global outbreak of COVID-19 continues to rapidly evolve. The extent to which COVID-19 will impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate severity and spread of the disease, the duration of the outbreak, travel restrictions and social distancing requirements in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

Given the speed and frequency of the continuously evolving developments with respect to this pandemic, we cannot reasonably estimate the magnitude of the impact to our results of operations, liquidity or financial position. To the extent that our customers and suppliers are adversely impacted by the coronavirus outbreak, this could reduce the availability, or result in delays, of materials or supplies, or delays in customer payments, which in turn could materially interrupt our business operations and/or impact our liquidity.

Goodwill and indefinite-lived intangible asset impairment

Our assets include a significant amount of goodwill and indefinite-lived intangible assets. We evaluate goodwill and indefinite-lived intangibles for impairment annually at our year-end, or more frequently if events or changes in circumstances indicate that the carrying value of a reporting unit may not be recoverable. During the first quarter of fiscal 2021, we identified qualitative indicators of impairment, including a significant decline in our stock price and market capitalization, along with concerns resulting from the COVID-19 pandemic at four of our nine identified reporting units. The assessment of impairment requires determination of estimated fair value, generally using a discounted cash flow analysis, which involves significant judgment and projections about future performance.

Evaluating goodwill for impairment involves the determination of the fair value of each reporting unit in which goodwill is recorded using a qualitative or quantitative analysis. A reporting unit is an operating segment or a component of an operating segment for which discrete financial information is available and reviewed by management on a regular basis. Each of our nine business units represents a reporting unit for the goodwill impairment analysis. Based on the results of the interim quantitative goodwill impairment analysis, the estimated fair value of each reporting unit exceeded its carrying value and, therefore, goodwill impairment was not indicated as of May 30, 2020. However, the estimated fair value did not exceed carrying value by a significant margin at two reporting units within the Architectural Framing Systems segment, EFCO and Sotawall, which had goodwill balances of $90.4 million and $26.7 million, respectively, at May 30, 2020. We utilized a discount rate of 11.0 percent in determining the discounted cash flows for EFCO and a discount rate of 10.4 percent in determining the discounted cash flows for Sotawall. We utilized a long-term growth rate of 3.0 percent in our fair value analysis for all reporting units. If our discount rates were to increase by 100 basis points at Sotawall and EFCO, the fair value of these reporting units would fall below carrying value, which would indicate impairment of the goodwill. Additionally, this discounted cash flow analysis is dependent upon achieving forecasted levels of revenue and profitability. If revenue or profitability were to fall below forecasted levels, or if market conditions were to decline in a material or sustained manner, impairment could be indicated at these reporting units, and potentially at other reporting units. If the impacts that we have experienced from COVID-19 continue at the current or worsening levels, this will likely have a negative impact on our forecasted revenue and profitability and this could result in an indication of goodwill impairment in future periods.

Fair value of our indefinite-lived intangible assets is measured using the relief-from-royalty method. This method assumes the trade name or trademark has value to the extent that the owner is relieved of the obligation to pay royalties for the benefits received from the asset. This method requires estimation of the future revenue from the related asset, the appropriate royalty rate, and the weighted average cost of capital. During the first quarter of fiscal 2021, we identified qualitative indicators of impairment, including deteriorating macroeconomic conditions resulting from the COVID-19 pandemic. Therefore, the Company performed a quantitative indefinite-lived intangible asset impairment evaluation as of May 30, 2020. Based on our analysis, the fair value of each of our trade names exceeded its carrying amount and impairment was not indicated. In determining the discounted future revenue in our fair value analysis, we used discount rates that are appropriate with the risks and uncertainties inherent in the respective businesses in the range of 10.9 percent to 11.5 percent, royalty rates of 1.5 to 2.0 percent, and a long-term growth rate

of 3.0 percent. We continue to conclude that the useful life of our indefinite-lived intangible assets is appropriate. If future revenue were to fall below forecasted levels or if market conditions were to decline in a material or sustained manner, due to COVID-19 or otherwise, impairment could be indicated on one or more of our indefinite-lived intangible assets.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information with respect to purchases made by the Company of its own stock during the ~~third~~first quarter of fiscal ~~2020:~~2021:

Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b) Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (b)
September 1, 2019 to September 28, 2019 —
$ —
—
1,450,088
September 29, 2019 to October 26, 2019 1,162
37.65
—
1,450,088
October 27, 2019 to November 30, 2019 —
—
—
1,450,088
Total 1,162
$ 37.65
—
1,450,088



Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)	Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (b)
March 1, 2020 to March 28, 2020	234,272	$	21.72	231,492	2,063,596
March 29, 2020 to April 25, 2020	2,590	18.83		—	2,063,596
April 26, 2020 to May 30, 2020	20,133	20.48		—	2,063,596
Total	256,995	$	20.86	231,492	2,063,596

(a)

The shares in this column represent the total number of shares that were repurchased by us pursuant to our publicly announced repurchase program, plus the shares surrendered to us by plan participants to satisfy ~~stock-for-stock option exercises or~~ withholding tax obligations related to share-based compensation. ~~We did not purchase any shares pursuant to our publicly announced repurchase program during the fiscal quarter.~~

(b)

In fiscal 2004, announced on April 10, 2003, the Board of Directors authorized the repurchase of 1,500,000 shares of Company stock. The Board increased the authorization by 750,000 shares, announced on January 24, 2008; by 1,000,000 shares on each of the announcement dates of October 8, 2008, January 13, 2016, January 9, 2018, and January ~~9, 2018;~~14, 2020; and by 2,000,000 shares, announced on October 3, 2018. The repurchase program does not have an expiration date.


Item 6.	Exhibits



10.1	~~Cooperation Agreement, dated November 10, 2019, by and among~~Restricted Stock Deferral Program Under the Apogee Enterprises, Inc. ~~and Engaged Group.~~2019 Non-Employee Director Stock Incentive Plan. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on ~~November 12, 2019.~~April 29, 2020.
10.2	~~Engaged Capital Waiver, effective October 31,~~Form of Restricted Stock Unit Agreement under the Apogee Enterprises, Inc. 2019 Non-Employee Director Stock Plan. Incorporated by ~~and among~~reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K filed on April 29, 2020.
10.3	Offer Letter dated May 27, 2020 between Apogee Enterprises, Inc. and ~~Engaged Group.~~Nisheet Gupta.
10.4	Form of Stock Option Agreement under the Apogee Enterprises, Inc. 2019 Stock Incentive Plan. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on ~~October 31, 2019.~~July 7, 2020.
~~10.3~~10.5	~~Engaged Capital Waiver, effective October 10, 2019, by and among Apogee Enterprises, Inc. and Engaged Group.~~Form of Annual Cash Incentive Award Agreement. Incorporated by reference to Exhibit ~~10.1~~10.2 to Registrant's Current Report on Form 8-K filed on ~~October 11, 2019.~~July 7, 2020.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from Apogee Enterprises, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~November~~May 30, ~~2019~~2020 are furnished herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets as of ~~November~~May 30, ~~2019~~2020 and ~~March 2, 2019,~~February 29, 2020, (ii) the Consolidated Results of Operations for the ~~three-~~three-months ended May 30, 2020 and ~~nine-months ended November 30,~~June 1, 2019, ~~and December 1, 2018,~~ (iii) the Consolidated Statements of Comprehensive Earnings for the ~~three-~~three-months ended May 30, 2020 and ~~nine-months ended November 30,~~June 1, 2019, ~~and December 1, 2018,~~ (iv) the Consolidated Statements of Cash Flows for the ~~nine-months~~three-months ended ~~November~~May 30, ~~2019~~2020 and ~~December~~June 1, ~~2018,~~2019, (v) the Consolidated Statements of Shareholders' Equity for the ~~three-~~three-months ended May 30, 2020 and ~~nine-months ended November 30,~~June 1, 2019, ~~and December 1, 2018,~~ and (vi) Notes to Consolidated Financial Statements.
104	Cover Page, formatted as Inline Extensible Business Reporting Language and contained in Exhibit 101.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	APOGEE ENTERPRISES, INC.

Date: ~~January~~July 9, 2020	By: /s/ Joseph F. Puishys
		Joseph F. Puishys President and Chief Executive Officer (Principal Executive Officer)



Date: ~~January~~July 9, 2020	By: /s/ ~~James S. Porter~~Nisheet Gupta
		~~James S. Porter~~Nisheet Gupta Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

2627



		Page
PART I	Financial Information

Item 1.	Financial Statements (Unaudited):

	Consolidated Balance Sheets	4

	Consolidated Results of Operations	5

	Consolidated Statements of Comprehensive Earnings	6

	Consolidated Statements of Cash Flows	7

	Consolidated Statements of Shareholders' Equity	8

	Notes to Consolidated Financial Statements	109

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2019

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	24

PART II	Other Information

Item 1.	Legal Proceedings	24

Item 1A.	Risk Factors	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2526

Item 6.	Exhibits	2526

Signatures		2627



In thousands	2020		2021	2022	2023	2024	Thereafter	Total
Total minimum payments	$	14,888	11,787	9,669	8,772	6,735	16,806	$	68,657