Apogee Enterprises 2nd Quarter Earnings Per Share Increase 25 Percent; Apogee Reaffirms Guidance for Fiscal 2006
MINNEAPOLIS, Sep 14, 2005 (BUSINESS WIRE) -- Apogee Enterprises, Inc. (Nasdaq:APOG) today announced fiscal 2006 second quarter earnings. Apogee develops and delivers value-added glass products and services for the architectural, large-scale optical and automotive industries.
SECOND QUARTER HIGHLIGHTS
-- Earnings from continuing operations were $0.20 per share,
versus $0.16 per share a year earlier.
-- Prior-year period earnings included a $0.05 per share gain
from net proceeds of a class action lawsuit settlement
with certain flat glass manufacturers.
-- Operating margin was 4.4 percent. This compares to 4.6
percent in the prior-year period, or 3.1 percent excluding
the flat glass settlement.
-- Revenues of $173.7 million were up 15 percent versus the
prior-year period.
-- Architectural segment revenues were up 13 percent. Operating
income decreased 15 percent to $3.9 million compared to the
prior year, but was up 18 percent after excluding unusual
items in both years ($0.6 million charge for realignment of
window manufacturing business in current quarter and flat
glass settlement income of $0.8 million in prior-year period).
-- Architectural backlog grew 24 percent to $276.5 million
from the prior-year period.
-- Apogee announced plans on September 13 to build a new
fabrication plant in the Southwest. The new capacity,
which is designed to meet increasing demand for
architectural glass products, is part of the company's
strategy to grow this market.
-- Large-scale optical segment revenues increased 37 percent,
while operating income increased to $5.0 million from $1.7
million in the prior-year period. Conversion to value-added
products continued strong, and national retail customers
stocked inventory.
-- Reaffirmed full-year guidance of $0.74 to $0.80 per share.
Commentary
"Continuing our momentum, we have completed another solid quarter, with growth in both revenues and earnings," said Russell Huffer, Apogee chairman and chief executive officer. "We remain optimistic about our outlook for the second half.
"In the second quarter, our picture framing business achieved strong sales of higher value-added products," he said. "Our architectural segment grew revenues as it gained share, and our backlog strength led to the decision to build a third architectural glass facility. This progress was somewhat offset by production inefficiency related to equipment installation and maintenance, charges to realign our window business and work on some lower margin projects that are nearing completion."
SEGMENT AND OPERATING HIGHLIGHTS
Architectural Products and Services
-- Revenues of $141.3 million were up 13 percent over the
prior-year period. Strongest growth was in the architectural
glass business as its markets continued to strengthen, sales
of value-added energy-efficient, hurricane and blast products
increased, a smaller, direct competitor exited the market and
pricing started to improve.
-- Operating income was $3.9 million, down 15 percent from a year
ago. The current year includes $0.6 million in realignment
charges in the window manufacturing business, while the prior
year benefited from a $0.8 million gain from the flat glass
settlement. Results were also impacted by some unplanned
equipment downtime and work on certain lower margin projects
nearing completion.
-- Operating margin was 2.8 percent, compared to 3.7 percent
in the prior-year period. Excluding unusual items in both
years, the second quarter margin was 3.2 percent, compared
to 3.1 percent in the prior-year period.
-- Segment backlog was $276.5 million, compared to a backlog of
$223.9 million in the prior-year period and $235.0 million at
the end of the first quarter.
-- On September 13, Apogee announced plans for a new
architectural glass plant, which is expected to start up in
about 18 months. At a cost of approximately $25 million, it is
expected to add about $40 million to Apogee's glass
fabrication capacity at full production.
-- The current expansion of the Statesboro, GA, facility,
which will add approximately $20 million in annual
capacity, is completed.
Large-Scale Optical Technologies
-- Revenues of $24.3 million were up 37 percent over the
prior-year period. Sales of higher value-added picture framing
products increased significantly.
-- Operating income was $5.0 million, up significantly from
earnings of $1.7 million in the prior-year period, which
included a $0.3 million gain from the flat glass settlement.
Operating margin was 20.6 percent, versus 9.5 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.
-- National retail customer inventory and promotional programs
were also stronger and earlier than had been anticipated.
Automotive Replacement Glass and Services
-- Revenues of $8.1 million were flat compared to the prior-year
period.
-- There was an operating loss of $0.6 million, compared to
earnings of $1.2 million in the prior-year period, which
included a $1.1 million gain from the flat glass settlement.
Results included a charge related to the conclusion of the
supply agreement with PPG Industries, as well as unfavorable
product mix in final shipments provided under the agreement.
Equity in Affiliates
-- Earnings were $1.3 million from investment in PPG Auto Glass,
LLC, versus $0.2 million in the prior-year period. Volume,
pricing and operations continue to improve.
Financial Condition
-- Long-term debt was $39.0 million at the end of the second
quarter, compared to $47.2 million at the end of the first
quarter and $35.2 million at the end of fiscal 2005.
-- Long-term debt-to-total-capital ratio was 17 percent.
-- Non-cash working capital (current assets, excluding cash, less
current liabilities) was $68.2 million, compared to $77.2
million in the first quarter and $61.6 million at the end of
fiscal 2005.
