Prepared remarks
Thank you, Gigi. Good morning, everyone, and welcome to Apogee Enterprises fiscal 2024 fourth quarter earnings call. With me today are Ty Silberhorn, Apogee's Chief Executive Officer; and Matt Osberg, Chief Financial Officer. I'd like to remind everyone that there are slides to accompany today's remarks, and these are available in the Investor Relations section of Apogee's website. During this call, we will reference certain non-GAAP financial measures. Definitions of these measures and a reconciliation to the nearest GAAP measures are provided in the earnings release and slide deck we issued this morning. I'd also like to remind everyone that our call will contain forward-looking statements. These reflect management's expectations based on currently available information. Actual results may differ materially. More information about factors that could affect Apogee's business and financial results can be found in today's press release and in our SEC filings. With that, I'll turn the call over to you, Ty.
Thank you, Jeff. Good morning, everyone, and thanks for joining us today. The fourth quarter was a strong finish to another great year for Apogee. Our team achieved tremendous success through executing our strategy, strengthening our operational foundation, and driving record financial results. Today, I'll comment on our key accomplishments in fiscal '24, how our strategy is driving sustainable improvements in our business, and our priorities as we move into the new fiscal year. Three years ago, we embarked on a new strategic direction with the goal of building a stronger foundation for long-term profitable growth. An overview of that strategy is shown on Page four in today's presentation. At its core, our strategy is focused on building differentiated businesses that provide compelling value for our customers and improving operational execution across our entire company. During the past year, our team made strong progress on both fronts as highlighted on Slide 5.
We delivered significant productivity gains through the continued deployment of the Apogee Management System, or AMS. As a reminder, AMS is our operating framework based on the foundations of lean and continuous improvement. Our deployment of AMS has led to meaningful cost and productivity improvements, while enabling us to meet or exceed customer expectations to improve quality, service, and delivery. We also continue to grow our mix of differentiated products and services. In Architectural Glass, we advanced our shift toward premium, higher value-added offerings. In Framing Systems, we further rationalized our product portfolio, completing our move away from less differentiated lower-margin products. And in large-scale optical, we increased the mix of our highest-performing products. We also made progress towards strengthening our core capabilities. We continue to build out center-led functional expertise to better support the needs of the business.
We added to our talent management programs, and we further strengthened our approach to governance and sustainability. These efforts were evident in our fiscal '24 financial results. Full year adjusted operating income increased 16% to a record $146 million. Adjusted EPS grew 20% to a record $4.77, and cash flow from operations nearly doubled to a record $204 million. These results were particularly impressive given some of the headwinds we faced on the top line during the year, with net sales declining by 2%. Throughout the year, our improved results were led by exceptional performance in Architectural Glass. The glass segment delivered double-digit sales growth every quarter this year, and segment operating margin doubled compared to last year. These terrific results reflect the strategic transformation of our glass segment. We've significantly improved our cost structure, delivered meaningful productivity gains through AMS, and drove our sales mix toward higher value-added premium products.
We made strong progress in fiscal '24 to achieving the financial targets we set out in November of 2021, as shown on Page 6. Adjusted ROIC improved to 16.5%, well above our 12% target. Adjusted operating margin also exceeded our target, coming in at 10.3%, a 160 basis point improvement compared to last year. On revenue growth, we fell short of our goal of outgrowing our industry. Some of this was a function of our purposeful strategy. At the outset of our strategic plan, we emphasized that our initial focus was to improve ROIC and operating margins while growing our overall profit dollars. We've had great success with all three of these goals. As part of our strategy, we've moved away from some lower return product and service offerings and are doing so again with Project Fortify, all of which created a headwind for revenue. Revenue was also impacted by the dynamics in our end markets. Overall growth in non-residential construction was very strong last year.
