Apogee Enterprises Reports Fiscal 2006 First Quarter Earnings; Increases Guidance for Fiscal 2006
MINNEAPOLIS--(BUSINESS WIRE)--June 20, 2005--Apogee Enterprises, Inc. (Nasdaq:APOG) today announced fiscal 2006 first quarter earnings. Apogee develops and delivers value-added glass products and services for the architectural, large-scale optical and automotive industries.
FIRST QUARTER HIGHLIGHTS
-- Earnings from continuing operations were $0.14 per share,
versus $0.11 per share a year earlier. Operating margin was
3.8 percent, up from 2.9 percent the prior-year period.
-- Revenues of $164.1 million were up 12 percent versus the
prior-year period, with the architectural segment accounting
for the majority of the growth.
-- Architectural segment revenues were up 15 percent, and
operating income increased 14 percent to $3.6 million. Share
growth and market improvement led to increased volume.
-- Large-scale optical segment revenues increased 12 percent,
while operating income increased to $3.1 million from $0.6
million the prior-year period. Sales of higher value-added
picture framing glazing products continue to increase.
-- Full-year guidance was increased to a range of $0.74 to $0.80
per share on revenue growth of 9 to 11 percent for fiscal
2006, reflecting positive trends in the architectural and
picture framing businesses.
Commentary
"We started the fiscal year exceeding our expectations and are optimistic that momentum is building," said Russell Huffer, Apogee chairman and chief executive officer. "Our first quarter revenues and earnings were ahead of prior year and our fiscal 2006 plan, as our architectural segment continues to grow market share in an improving commercial construction market and our picture framing business experiences better than expected conversion to higher value-added glass products."
SEGMENT AND OPERATING HIGHLIGHTS
Architectural Products and Services
-- Revenues of $134.8 million were up 15 percent over the
prior-year period. Revenues were slightly stronger than
anticipated due to strength in high-end condos, government and
institutional work, along with ongoing improvement in the
office market. These projects generally also use more
value-added energy-efficient, hurricane and blast products.
-- Operating income was $3.6 million, up 14 percent from a year
ago on higher revenues. Operating margin was 2.7 percent, flat
compared to the prior year as current lower-margin projects
are completed.
-- Segment backlog was $235.0 million, compared to a backlog of
$233.7 million in the prior-year period and $220.1 million at
the end of the fourth quarter.
Large-Scale Optical Technologies
-- Revenues of $20.8 million were up 12 percent over the
prior-year period. Increased sales of higher value-added
picture framing products more than offset reduced volume from
consumer electronics products.
-- Operating income was $3.1 million, up significantly from
earnings of $0.6 million in the prior-year period. Operating
margin was 14.8 percent, versus 3.1 percent the prior year.
Conversion of the custom framing market from clear glass to
value added, as well as from value-added to higher-end,
value-added products was better than anticipated. Margins also
benefited from consolidation of the two operating facilities
and the reallocation of manufacturing capacity from consumer
electronics to picture framing glass. Consumer electronics
products are expected to decline to approximately 10 percent
of segment revenues in fiscal 2006.
Automotive Replacement Glass and Services
-- Revenues of $8.6 million were down 12 percent from the
prior-year period.
-- Operating income was $0.1 million, compared to earnings of
$1.1 million in the prior-year period. The segment met
expectations for break-even results in difficult market
conditions.
Equity in Affiliates
-- Earnings were $0.2 million from investment in PPG Auto Glass,
LLC, an improvement from a prior-year period loss of $0.6
million. Operations are improving in a market impacted by
reduced volume and lower pricing.
Discontinued Operations
-- There was no earnings per share impact in the quarter. This
compares to prior-year, after-tax earnings of $0.1 million.
Financial Condition
-- Long-term debt was $47.2 million at the end of the first
quarter, up from $35.2 million at the end of fiscal 2005 due
to the timing of capital investments and seasonal working
capital changes.
-- Debt-to-total-capital ratio increased to 20 percent, from
17 percent at the end of the prior year.
