Apogee Enterprises, Inc. (Nasdaq:APOG) today announced fiscal 2008
second quarter earnings. Apogee provides distinctive value-added glass
solutions for the architectural and picture framing industries.
SECOND QUARTER HIGHLIGHTS
Revenues of $217.7 million were up 20 percent versus the prior-year
period.
Earnings from continuing operations were $0.40 per share versus $0.26
per share a year earlier. Net earnings were $0.39 per share versus
$0.26 per share in the prior-year period.
Operating margin was 7.9 percent, compared to 5.7 percent in the
prior-year period.
Architectural segment revenues grew 21 percent, and operating income
increased 57 percent versus the prior-year period.
Large-scale optical segment revenues increased 6 percent, and
operating income increased 91 percent versus the prior-year period.
Outlook for fiscal year 2008 earnings from continuing operations has
been increased to a range of $1.43 to $1.53 per share, up from prior
guidance of $1.37 to $1.47 per share.
Commentary "We’ve completed
another strong quarter, and are very pleased with our second quarter
earnings and cash flow,” said Russell Huffer,
Apogee chairman and chief executive officer. "Our
architectural segment exceeded our expectations with slightly stronger
than expected revenue due to project timing and flow. Our large-scale
optical segment earnings benefited from a high mix of our best
value-added framing glass products.
"Our architectural segment continued to
operate well in a strong market,” said Huffer. "Revenues
increased significantly due to strong project flow and a low level of
project delays in the quarter, and pricing remains good. In addition,
the expansion of our architectural glass capacity, including the ramp up
of the new Utah plant and conversion of our auto glass factory, is on
schedule.
"Our architectural backlog remains high at
$405.4 million, as we recorded new orders of $190 million, one of our
highest booking quarters. We also continue to see high levels of bidding
activity for future architectural business,”
he said. "With the stronger performance of
our architectural and picture framing businesses, we have increased our
earnings guidance for fiscal 2008.” SEGMENT AND OPERATING HIGHLIGHTS Architectural Products and Services -- Revenues of $198.1 million were up 21 percent over the prior-year
period. All segment businesses contributed to this growth. With
strong commercial construction markets, there were fewer project
delays than expected.
-- Operating income was $14.4 million, up 57 percent from a year ago.
-- Operating margin was 7.3 percent, compared to 5.6 percent in the
prior-year period.
-- Margins are benefiting from good pricing and operating
performance, and high capacity utilization.
-- Segment backlog remained strong at $405.4 million, compared to
backlog of $391.0 million in the prior-year period and $413.7
million at the end of the first quarter. Large-Scale Optical Technologies -- Revenues of $19.6 million were up 6 percent compared to the
prior-year period.
-- Operating income was $3.6 million, up 91 percent from the
prior-year period.
-- Operating margin was 18.4 percent, compared to 10.2 percent in
the prior-year period.
-- Sales of our best value-added framing glass products, which
offer visual benefits to consumers, increased significantly as
we convert customers to a higher-margin product mix. Equity in Affiliates -- Earnings of $1.5 million from the PPG Auto Glass joint venture were
flat compared to the prior-year period. Discontinued Operations -- There was a net loss of $0.3 million from discontinued operations,
compared to a slight gain in the prior-year period.
-- The slight loss occurred in the recreational vehicle/bus
business. The sale of this business is expected to be completed
in the third quarter. Financial Condition -- Long-term debt was $24.3 million, compared to $35.4 million at the
end of fiscal 2007 and down from $43.4 million at the end of the
first quarter. Strong earnings along with sound working capital
management contributed to the decline in long-term debt.
-- Long-term debt-to-total-capital ratio was 8.4 percent, down from
13.1 percent at fiscal 2007 year end.
-- Non-cash working capital (current assets, excluding cash, less
current liabilities) was $69.5 million, compared to $90.8 million
at the end of the first quarter and $70.4 million at the end of
fiscal 2007. It decreased from the first quarter as a result of
sound working capital management partially offset by overall
growth.
-- Depreciation and amortization were $11.4 million, up 16 percent
from the prior year.
-- Capital expenditures were $26.0 million, compared to $15.4 million
in the prior-year period. OUTLOOK "We remain optimistic about our businesses
and markets served, and are positioned to meet our longer-term
objectives of 8 percent annual revenue growth and 20 percent average
earnings growth through fiscal 2010,” said
Huffer. "Our solid year-to-date earnings
along with our strong backlog, commitments and bidding activity give us
confidence in our ability to grow revenues and earnings through fiscal
2010.
