Apogee Enterprises, Inc. (Nasdaq:APOG) today announced fiscal 2008
fourth quarter and full-year earnings. Apogee provides distinctive
value-added glass solutions for the architectural and picture framing
industries.
FY08 FULL YEAR HIGHLIGHTS
-- Revenues were $881.8 million, an increase of 13 percent compared
to the prior year.
-- Earnings from continuing operations were a record $1.49 per
share, up 33 percent from earnings of $1.12 per share a year ago.
-- Operating margin was 7.5 percent, compared to 6.1 percent the
prior year.
-- Architectural segment revenues were up 15 percent, and operating
income grew 33 percent compared to the prior year.
-- Operating margin was 6.7 percent, up from 5.8 percent the prior
year.
-- Large-scale optical segment revenues were flat as expected, and
operating income increased 51 percent versus the prior year.
-- Net earnings were $1.67 per share, compared to $1.12 per share
last year.
-- Earnings from discontinued operations were $0.18 per share,
compared to no earnings in fiscal 2007.
-- Guidance provided for fiscal 2009: earnings from continuing
operations are expected to range from $1.82 to $1.94 per share,
which would represent a 22 to 30 percent increase over fiscal 2008
results.
FY08 FOURTH QUARTER HIGHLIGHTS
-- Revenues of $243.3 million were up 18 percent from the prior-year
period.
-- Operating income was $22.5 million, up 66 percent from the
prior-year period.
-- Operating margin was 9.2 percent, compared to 6.6 percent in the
prior-year period.
-- Earnings from continuing operations were $0.49 per share versus
$0.32 per share a year earlier.
-- Fourth-quarter acquisition of Tubelite was neutral to earnings
per share.
-- Architectural segment revenues grew 21 percent, and operating
income increased 64 percent versus the prior-year period.
-- Large-scale optical segment revenues declined 9 percent as
expected, and operating income increased 33 percent versus the
prior-year period.
-- Net earnings, including discontinued operations, were $0.50 per
share versus $0.34 per share in the prior-year period.
Commentary "Fiscal 2008 was another year of record
earnings for Apogee,” said Russell Huffer,
Apogee chairman and chief executive officer. "We
had strong operating income in both our architectural and large-scale
optical segments.” He added that both segments
also had significant growth in fourth quarter earnings, with drivers for
each of the segments consistent for the fourth quarter and full year.
"Our architectural segment has been operating
well in markets that are using more and more value-added design and
energy-efficient products,” he said. "Project
mix, pricing, high capacity utilization and productivity improvements
contributed to our strong performance and improving operating margins.
"As we enter fiscal 2009, we are positioned
for continued strong growth for our architectural segment,”
said Huffer. "We started the new year with
our highest architectural backlog ever –
$510.9 million. We have strong visibility for fiscal 2009 and into
fiscal 2010 due to our backlog, project commitments, strong bidding
activity and the construction levels and green building trends in
markets we serve.
"Turning to the large-scale optical segment,
earnings again benefited from an increased mix of our best value-added
framing glass products,” he said. "Although
retail and picture framing market conditions softened during the year,
we continue to convert framers to these great products.
"We made two strategic moves in fiscal 2008
that began to contribute to growing our architectural segment,”
said Huffer. "In the fourth quarter, we
acquired Tubelite, with annual revenues of approximately $60 million.
Tubelite fabricates aluminum storefront, entrance and curtainwall
products for the U.S. commercial construction industry, a large adjacent
market we didn’t previously serve. We also
completed our exit of windshield manufacturing operations and have now
converted that facility to serve our strongest business, architectural
glass fabrication.
"In the fourth quarter, we repurchased
approximately 339,000 shares at an average price of $15.96 per share,
for a total of $5.4 million,” Huffer added. "We
hadn’t repurchased shares for several
quarters and felt it was an attractive investment.” FOURTH QUARTER SEGMENT AND OPERATING HIGHLIGHTS Architectural Products and Services
-- Revenues of $223.4 million were up 21 percent over the prior-year
period.