-- Non-cash working capital (current assets, excluding cash, less
current liabilities) of $77.2 million was up from $61.6
million at the end of fiscal 2005.
-- First quarter depreciation and amortization were $4.8 million,
up 7 percent compared to the prior-year period.
-- Capital expenditures were $5.1 million, including spending for
our architectural capacity expansion in Georgia, which is on
schedule for a full start up at the beginning of the second
half. This compares to capital expenditures of $3.3 million in
the prior-year first quarter.
-- The prior-year period included an IRS interest refund that
increased the prior-year results by $0.02 per share, and a tax
deduction that increased prior-year results by $0.02 per
share.
OUTLOOK
"Looking ahead, we are encouraged by our performance to date and ongoing market conditions," Huffer said. "Building on the positive trends we are experiencing in our architectural and picture framing businesses, we are increasing our fiscal 2006 full-year guidance to $0.74 to $0.80 per share, up from previous guidance of $0.72 to $0.76 per share. We are also increasing our revenue guidance for the year to 9 to 11 percent growth, up from 6 to 8 percent."
Factors impacting Apogee's performance within this increased earnings per share range include:
-- Architectural segment, the mix and pricing of work secured to
fill in open second-half production capacity. Bidding activity
is strong and this work is expected to be secured during the
second quarter.
-- Large-scale optical segment, the ability to maintain the
current stronger mix of higher value-added picture framing
products.
"We are expecting stronger architectural segment revenue growth as markets further improve and we continue to gain share, including from the exit of a smaller architectural glass competitor," he said. "Our guidance for fiscal 2006 architectural revenue is being raised to 10 to 12 percent growth, from the previous rate of 6 to 9 percent growth. Our expected growth surpasses the F.W. Dodge outlook for our year of 4 percent improvement in the non-residential construction market." Dodge's estimate for calendar 2004 correlates to Apogee's fiscal 2006 due to the average nine-month lag between project starts and the installation of glass on buildings.
"In addition, we anticipate that strong growth in sales of value-added picture framing glass will continue, and as a result, are increasing our large-scale optical segment operating margin guidance for fiscal 2006 to 13 to 14 percent, from 12 percent," said Huffer. "We're seeing a better product mix in the segment as the market converts to higher-margin products, and we move away from less-profitable consumer electronics products faster than expected.
"Our longer-term goal is to achieve an average of 8 percent annual revenue growth and 20 percent annual earnings per share growth over the three-year period from fiscal 2006 to 2008," he said. "We expect continued improvement in architectural segment margins as we see market share growth in more attractive segments of the market, including new office construction and building renovation. For our large-scale optical segment, we anticipate maintaining current margin levels over the period with continued conversion to value-added products.
"We are excited about our prospects for the current year, as our initiatives deliver results and our architectural markets strengthen," said Huffer.
The following statements are based on current expectations for fiscal 2006. These statements are forward-looking, and actual results may differ materially.
-- Overall revenues for the year are expected to increase 9 to 11
percent (prior guidance was 6 to 8 percent).
-- Architectural segment revenues are expected to increase 10
to 12 percent for the year (prior guidance was 6 to 9
percent).
-- Growth is expected due to market improvement and share
gain through success of growth initiatives.
-- Large-scale optical segment revenues are expected to be up
7 to 9 percent (prior guidance was 4 percent), with growth
in picture framing glazing products continuing to be
somewhat offset by the shift away from consumer
electronics products.
-- Sales of value-added picture framing products are
expected to again grow more than 20 percent.
-- Auto glass segment revenues are expected to be
approximately 4 percent lower than in fiscal 2005 (prior
guidance was 3 percent).
-- Despite challenging market conditions leading to
slightly lower pricing and volume, we are winning new
independent customers for aftermarket windshields.
-- Annual gross margins are expected to be slightly less than 1
percentage point higher than the prior year as operational
improvements and cost reductions are somewhat offset by higher
costs for wages, materials, utilities and freight.