However, much of this growth was driven by mega projects in infrastructure and manufacturing along with warehouse and data center build-outs. These are sectors of the market where Apogee has a relatively low participation with our current product offerings. Many parts of the market where we play saw decelerating growth rates, which impacted the shorter cycle parts of our business. We remain committed to our target of outgrowing the market, and this is the primary focus for our team as we move forward. In addition to our enterprise financial targets in November 2021, we established margin targets for each of our segments, which are shown on Page 7. Three of our four segments performed within or above the target adjusted margin ranges this year. Earlier in the fiscal year, we increased the target range for architectural glass from 7% to 10% to a range of 10% to 15%. With the strong performance of Framing Systems the past two years, along with the strategic actions we announced in January, we are also increasing framing's target range to 10% to 15%.
Architectural Services margin level was below the target range but did improve sequentially throughout the year. We see the opportunity for further progress in services this fiscal year. As we move into fiscal 2025, we intend to build on the gains we've achieved while positioning the company for stronger long-term growth. Over the next 12 months, we see a mixed picture for our end markets, as shown on Slide 8. We do see some headwinds in the market, as do the leading market research firms, especially in some of the key segments in which we play. Most industry forecasts call for further deceleration in nonresidential construction over the next year, even if the overall growth level remains in positive territory. The commercial segment of the non-residential construction market has been impacted by higher interest rates, tighter lending standards, and increased costs. This includes sectors such as office and retail.
On a more positive note, institutional and infrastructure projects appear poised for continued growth over the next year. This includes sectors such as healthcare, education, and transportation. Our team has had good success diversifying our business into these end-market verticals. This will remain a focus in the coming year as we mitigate those larger segment headwinds and position ourselves for a strong revenue rebound in fiscal '26. Regardless of the macro environment, we have driven sustainable improvements across our business that puts us on a solid foundation. Our company is well positioned to continue delivering strong results as we move forward. I'd like to elaborate on a few of our priorities in the coming year. Let me start by discussing Project Fortify on page 9. Project Fortify further advances our company's strategy. It builds on the success we've achieved, further improving our cost structure, enabling productivity gains, and allowing our team to focus on higher growth, higher return opportunities.
These actions were primarily focused on framing systems. Framing has achieved strong performance gains, moving from mid-single digit operating margin in fiscal '21 to a 12% range over the past two years. Project Fortify positions framing for further margin gains, which is reflected in our increased margin target for the segment. It also brings more clarity to our go-to-market strategy, positioning the business for future growth. I spoke earlier about the Apogee management system. Driving further productivity gains through the deployment of AMS will remain a focus in fiscal '25. We view AMS as a multi-year journey, building a culture of operational excellence, as outlined on page 10. In fiscal '25, we will continue to broaden the scope of AMS across our company. We believe AMS will generate incremental costs and productivity gains, improving margins, and helping us offset potential market headwinds.
Next, I'd like to address our increased focus on growth, which is outlined on page 11. We are driving a growth mindset in everything we do, given that we serve a very large and diverse set of end markets. That means there are always opportunities for growth. We are focused on seizing those opportunities to outperform the overall market. Our combination of leading brands, deep customer relationships, and differentiated offerings positions us to gain share in a fragmented industry. We are pursuing geographic expansions, particularly in services and in framing systems, expanding our reach to portions of the U.S. and Canada where we are underrepresented today. We also see opportunities for share gains by continuing to improve our service levels and our product performance. With the recent growth in services backlog, we may already be seeing some flight to quality with customers seeking to de-risk their projects by working with industry-leading suppliers like our Harman brand.
We will also continue to diversify our sales mix, focusing on higher growth sectors of the market. This includes expansion into attractive adjacencies, particularly within large-scale optical. Finally, we will continue to evaluate investment opportunities that will accelerate our growth, including both organic investments and acquisitions. To wrap up, we are very proud of the progress that we've achieved. We have established a stronger foundation for our company, and we have significantly improved our financial performance. Our team is focused on building on these gains, driving organic and inorganic growth opportunities to further accelerate our earnings and margins in the years ahead. With that, let me turn it over to Matt.