"We have increased our fiscal 2008 earnings
guidance for continuing operations to $1.43 to $1.53 per share, as a
result of the stronger year-to-date performance of our architectural and
picture framing businesses,” said Huffer. The
previous guidance for earnings from continuing operations was $1.37 to
$1.47 per share.
"We have slightly increased our fiscal 2008
architectural segment guidance to revenue growth of 13 to 15 percent and
operating margins of 6.7 to 7.1 percent,”
said Huffer. "Our commercial construction
markets are strong. McGraw-Hill Construction forecasts growth for
non-residential construction markets through fiscal 2009, with markets
flat in fiscal 2010 and then modest growth for the following few years.
"Our continued high level of architectural
segment backlog with improving margins also supports our positive
architectural outlook,” said Huffer. "I
would like to underscore that sequential growth in our backlog isn’t
necessary for us to meet our objectives – we
just need to maintain our backlog at high levels, which we are
anticipating based on current market conditions and our strong bidding
activity. In addition, this bidding activity allows us to select
projects with higher margins.
"We expect continued strong performance in
our picture framing glass business as we successfully convert customers
to a mix of our best value-added picture framing glass products,”
he said. "Planned second half investments in
picture framing glass coating capacity to meet increasing demand for our
best products, as well as higher spending on sales and marketing to
drive this growth will somewhat dampen second-half and full-year
large-scale optical segment operating margins.”
Huffer noted that the fiscal 2008 earnings outlook does not include the
impact of initiatives that could lower the tax rate; the potential for
the sale of Apogee’s minority interest in the
PPG Auto Glass joint venture, reported as equity income in affiliates;
or any gain from the expected third quarter sale of the recreational
vehicle and bus windshield business, reported in discontinued operations.
The following statements are based on current expectations for fiscal
2008. These statements are forward-looking, and actual results may
differ materially.
-- Overall fiscal 2008 revenues for the year are expected to increase
11 to 13 percent (prior guidance was 10 to 13 percent).
-- Architectural segment revenues are expected to increase 13 to 15
percent (prior guidance was 11 to 14 percent).
-- Large-scale optical segment revenues are expected to be
approximately flat (prior guidance was up slightly).
-- Annual gross margins are expected to be approximately 20 percent
(prior guidance was slightly higher than 20 percent); increased
pricing, operational improvements and cost reductions are expected
to more than offset increases in wages, health care, energy,
materials and freight, as well as costs related to the startup of
the new architectural glass facility and reallocating coating
equipment between the architectural glass and picture framing
businesses.
-- Selling, general and administrative expenses as a percent of annual
sales are projected to be approximately 12.5 percent (prior
guidance was approximately 13 percent).
-- Expected annual operating margins by segment are: architectural,
6.7 to 7.1 percent, including the negative full-year impact of
approximately 0.3 percentage point for the one-time startup costs
for the new architectural glass facility (prior guidance was 6.6 to
6.9 percent); and large-scale optical, approximately 16 percent
(prior guidance was 14 to 15 percent).
-- Equity in affiliates, which reflects Apogee's portion of the
results of the PPG Auto Glass joint venture, is expected to report
pre-tax, annual earnings of approximately $2 million. This excludes
the impact of any potential transaction related to the joint
venture; PPG Industries has announced it has signed an agreement to
divest its automotive replacement glass businesses.
-- Full-year capital expenditures are projected to be approximately
$60 million, including capital for capacity expansions and
productivity improvements in the architectural and large-scale
optical segments.
-- Depreciation and amortization are estimated at approximately $23
million for the year.
-- Debt is expected to be $25 to $35 million at year end (prior
guidance was $35 to $45 million).
-- The effective tax rate for the full year is anticipated to be
slightly higher than 34.5 percent, not including initiatives
underway that could reduce the tax rate.
-- Fiscal 2008 earnings per share from continuing operations are
expected to range from $1.43 to $1.53, up from prior guidance of
$1.37 to $1.47 per share.