-- Revenues grew for all businesses, with the greatest increase in
architectural glass as we ramp up new capacity at our Utah and
converted Minnesota facilities.
-- Operating income was $19.9 million, up 64 percent from a year ago.
-- Operating margin was 8.9 percent, compared to 6.6 percent in the
prior-year period. Drivers were project mix in architectural glass
and engineered windows, pricing, high capacity utilization and
productivity improvements.
-- Segment backlog grew to $510.9 million, up 21 percent from $423.8
million in the prior-year period and 12 percent from $456.7 million
at the end of the third quarter.
-- Backlog is strong, providing good visibility into upcoming fiscal
years.
-- Approximately $368 million, or 72 percent, of the backlog is to
be delivered in fiscal 2009; and approximately $125 million, or 25
percent, in fiscal 2010.
Large-Scale Optical Technologies
-- Revenues of $19.9 million declined 9 percent compared to the
prior-year period, as expected.
-- Operating income was $3.3 million, up 33 percent from the
prior-year period.
-- Operating margin was 16.7 percent, compared to 11.4 percent in
the prior-year period.
-- The mix of our best value-added framing glass products exceeded
50 percent of product revenue for a second consecutive quarter.
Equity in Affiliates
-- There was a loss of $0.3 million from the PPG Auto Glass, LLC
joint venture, compared to earnings of $0.4 million in the
prior-year period.
Discontinued Operations
-- Earnings of $0.3 million, net of tax, related to our exit from
the auto glass segment. This compares to earnings of $0.4 million in
the prior-year period.
Financial Condition
-- Long-term debt was $58.2 million, compared to $35.4 million at
the end of fiscal 2007 and up from $20.6 million at the end of the
third quarter. The fourth quarter increase in debt was due to the
$45.7 million acquisition of Tubelite and the share repurchase of
$5.4 million, partially offset by operating cash flow.
-- Long-term debt-to-total-capital ratio was 17.0 percent, up from
13.1 percent at fiscal 2007 year end.
-- Non-cash working capital (current assets, excluding cash, less
current liabilities) was $69.7 million, compared to $82.1 million at
the end of the third quarter and $70.4 million at the end of fiscal
2007. The decrease from the third quarter is the result of success
in managing working capital needs during the quarter.
-- Depreciation and amortization were $22.8 million, up 23 percent
from the prior year.
-- Capital expenditures for fiscal 2008 were $55.2 million, compared
to $39.9 million in the prior year. Fiscal 2008 included spending on
capacity expansions and productivity improvements in both operating
segments.
-- Full-year tax rate was 30.7 percent.
OUTLOOK "We are expecting another outstanding year in
fiscal 2009,” said Huffer. "We
are entering the year stronger than ever in our architectural segment,
which will drive our performance this year. Demand for our architectural
products and services remains healthy, our backlog is at a record level,
new capacity is in place, and we have opportunities for further
operational improvements.
"We are expecting to earn from $1.82 to $1.94
per share from continuing operations, which would represent a 22 to 30
percent increase over fiscal 2008 results,”
he said. "At the same time, we anticipate
revenue growth of 12 to 15 percent.
"Looking ahead to fiscal 2010, our longer
term goals of 8 percent annual revenue growth and 20 percent average
earnings growth remain achievable, despite mixed signals from industry
forecasters,” said Huffer. "We
are positive about the prospects for our business based on the size and
mix of our backlog for fiscal 2010 and our bidding activity, as well as
the increase in green building and our ability to expand into markets
currently underserved by Apogee, including the broader, small project
and international markets.
"For the current year, we expect our
architectural business will increase revenues 13 to 16 percent and
achieve an operating margin ranging from 8.0 to 8.3 percent,”
he said. "This margin outlook shows continued
improvement from our fiscal 2008 operating margin of 6.7 percent. In
fiscal 2009, we are expecting a more balanced project mix, compared to
the fiscal 2008 fourth quarter when our operating margin was 8.9 percent
with favorable project mix and timing in our window business.
"Our picture framing business continues to
convert customers to our best framing glass and acrylic products,”
Huffer said. "As a result, in a soft retail
and custom picture framing market, we expect to maintain revenues, with
margins ranging from 17.5 to 18.5 percent.