Thanks, Ty, and good morning, everyone. First, I'll begin with a review of our results in the quarter, then I will summarize some of the highlights of the full year. Finally, I'll discuss our outlook for fiscal '25. The fourth quarter was a strong close to fiscal '24 as we delivered adjusted operating margin expansion, adjusted EPS growth, and continued to generate exceptionally strong cash flow. We also achieved meaningful backlog growth in the longer lead time parts of our business. As a reminder, the fourth quarter and the full year included an extra week of operations compared to fiscal '23. Looking at the results for the fourth quarter, net sales grew 5% to $362 million. This growth was driven by improved pricing and mix, especially in glass. This was partially offset by lower volumes, primarily in framing. Fourth quarter results included $12.4 million of restructuring charges related to Project Fortify, of which $5.5 million was included in cost of goods sold and $6.9 million was included in SG&A. Including these charges, fourth quarter gross profit increased 13% and gross margin improved by 170 basis points, driven by improved pricing and mix and the benefits from cost-saving initiatives.
SG&A expense increased $14.2 million to 18.4% of net sales, compared to 15.2% of net sales in last year's fourth quarter. The increase was primarily due to restructuring charges associated with Project Fortify, along with higher compensation-related costs. Operating income was $21.9 million or 6% of net sales. Excluding the impact of restructuring, adjusted operating income grew 33% and adjusted operating margin expanded 200 basis points to 9.5%. This was primarily driven by improved segment operating margin in glass. Diluted EPS was $0.71 and adjusted diluted EPS grew 33% to $1.14. This was primarily driven by higher adjusted operating income. Turning to the segment results for the quarter, framing net sales declined 6.3% due to lower volumes, reflecting the deceleration in commercial construction activity that Ty described. Framing results included $6 million of restructuring charges related to Project Fortify.
Excluding these charges, adjusted operating margin for framing contracted 130 basis points to 9.2%, primarily due to the impact of lower sales volume and a less favorable mix of projects. Framing backlog increased 9% compared to the third quarter to $201 million. As a part of Project Fortify, we are phasing out some of the longer lead time work within the framing segment. Going forward, most of the projects and framing will be completed in six months or less, making backlog a less relevant measure for the segment. As a result, beginning next quarter, we will no longer report backlog for the framing segment. The glass segment continued to outperform our expectations driven by improved pricing and mix. Net sales for glass grew 18% and segment operating income nearly doubled to $18.9 million, while segment operating margin expanded 800 basis points to 19.7%. Services sales grew 8% to $106 million, and adjusted operating margin increased by 210 basis points to 5.8%, primarily driven by a more favorable mix of projects partially offset by higher compensation costs.
Services backlog ended the quarter at $808 million. This is 4% higher than the third quarter and 11% above last year. This reflects our strong market position as we've significantly increased backlog even in a more challenging market environment. Importantly, the backlog growth in services reflects our continued efforts to diversify our project mix with significant wins in the hospitality, healthcare, and transportation sectors. LSO sales were essentially flat year-over-year with improved mix offsetting lower volume. However, operating margin improved by 450 basis points to 25.6%, reflecting the improvement in mix. Corporate expenses increased primarily due to $3.9 million of restructuring charges related to Project Fortify and higher compensation-related costs. Turning to cash flow. We had another strong result, generating $75 million of cash from operations in the quarter compared to $52 million in last year's fourth quarter.
Our primary use of cash in the quarter was debt reduction as we paid down $39 million of debt. This brought our net leverage ratio down to 0.1 times trailing 12-month adjusted EBITDA. Looking at the full fiscal year, we are very proud of the results we delivered. Adjusted operating margin increased 160 basis points to 10.3%. Adjusted diluted EPS grew 20% to a record $4.77. Cash flow from operations nearly doubled to $204 million for the best cash flow in the company's history. During the year, we paid down our debt by $108 million and invested $43 million in capital expenditures, which funded a capacity expansion in LSO and other projects to enhance productivity through automation. We also returned $33 million of cash to shareholders through dividends and share repurchases. Adjusted ROIC continued to improve as well, reaching 16.5%. For the segments, Glass grew net sales by 20% and operating income by almost 140% while doubling operating margin.