-- Expected annual operating margins by segment are:
architectural, 3.5 to 4.0 percent, as margins continue to
increase over the fiscal 2005 margin of 3.0 percent with
improved pricing and capacity utilization (prior guidance
was 3.5 to 4.5 percent); large-scale optical, 13 to 14
percent (prior guidance was approximately 12 percent),
relatively flat with the focus on making products more
affordable for consumers; and auto glass, breakeven or
slightly better, a decrease due to competitive market
dynamics.
-- Selling, general and administrative expenses as a percent of
sales are projected to be approximately 14.0 percent (prior
guidance was 14.5 percent).
-- Equity in affiliates, which reflects Apogee's portion of the
results of the PPG Auto Glass joint venture, is expected to
report earnings of approximately $1 million due to increased
volume and operational improvements.
-- Capital expenditures are targeted at $25 million.
-- Depreciation and amortization are estimated at $19 million for
the year.
-- Debt is expected to be reduced to approximately $30 million by
year end.
-- The effective tax rate for the full year is anticipated to be
33 to 34 percent.
-- Earnings per share from continuing operations are expected to
range from $0.74 to $0.80 (prior guidance was $0.72 to $0.76).
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; v) integration of the AWallS acquisition in a timely and cost-efficient manner; and vi) completion and production ramp-up of the Viracon capacity expansion in a timely and cost-efficient manner; (B) the Large-Scale Optical segment: i) markets that are impacted by consumer confidence; ii) dependence on a relatively small number of customers; and iii) ability to utilize manufacturing facilities; and (C) the Auto Glass segment: i) transition of markets served, as the long-term supply agreement with PPG Industries for auto replacement windshields expires in the second quarter of fiscal 2006 and product is then marketed to independent distributors; ii) changes in market dynamics; iii) market seasonality; iv) highly competitive, fairly mature industry; and v) performance of the PPG Auto Glass, LLC joint venture. Additional factors include: i) revenue and operating results that are volatile; ii) the possibility of a material product liability event; iii) the costs of compliance with governmental regulations relating to hazardous substances; iv) management of discontinued operations exiting activities; and v) foreign currency risk related to discontinued operations. The company cautions readers that actual future results could differ materially from those described in the forward-looking statements. The company wishes to caution investors 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 Exhibit 99.1 to the company's Annual Report on Form 10-K for the fiscal year ended February 26, 2005.
TELECONFERENCE AND SIMULTANEOUS WEBCAST
Analysts, investors and media are invited to listen to Apogee's live teleconference or webcast at 7:30 a.m. Central Time tomorrow, June 21. To participate in the teleconference, call 1-888-396-2386 toll free or 617-847-8712 international, access code 88380295. The replay will be available from 9:30 a.m. Central Time on Tuesday, June 21, through midnight Central Time on Tuesday, June 28 by calling 1-888-286-8010 toll free, access code 15428407. 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 world leader in technologies involving the design and development of value-added glass products and services. The company is organized in three 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 technologies segment consists of Tru Vue,
a value-added glass and acrylic manufacturer for the custom
framing and pre-framed art markets, and a producer of optical
thin film coatings for consumer electronics displays.
-- Automotive replacement glass and services segment consists of
Viracon/Curvlite, a U.S. fabricator of aftermarket foreign and
domestic car windshields.