The discussion above, including all statements in the Outlook section,
contains "forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of
1995. These statements reflect Apogee management’s
expectations or beliefs as of the date of this release. The company
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. All forward-looking statements are qualified
by factors that may affect the operating results of the company,
including the following: operational risks within (A) the architectural
segment: i) competitive, price-sensitive and changing market conditions,
including unforeseen delays in project timing and work flow; ii)
economic conditions and the cyclical nature of the North American
commercial construction industry; iii) product performance, reliability
or quality problems that could delay payments, increase costs, impact
orders or lead to litigation; iv) the segment’s
ability to fully utilize production capacity; and v) ramp up to full
production of the third Viracon plant in a timely and cost-efficient
manner; and (B) the large-scale optical segment: i) markets that are
impacted by consumer confidence and trends; ii) dependence on a
relatively small number of customers; iii) changing market conditions,
including unfavorable shift in product mix; iv) ability to utilize
manufacturing facilities; and v) the company’s
ability to complete the sale of the pre-framed art/wall décor
product line in a timely and effective manner. Additional factors
include: i) revenue and operating results that are volatile; ii)
self-insurance risk related to a material product liability event and to
health insurance programs; iii) performance of the PPG Auto Glass, LLC
joint venture; iv) management of discontinued operations exiting
activities, including the company’s ability
to complete the sale of the RV and bus windshield manufacturing assets;
v) cost of compliance with governmental regulations relating to
hazardous substances; and vi) foreign currency risk related to certain
discontinued operations. The company cautions investors that actual
future results could differ materially from those described in the
forward-looking statements, and that other factors may in the future
prove to be important in affecting the company’s
results of operations. New factors emerge from time to time and 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. For a more detailed explanation of the foregoing and other
risks and uncertainties, see Item 1A of the company’s
Annual Report on Form 10-K for the fiscal year ended March 3, 2007.
TELECONFERENCE AND SIMULTANEOUS WEBCAST
Analysts, investors and media are invited to listen to Apogee’s
live teleconference or webcast at 10 a.m. Central Time tomorrow,
September 20. To participate in the teleconference, call 1-800-561-2693
toll free or 617-614-3523 international, access code 16850368. The
replay will be available from noon Central Time on Thursday, September
20, through midnight Central Time on Thursday, September 27, by calling
1-888-286-8010 toll free, access code 94575790. To listen to the live
conference call over the internet, go to the Apogee web site at http://www.apog.com
and click on "investor relations”
and then the webcast link at the top of that page. The webcast also will
be archived on the company’s web site.
Apogee Enterprises, Inc., headquartered in Minneapolis, is a leader in
technologies involving the design and development of value-added glass
products and services. The company is organized in two segments:
Architectural products and services companies design, engineer,
fabricate, install, maintain and renovate the walls of glass and
windows comprising the outside skin of commercial and institutional
buildings. Businesses in this segment are: Viracon, the leading
fabricator of coated, high-performance architectural glass for global
markets; Harmon, Inc., one of the largest U.S. full-service building
glass installation, maintenance and renovation companies; Wausau
Window and Wall Systems, a manufacturer of custom aluminum window
systems and curtainwall; and Linetec, a paint and anodizing finisher
of window frames and PVC shutters.
Large-scale optical segment consists of Tru Vue, a value-added glass
and acrylic manufacturer for the custom picture framing market and a
producer of optical thin film coatings for consumer electronics
displays.