Despite lower sales and framing, the segment delivered adjusted operating margin at the top of the 9% to 12% target range. Services sales declined and margins remained below our 7% to 9% target range, but we expect both top and bottom-line improvements in fiscal '25. LSO sales declined, but margins remained very strong at over 24%. Moving to our outlook for fiscal '25, we expect net sales to decline 4% to 7%. This range includes approximately two percentage points of decline related to fiscal '25 reverting to a 52-week year and approximately one percentage point of decline related to the actions of Project Fortify to eliminate certain lower-margin product and service offerings. Also, as Ty discussed, we expect decelerating end market growth this year to put pressure on volume and pricing in the framing and glass segments. We expect sales declines in framing and glass to be partially offset by growth in services as we execute a strong pipeline of projects in our backlog, with LSO sales approximately flat as retail channel headwinds offset new channel adjacency growth.
Looking at adjusted operating margin trends, we expect our fiscal '25 consolidated margin to remain approximately flat to fiscal '24. We expect framing margins to improve and be within the new elevated target range of 10% to 15%. We expect the glass segment will moderate compared to fiscal '24 and move back into the 10% to 15% target range with higher margins expected in the first half of the year and sequentially declining as the year progresses. We expect services margins will improve and move closer to the 7.9% to the 7% to 9% target range. We expect LSO margins to decline as we expand into new adjacencies and begin to depreciate the capital assets for our capacity expansion but still be above the 20% target range. Finally, we expect corporate costs to return to levels approximating what we incurred in fiscal '23. We are forecasting adjusted diluted EPS in a range of $4.35 to $4.75, with the impact of the reversion to a 52-week year expected to reduce adjusted diluted EPS by approximately $0.20 with no expected material EPS impact related to the adverse net sales impact of Project Fortify.
We expect an average tax rate of approximately 24.5% and anticipate $40 million to $50 million of capital expenditures during the year. Finally, we expect lower cash flow from operations as the working capital changes that impacted the past two years begin to normalize. Looking at the quarterly cadence of the year, we expect the first quarter to be our lowest level of sales and EPS for the year with the fourth quarter comparison to the prior year being impacted by the additional week in fiscal '24. In closing, this was another strong quarter to finish a great year. Over the past three years, we have built a stronger financial and operational foundation for the company, and we believe there are opportunities to continue to make organic and inorganic investments in the business to build on what we have already achieved. With that, I'll turn it back over to Ty for some concluding remarks.
Thanks, Matt. To wrap up, I want to thank our team for delivering another strong quarter. I'm really proud of what we've accomplished, and more importantly, I'm excited about the opportunities ahead for our business as we focus on growth. Execution of our strategy has driven sustainable operating improvements across our business. We've achieved meaningful cost and productivity improvements, grown our mix of differentiated products, and built a stronger set of core processes and systems. These operational improvements have led to a step change in financial performance and created a solid foundation for us to weather any slowdown and create strong profit leverage as volume increases, as we saw with glass in fiscal '24. Our team is focused on building on these improvements and delivering another successful year in fiscal '25 while positioning us for a strong fiscal '26. With that, we're ready to take your questions.
Questions and answers
Our first question comes from Julio Romero from Sidoti & Company, LLC.
Thanks. Hey, good morning, Ty. Good morning, Matt, Jeff. Good morning. Hey, guys, I wanted to talk about Project Fortify for a second and some of the things you're doing within framing. Can you maybe give us a quick refresher of what the current sales mix is within framing between shorter cycle work and the longer lead time work and maybe ballpark what that looks like post the phasing out of some of the longer lead time stuff within framing?
Yes. Let me begin by discussing the product lines and services we are moving away from with Project Fortify. At the end of 2021, we consolidated several separate business units but maintained a two-business unit structure for our commercial go-to-market approach. This includes our storefront and finishing business, along with our window and wall business. Within our window and wall business, we had been supplying manufactured curtain wall and window wall for smaller projects. Our Services segment typically engages in projects worth $25 million to $45 million, covering everything from start to finish, including installation. We were also handling smaller supply side projects for window wall and some lower-end curtain wall, valued at around $5 million to $8 million. This segment of our product line had been underperforming in terms of margins, but we believed we could enhance those margins.