"We have great businesses, solid markets and
backlogs, new capacity and our businesses are executing well,”
said Huffer. "I’m
feeling very good about the future prospects and potential for Apogee
and its businesses.”
The following statements are based on current expectations for fiscal
2009. These statements are forward-looking, and actual results may
differ materially.
-- Overall revenues for the year are expected to increase 12 to 15
percent.
-- Architectural segment revenues are expected to increase 13 to 16
percent.
-- Large-scale optical segment revenues are expected to be flat.
-- Annual gross margins are expected to be slightly less than 22.5
percent; increased pricing, operational improvements and cost
reductions are expected to more than offset increases in wages,
health care, energy, materials and freight.
-- Selling, general and administrative expenses as a percent of
annual sales are projected to be slightly less than 14 percent.
-- Expected annual operating margins by segment are: architectural,
8.0 to 8.3 percent; and large-scale optical, 17.5 to 18.5 percent.
-- Equity in affiliates, which reflects Apogee's portion of the
results of the PPG Auto Glass joint venture, is expected to have
pre-tax earnings of approximately $1.5 million.
-- Full-year capital expenditures are projected to be approximately
$60 million, including capital for modernization of the
architectural window facility, and capacity expansions and
productivity improvements in both operating segments.
-- Depreciation and amortization are estimated at approximately $32
million for the year.
-- Debt is expected to be $35 to $45 million at year end.
-- The effective tax rate for the full year is anticipated to be
approximately 35 percent.
-- Fiscal 2009 earnings per share from continuing operations are
expected to range from $1.82 to $1.94.
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,
execution 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; and iv) ability to utilize
manufacturing facilities. 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; 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, April
10. To participate in the teleconference, call 1-800-901-5217 toll free
or 617-786-2964 international, access code 21196794. The replay will be
available from noon Central Time on Thursday, April 10, through midnight
Central Time on Thursday, April 17 by calling 1-888-286-8010 toll free,
access code 44227696. 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; Linetec, a paint and anodizing
finisher of window frames and PVC shutters; and Tubelite, a
fabricator of aluminum storefront, entrance and curtainwall products.
-- Large-scale optical segment consists of Tru Vue, a value-added
glass and acrylic manufacturer for the custom picture framing market
and commercial optics.
Apogee Enterprises, Inc. & Subsidiaries Consolidated Condensed Statement of Income (Unaudited) Thirteen
Thirteen
Fifty-two
Fifty-three
Weeks Ended Weeks Ended % Weeks Ended Weeks Ended %
Dollar amounts in thousands, except for per share amounts
March 1, 2008 March 3, 2007 Change March 1, 2008 March 3, 2007 Change
Net sales
$
243,276
$
206,202
18
%
$
881,809
$
778,847
13
%
Cost of goods sold
188,091
165,971
13
%
696,659
630,433
10
%
Gross profit
55,185
40,231
37
%
185,150
148,414
25
%
Selling, general and administrative expenses
32,735
26,676
23
%
118,691
100,689
18
%
Operating income
22,450
13,555
66
%
66,459
47,725
39
%
Interest income
262
201
30
%
972
1,024
-5
%
Interest expense
898
354
154
%
2,485
2,652
-6
%
Other income (expense), net
47
(7
)
N/M
128
(22
)
N/M
Equity in (loss) income of affiliated companies
(281
)
361
N/M
(2,772
)
2,724
N/M