Apogee Enterprises, Inc. & Subsidiaries Consolidated Condensed Statement of Income (Unaudited)
Thirteen Thirteen Twenty-six Twenty-seven Weeks Ended Weeks Ended % Weeks Ended Weeks Ended %
Dollar amounts in thousands, except for per share amounts
September 1,2007 September 2,2006 Change September 1,2007 September 2,2006 Change
Net sales
$217,673
$181,755
20%
$427,558
$368,760
16%
Cost of goods sold
170,810
147,068
16%
337,807
301,229
12%
Gross profit
46,863
34,687
35%
89,751
67,531
33%
Selling, general and administrative expenses
29,598
24,255
22%
57,520
48,953
18%
Operating income
17,265
10,432
66%
32,231
18,578
73%
Interest income
237
279
-15%
447
601
-26%
Interest expense
689
794
-13%
1,141
1,614
-29%
Other (expense) income, net
(32
)
30
N/M
(12
)
(29
)
59%
Equity in income of affiliated companies
1,493
1,473
1%
1,476
1,283
15%
Earnings from continuing operations before income taxes and other
items below
18,274
11,420
60%
33,001
18,819
75%
Income taxes
6,487
4,099
58%
11,489
6,637
73%
Earnings from continuing operations
11,787
7,321
61%
21,512
12,182
77%
(Loss) earnings from discontinued operations
(313
)
12
N/M
1,658
(107
)
N/M
Net earnings
$11,474
$7,333
56%
$23,170
$12,075
92%
Earnings per share - basic:
Earnings from continuing operations
$0.42
$0.27
56%
$0.76
$0.44
73%
(Loss) earnings from discontinued operations
($0.02
)
$ -
N/M
$0.06
$ -
N/M
Net earnings
$0.40
$0.27
48%
$0.82
$0.44
86%
Average common shares outstanding
28,385,538
27,586,396
3%
28,267,707
27,594,934
2%
Earnings per share - diluted:
Earnings from continuing operations
$0.40
$0.26
54%
$0.74
$0.43
72%
(Loss) earnings from discontinued operations
($0.01
)
$ -
N/M
$0.06
$ -
N/M
Net earnings
$0.39
$0.26
50%
$0.80
$0.43
86%
Average common and common equivalent shares outstanding
29,197,737
27,993,684
4%
29,041,349
28,007,686
4%
Cash dividends per common share
$0.0675
$0.0650
4%
$0.1350
$0.1300
4%
Business Segments Information (Unaudited)
Thirteen Thirteen Twenty-six Twenty-seven Weeks Ended Weeks Ended % Weeks Ended Weeks Ended % September 1,2007 September 2,2006 Change September 1,2007 September 2,2006 Change Sales
Architectural
$198,084
$163,242
21%
$386,311
$328,505
18%
Large-Scale Optical
19,594
18,513
6%
41,249
40,278
2%
Eliminations
(5
)
-
N/M
(2
)
(23
)
91%
Total
$217,673
$181,755
20%
$427,558
$368,760
16%
Operating income (loss)
Architectural
$14,392
$9,193
57%
$25,977
$14,760
76%
Large-Scale Optical
3,605
1,892
91%
7,532
5,025
50%
Corporate and other
(732
)
(653
)
-12%
(1,278
)
(1,207
)
-6%
Total
$17,265
$10,432
66%
$32,231
$18,578
73%
Consolidated Condensed Balance Sheets (Unaudited)
September 1, March 3, 2007 2007 Assets
Current assets
$232,206
$222,484
Net property, plant and equipment
151,363
134,256
Other assets
97,670
92,421
Total assets
$481,239
$449,161
Liabilities and shareholders' equity
Current liabilities
$152,407
$145,859
Long-term debt
24,300
35,400
Other liabilities
40,066
32,234
Shareholders' equity
264,466
235,668
Total liabilities and shareholders' equity
$481,239
$449,161
N/M = Not meaningful Apogee Enterprises, Inc. & Subsidiaries Consolidated Condensed Statement of Cash Flows (Unaudited)
Twenty-six Twenty-seven Weeks Ended Weeks Ended
Dollar amounts in thousands
September 1, 2007 September 2, 2006
Net earnings
$23,170
$12,075
Net (earnings) loss from discontinued operations
(1,658
)
107
Depreciation and amortization
11,414
9,824
Stock-based compensation
3,587
2,449
Results from equity investments
(1,476
)
(1,283
)
Other, net
(2,487
)
(2,368
)
Changes in operating assets and liabilities
1,967
(20,382
)
Net cash provided by continuing operating activities
34,517
422
Capital expenditures and acquisition of intangible assets
(26,030
)
(15,441
)
Proceeds on sale of property
27
1,573
Net purchases of marketable securities
(1,863
)
(235
)
Other investing activities
-
5,000
Net cash used in investing activities
(27,866
)
(9,103
)
Net (payments on) proceeds from long-term debt and revolving credit
agreement
(11,100
)
11,300
Proceeds from issuance of common stock, net of cancellations
3,066
2,050
Dividends paid
(3,908
)
(5,474
)
Other, net
2,107
1,282
Net cash (used in) provided by financing activities
(9,835
)
9,158
Cash provided by (used in) by discontinued operations
7,308
(464
)
Increase in cash and cash equivalents
4,124
13
Cash and cash equivalents at beginning of year
6,187
4,676
Cash and cash equivalents at end of period
$10,311
$4,689