We made progress in this area; however, we recognized the need to increase prices on these offerings to make the business sustainable and better align with our overall margin goals. As the market slowed down and we adopted a more aggressive pricing strategy, we noticed a decline in volumes throughout fiscal '24. Consequently, we decided to exit this part of the business. This move also provided an opportunity to reassess our operations and consider consolidation. We had already been working to operate framing systems from a manufacturing operations and supply chain perspective as a single entity, and now we can fully implement that plan. Additionally, it allows us to utilize some open capacity from the exit of these products at one of our Wausau, Wisconsin facilities, enabling us to capitalize on cost synergies.
And yes, Julio, this is Matt. I'd just add on to that in terms of kind of how to size that. We called out this year that there's about a one percentage point headwind as we start to step away from some of that longer-term project, unitized curtain wall business that Ty mentioned. And as you think about continuing to phase out, those are longer-term projects. So some of that will span into fiscal '26, but it would be less than the headwind that we've got this year as we kind of continue to phase that out by the end of fiscal '26, that project flow would be out of our revenue.
Got it. That's really helpful, the color you gave there. And then maybe earlier, you guys spoke about diversifying the market mix. I love what you showed on Slide 8, I believe, the work you've done, moving the mix towards health care, education, transportation, et cetera. Any way you can kind of help us think about where the end market exposure stands today, just in the name of causing this kind of track the sales diversification and where the portfolio is moving? Maybe you want to tell us like how much health care education will make up X number of years from now? Just any way you could maybe help us overall?
Yes, this is Ty. Let me provide some details. We chose to reference the latest data from FMI. It's important to note that the projections for non-residential construction in calendar year '24 vary significantly, ranging from a decline of 1% to an increase of 11%. This is the widest range I've encountered during my three and a half years at Apogee, indicating some uncertainty in the market. It seems likely that the latter half of the year will be more challenging than the first half. As Matt mentioned, we face some ups and downs in our framing and other businesses, making the first quarter potentially our most difficult in terms of revenue. Regarding the segments we are focusing on, we’ve been working to increase our presence in health care, education, and recreation. For us, transportation primarily includes airports. We've been targeting these building types for nearly three years to diversify our portfolio, and we’ve made significant progress in that area.
If you examine the full FMI report, it suggests that our addressable market may grow slightly, perhaps by a few percentage points. However, we also have to consider our 53-week fiscal year and the exit from certain supply lines, such as curtain wall and window wall, which could place us in a slightly negative position. Excluding the 53-week impact, we are anticipating a decline in the range of 1% to 4%. This reflects the uncertainty we observe in the forecasts and our cautious approach as we consider how the year might unfold.
And Julio, the only thing I would add to it is we really tried to call out in Q3 and in this quarter, services, in particular, has made improvements in their backlog and the mix of projects that we've been winning there has been very diverse, right? So I think that there's obviously lots of stuff in that backlog. But I see, as we continue to focus on these segments of the market that are growing and helping us diversify. We're seeing that show up in our more recent project wins.
I mean, again, we don't share that a big reason is for competitive reasons. But as we've commented before, office, which was a huge part of our backlog reports across our businesses or our award mix three years ago is down significantly, and it was down again sequentially in the quarter and for this fiscal year compared to last fiscal year. Yet if you look at services, and that's an easy one to point to, the backlog is actually up. So that for us is a positive signal. We're getting the diversification, and it still will allow us to grow the business, both in the medium and long term.
Got it. Really helpful. And I appreciate the last comment, Ty, on office being down sequentially. I think that really helps us think about things. Maybe just the last one for me would be one of the things you talked about in terms of diversifying the end market mix is the geographic expansion in services. Can you just give us a quick update on how that's progressing in terms of the Westwood expansion there?