Earnings from continuing operations before income taxes and other
items below
21,580
13,756
57
%
62,302
48,799
28
%
Income taxes
7,487
4,518
66
%
19,132
17,147
12
%
Earnings from continuing operations
14,093
9,238
53
%
43,170
31,652
36
%
Earnings from discontinued operations
292
437
-33
%
5,381
1
N/M
Net earnings
$
14,385
$
9,675
49
%
$
48,551
$
31,653
53
%
Earnings per share - basic:
Earnings from continuing operations
$
0.50
$
0.33
52
%
$
1.52
$
1.14
33
%
Earnings from discontinued operations
$
0.01
$
0.02
-50
%
$
0.19
$
-
N/M
Net earnings
$
0.51
$
0.35
46
%
$
1.71
$
1.14
50
%
Average common shares outstanding
28,269,264
27,912,112
1
%
28,319,279
27,688,386
2
%
Earnings per share - diluted:
Earnings from continuing operations
$
0.49
$
0.32
53
%
$
1.49
$
1.12
33
%
Earnings from discontinued operations
$
0.01
$
0.02
-50
%
$
0.18
$
-
N/M
Net earnings
$
0.50
$
0.34
47
%
$
1.67
$
1.12
49
%
Average common and common equivalent shares outstanding
28,927,508
28,670,788
1
%
29,053,846
28,246,464
3
%
Cash dividends per common share
$
0.0740
$
0.0675
10
%
$
0.2830
$
0.2650
7
%
Business Segments Information (Unaudited) Thirteen Thirteen Fifty-two Fifty-three Weeks Ended Weeks Ended % Weeks Ended Weeks Ended % March 1, 2008 March 3, 2007 Change March 1, 2008 March 3, 2007 Change Sales
Architectural
$
223,374
$
184,312
21
%
$
798,819
$
694,888
15
%
Large-Scale Optical
19,903
21,968
-9
%
82,993
84,082
-1
%
Eliminations
(1
)
(78
)
99
%
(3
)
(123
)
98
%
Total
$
243,276
$
206,202
18
%
$
881,809
$
778,847
13
%
Operating income (loss)
Architectural
$
19,853
$
12,120
64
%
$
53,549
$
40,323
33
%
Large-Scale Optical
3,320
2,496
33
%
15,398
10,215
51
%
Corporate and other
(723
)
(1,061
)
32
%
(2,488
)
(2,813
)
12
%
Total
$
22,450
$
13,555
66
%
$
66,459
$
47,725
39
%
Consolidated Condensed Balance Sheets (Unaudited) March 1, March 3, 2008 2007 Assets
Current assets
$
259,230
$
222,484
Net property, plant and equipment
176,676
134,256
Other assets
126,566
92,421
Total assets
$
562,472
$
449,161
Liabilities and shareholders' equity
Current liabilities
$
177,315
$
145,859
Long-term debt
58,200
35,400
Other liabilities
42,374
32,234
Shareholders' equity
284,583
235,668
Total liabilities and shareholders' equity
$
562,472
$
449,161
N/M = Not meaningful Apogee Enterprises, Inc. & Subsidiaries Consolidated Condensed Statement of Cash Flows (Unaudited)
Fifty-two
Fifty-three Weeks Ended Weeks Ended
Dollar amounts in thousands
March 1, 2008 March 3, 2007
Net earnings
$
48,551
$
31,653
Net earnings from discontinued operations
(5,381
)
(1
)
Depreciation and amortization
22,776
18,536
Stock-based compensation
7,374
5,127
Results from equity investments
2,771
(2,724
)
Other, net
2,557
(5,105
)
Changes in operating assets and liabilities
7,588
585
Net cash provided by continuing operating activities
86,236
48,071
Capital expenditures
(55,208
)
(39,893
)
Proceeds on sale of property
354
1,650
Acquisition of businesses, net of cash acquired
(45,691
)
(444
)
Purchases of marketable securities, net of sales proceeds
(3,039
)
(1,070
)
Other investing activities
-
5,000
Net cash used in investing activities
(103,584
)
(34,757
)
Net proceeds from (payments on) long-term debt and revolving credit
agreement
22,800
(9,800
)
Proceeds from issuance of common stock, net of cancellations
3,085
6,702
Repurchase and retirement of common stock
(5,414
)
-
Dividends paid
(8,192
)
(9,312
)
Other, net
2,563
1,758
Net cash provided by (used in) financing activities
14,842
(10,652
)
Cash provided by (used in) discontinued operations
8,583
(1,151
)
Increase in cash and cash equivalents
6,077
1,511
Cash and cash equivalents at beginning of year
6,187
4,676
Cash and cash equivalents at end of period
$
12,264
$
6,187