Apogee Enterprises, Inc. & Subsidiaries
Consolidated Condensed Statement of Income
(Unaudited)
Thirteen Thirteen
Dollar amounts in thousands, except Weeks Ended Weeks Ended %
for per share amounts May 28, 2005 May 29, 2004 Change
------------ ------------ ------
Net sales $164,132 $145,900 12%
Cost of goods sold 134,283 120,087 12%
------------ ------------
Gross profit 29,849 25,813 16%
Selling, general and administrative
expenses 23,663 21,516 10%
------------ ------------
Operating income 6,186 4,297 44%
Interest income 187 1,083 -83%
Interest expense 617 897 -31%
Other income (expense), net (34) (43) 21%
Equity in income (loss) of affiliated
companies 190 (649) N/M
------------ ------------
Earnings from continuing
operations before income taxes
and other items below 5,912 3,791 56%
Income taxes 1,972 702 181%
------------ ------------
Earnings from continuing
operations 3,940 3,089 28%
Earnings from discontinued operations - 67 N/M
------------ ------------
Net earnings $3,940 $3,156 25%
============ ============
Earnings per share - basic:
Earnings from continuing operations $0.14 $0.11 27%
Earnings from discontinued
operations $- $0.01 N/M
Net earnings $0.14 $0.12 17%
Average common shares outstanding 27,280,889 27,104,296 1%
Earnings per share - diluted:
Earnings from continuing operations $0.14 $0.11 27%
Earnings from discontinued
operations $- $- -
Net earnings $0.14 $0.11 27%
Average common and common equivalent
shares outstanding 27,750,695 27,771,235 0%
Cash dividends per common share $0.0625 $0.0600 4%
----------------------------------------------------------------------
Business Segments Information
(Unaudited)
Thirteen Thirteen
Weeks Ended Weeks Ended %
May 28, 2005 May 29, 2004 Change
------------ ------------ ------
Sales
Architectural $134,829 $117,549 15%
Large-Scale Optical 20,766 18,548 12%
Auto Glass 8,610 9,819 -12%
Eliminations (73) (16) N/M
------------ ------------
Total $164,132 $145,900 12%
------------ ------------
Operating income (loss)
Architectural $3,606 $3,176 14%
Large-Scale Optical 3,083 575 436%
Auto Glass 73 1,140 -94%
Corporate and other (576) (594) 3%
------------ ------------
Total $6,186 $4,297 44%
------------ ------------
----------------------------------------------------------------------
Consolidated Condensed Balance Sheets
(Unaudited)
May 28, February 26,
2005 2005
------------ ------------
Assets
Current assets $191,491 $187,106
Net property, plant and equipment 101,244 100,539
Other assets 80,143 80,820
------------ ------------
Total assets $372,878 $368,465
------------ ------------
Liabilities and shareholders' equity
Current liabilities $108,756 $119,492
Long-term debt 47,200 35,150
Other liabilities 33,634 35,743
Shareholders' equity 183,288 178,080
------------ ------------
Total liabilities and shareholders'
equity $372,878 $368,465
------------ ------------
Apogee Enterprises, Inc. & Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
Thirteen Thirteen
Weeks Ended Weeks Ended
Dollar amounts in thousands May 28, 2005 May 29, 2004
------------ ------------
Net earnings $3,940 $3,156
Net earnings from discontinued operations - (67)
Depreciation and amortization 4,784 4,490
Results from equity investments (190) 649
Other, net (806) 415
Changes in operating assets and liabilities,
net of effect of acquisitions (14,646) (3,444)
------------ ------------
Net cash (used in) provided by continuing
operating activities (6,918) 5,199
------------ ------------
Capital expenditures (5,116) (3,265)
Proceeds on sale of property 2 69
Net purchases of marketable securities (300) (612)
Other investing activities - (14)
------------ ------------
Net cash used in investing activities (5,414) (3,822)
------------ ------------
Net proceeds from (payments on) long-term
debt and revolving credit agreement 12,050 (358)
Proceeds from issuance of common stock, net
of cancellations 2,119 209
Dividends paid (1,738) (1,647)
Other, net (250)
------------ ------------
Net cash provided by (used in) financing
activities 12,181 (1,796)
------------ ------------
Cash used in discontinued operations (294) (513)
------------ ------------
Decrease in cash and cash equivalents (445) (932)
Cash and cash equivalents at beginning of
year 5,967 7,822
------------ ------------
Cash and cash equivalents at end of period $5,522 $6,890
============ ============
CONTACT: Apogee Enterprises, Inc., Minneapolis
Investor Relations:
Mary Ann Jackson, 952-830-0674
mjackson@apog.com
SOURCE: Apogee Enterprises, Inc.