Yes. They are actively pursuing projects west of the Rockies and have had a recent success, as we discussed last quarter. There are additional items in the current backlog, including more work in the West. We plan to invest in expanding an existing facility in Texas to increase our capacity there. Additionally, we are developing a strategy for our footprint in the West for both services and framing. One of the challenges we face with framing is accessing those markets without a presence in the area. The Southwest and West experienced good growth last year, but our framing business struggles to reach these markets. We are crafting a plan that involves both organic growth and acquisitions to establish a footprint out west, enabling us to expand our framing operations across North America. Currently, our reach is mainly limited to areas east of the Rockies, and in Canada, we are focused primarily on the greater Toronto area. We are looking to make further investments, both organically and inorganically, in this region.
One moment for our next question. Our next question comes from the line of Brent Thielman from D.A. Davidson.
Hey, good morning, guys. Hey, congrats on a great year. I guess first would just be, Ty, you have the slide in here around objectives to outgrow the market kind of moving forward. And I guess my question is just among the three categories that you have in the slide deck for to capture share focused on high-growth opportunities and investments, where is the low-hanging fruit in your view? And what do you think is going to be most impactful in terms of your ability to sort of accelerate growth regardless of market conditions?
Yes. It's a great question, Brent. I would say as we see the market softening, I'd like to say there's a lot of low-hanging fruit there, but I think it's going to take good effort because, as you know, as the market softens, competition gets a little bit stiffer and tighter with respect to that. Now we have seen, like we commented on in the script, that we've seen services, they're picking up some business and what we're seeing, we believe, is maybe a little bit of a flight to quality to make sure that, okay, if I'm a developer contractor, and I've got a limited number of projects, I want to make sure they go really well. And so we're seeing some signals of that that we think that plays well for, frankly, all of our businesses for glass, services, and framing. So we're digging to understand that better and how we might promote that more strongly. And that becomes a share gain opportunity for services and for framing in particular.
So I think that's the one area that we're focused on that we potentially could see some short-term benefits with respect to that. I think really being able to reach more deeply geographically, that's a bit more of a medium long term that's going to take either or a combination of build, buy to get us the footprint that we can step into that and as we've talked about, a very active M&A pipeline. We were very active in the fiscal year. Even though the market for acquisitions has been relatively slow. You can see and read that data because of interest rates, because of private equity being a bit sidelined. That doesn't mean we didn't engage and look at a number of opportunities, and we'll continue to do that. But as part of that, we're also being very diligent and strategic in our focus. So we want something that has a great strategic fit that we're confident we can add value and generate more value owning that asset and that's going to help us accomplish our financial goals, including our growth objectives over the long term.
Okay. That's helpful. And then I guess with some indications that murkiness and corners of the market today. At the same time, you guys are looking to potentially deploy some capital. You're clearly under-levered right now, but if you views around leverage changed at all as you continue to kind of monitor the macro picture and what you can see coming in the pipeline?
No, I think you're right, Brent. Obviously, we would like to invest more in growth initiatives. As Ty mentioned, we've made some investments in growth, particularly in fiscal '24 for LSO, which should become operational this year. We're also expanding some of our services capabilities to support further expansion westward. Additionally, we're actively looking in the M&A market and would love to find an opportunity to invest there. Therefore, we're aiming to make investments that will place us on a solid growth trajectory, which would certainly provide leverage, and we hope to do this with the right assets.
Yes, we have a 16% return on invested capital. Three years ago, this business was at 7%, well below our cost of capital. We are seeking investment opportunities to enhance value for our shareholders, and we see those opportunities ahead. Our main focus is to drive the organization in this direction. This doesn't mean we will neglect managing our margins and generating cash. With Fortify improving our product offerings, we are fully in growth mode regardless of market conditions. Both organically and through acquisitions, this is the directive for our team as we enter fiscal '25. We aim to achieve growth and outperform the market. If the market declines, we want to minimize our losses or find ways to grow. Conversely, if the market rises, we aspire to outpace it. This is the message and focus for our team in fiscal '25.
Our next question comes from B.J. Cook from Singular Research.
You guys announced some higher pricing in Q4. Just wondering if there's an indicator of some pricing power? Or is it more correlated to eliminating some lower-margin projects?
Yes. I think some of the benefits we got in Q4, B.J were from some of the pricing initiatives that we put in place earlier in the year and as well as, especially in glass, the way we are trying to shift to higher value-add strategies. So just improving the mix and the price. We didn't take any specific pricing actions in Q4. I think it is a carry forward of a lot of things that were put in place earlier in the year. And then as we looked at fiscal '25, we do see some pressure coming in both glass and framing on volumes, and you will have to have some pressure on price probably as well. And that's why we looked call down those two from a revenue perspective in fiscal '25, so no new pricing initiatives that we put in place in Q4.
Got it. Thanks for the conservancy. Appreciate it. You mentioned expanding into some adjacent markets. I just wondered if you could talk a bit about your strategy, maybe that there's any significant changes to what you guys are doing currently or any additional investment there?
Yes. I'd start on the immediate front is with large-scale optical with the new coder coming online later this year that will allow them to be more aggressive at pursuing some adjacent applications where they can leverage the coding capabilities that they have for both glass and acrylic for different market applications, that we see our ability to offer some really strong differentiated product offerings in those markets. So that's not going to move the needle in fiscal '25, but it will set us up as we go into fiscal '26 and beyond, but we've got a nice healthy pipeline that they're starting to build as they look at those adjacencies. And then we've talked about just trying to further diversify the building types in our project backlogs that the team has done, and we'll continue to focus on that. And then geographic, right, that becomes another avenue for us to further diversify and kind of strengthen our reach out west. And again, that can be organic or inorganic in how we approach that. And then certainly, as we look at our acquisition pipeline, we are looking at different products, materials that allow us to move into some adjacencies for our business as well that kind of expands our product portfolio, our service offering, but again, doing so in a way that's accretive to our current and long-term margin goals as well.
One moment for our next question. Our next question comes from the line of Jon Braatz from KCCA.
Good morning, everyone. I have a question about Project Fortify and the actions being taken, particularly in the Architectural Framing segment. How do you plan to stabilize the margins in that segment throughout the cycle? What steps are you taking to help achieve that goal?
Thank you for the question, Jon. There are a couple of points to consider. First, we are being completely transparent. Three years ago, we evaluated some products and chose to keep them in our portfolio because we believed there was a path to improve their margins, but we have not achieved that. This shows strong leadership from our business teams in recognizing when a path is not viable. If the market weakens, it becomes even more challenging, so we need to take decisive action and move forward. This is the final step in refining our portfolio to establish a solid foundation for resetting our margin expectations. Additionally, this allows us to reduce costs. In terms of framing, it would likely have seen a significant decline in Q4 without the impact of the additional week and some order pull-through. We anticipate a tougher Q1, and we'll analyze framing performance across both Q4 and Q1 collectively.
By taking these measures, we open up further opportunities to manage costs, which, despite lower volumes, gives us confidence in maintaining margins in the 10% to 15% range. We're optimistic about positioning that business similarly to glass, anticipating that as volume increases, we will see considerable leverage, potentially pushing us toward the higher end of that range. In an exceptional quarter, we may even exceed it, much like we experienced with glass. Overall, we feel positive about the business, and as they work to consolidate their operations, expected to finish by summer, they will be well-positioned to handle increased volume and significantly boost profits as a result.
Can you provide an update on Project Fortify, particularly regarding the annualized cost savings of $12 million to $14 million you mentioned in January, with 60% expected in 2025 and the remainder in 2026? Are you ahead of schedule, and do you believe these savings could exceed your initial expectations? Where do you currently stand on achieving those cost savings?
Jon, it's Matt. Yes, we're on track for both kind of the total amount of charges related to Fortify and the amount of annualized cost savings.
Thanks, John. Thank you. At this time, I would now like to turn the conference back over to Ty Silberhorn, CEO, for closing remarks.
All right. Well, thanks for joining us today. We look forward to connecting at an upcoming investor conference or at our next earnings call. Everyone, have a great day.
This concludes today's conference call. Thank you for participating. You may now disconnect.