-- Year-to-date depreciation and amortization were $9.3 million,
up 3 percent compared to the prior-year period.
-- Capital expenditures were $12.8 million year-to-date,
including spending for the Georgia architectural capacity
expansion. This compares to capital expenditures of $10.5
million in the prior-year first half.
OUTLOOK
"Looking ahead, we are encouraged by our performance to date and improving market conditions," Huffer said. "We are reaffirming our guidance range for the year of $0.74 to $0.80 per share. We expect that our revenue growth will be at the higher end of our current 9 to 11 percent range.
"For the remainder of the year, we are anticipating a stronger operating performance from our architectural segment," said Huffer, "while we expect that second half growth will be lower than first half growth for the large-scale optical segment.
"As we start the second half of our fiscal year, our architectural segment is building momentum," he said. "Markets are strengthening, and we're seeing pricing improvement in our architectural glass business. Our backlog strength is also very encouraging.
"We intend to capitalize on operating improvements throughout the architectural segment and to leverage overhead costs as revenues continue to increase," Huffer said. "We are positioned for the margin improvement necessary to meet our full-year guidance of a 3.6 to 4.0 percent operating margin for the architectural segment.
"In our large-scale optical segment, we are anticipating stronger full year growth but a different seasonality, with the first half stronger than the second, driven by inventory and promotion activities at some of our national retail accounts," he said.
"We expect that our auto glass manufacturing business will meet guidance of break-even performance for the year, while generating cash," he added.
"We are excited about our prospects for the current year, as our strategic 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.
-- Architectural segment revenues are expected to increase 10
to 12 percent for the year.
-- 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
10 to 12 percent (prior guidance was 7 to 9 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.
-- Annual gross margins are expected to be flat to slightly up
from 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, 3.6 to 4.0 percent (prior guidance was 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; large-scale optical,
approximately 15 percent (prior guidance was 13 to 14
percent), up slightly 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 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 $2 million (prior guidance
was $1 million) due to increased volume and operational
improvements.
-- Capital expenditures are projected to be approximately $30
million (prior guidance was $25 million).
-- Depreciation and amortization are estimated at $19 to $20
million for the year.
-- Debt is expected to be approximately $45 million at year end
(prior guidance was $30 million), with a corresponding effect
on interest expense.
-- The effective tax rate for the full year is anticipated to be
34 percent (prior guidance was 33 to 34 percent).
-- Earnings per share from continuing operations are expected to
range from $0.74 to $0.80.
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; vi) production ramp-up of the Viracon capacity expansion in Georgia in a timely and cost-efficient manner; and vii) construction and ramp-up to full production of the announced third Viracon plant 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 Viracon/Curvlite focuses on selling to aftermarket manufacturers following the end of its long-term supply agreement with PPG Industries in Q2 Fiscal 2006; 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
10 a.m. Central Time tomorrow, September 15. To participate in the teleconference, call
1-888-396-2298 toll free or 617-847-8708 international, access code 85653950. The replay will be available from noon Central Time on Thursday, September 15, through midnight Central Time on Thursday, September 22 by calling 1-888-286-8010 toll free, access code 26022297. 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
Weeks Ended Weeks Ended %
Dollar amounts in thousands, August 27, 2005 August 28, 2004 Change
except for per share amounts
--------------- --------------- -------
Net sales $173,730 $150,957 15%
Cost of goods sold 141,681 122,813 15%
--------------- ---------------
Gross profit 32,049 28,144 14%
Selling, general and
administrative expenses 24,381 21,213 15%
--------------- ---------------
Operating income 7,668 6,931 11%
Interest income 206 455 -55%
Interest expense 565 878 -36%
Other income (expense), net 73 6 N/M
Equity in income (loss) of
affiliated companies 1,256 184 583%
--------------- ---------------
Earnings from continuing
operations
before income taxes
and other items below 8,638 6,698 29%
Income taxes 3,130 2,377 32%
--------------- ---------------
Earnings from continuing
operations 5,508 4,321 27%
Earnings from discontinued
operations - - -
--------------- ---------------
Net earnings $5,508 $4,321 27%
=============== ===============
Earnings per share - basic:
Earnings from continuing
operations $0.20 $0.16 25%
Earnings from discontinued
operations $- $- -
Net earnings $0.20 $0.16 25%
Average common shares
outstanding 27,583,876 27,066,144 2%
Earnings per share - diluted:
Earnings from continuing
operations $0.20 $0.16 25%
Earnings from discontinued
operations $- $- -
Net earnings $0.20 $0.16 25%
Average common and common
equivalent shares
outstanding 28,073,960 27,646,350 2%
Cash dividends per common
share $0.0625 $0.0600 4%
Twenty-six Twenty-six
Weeks Ended Weeks Ended %
Dollar amounts in thousands, August 27, 2005 August 28, 2004 Change
except for per share amounts
--------------- --------------- -------
Net sales $337,862 $296,857 14%
Cost of goods sold 275,964 242,899 14%
--------------- ---------------
Gross profit 61,898 53,958 15%
Selling, general and
administrative expenses 48,044 42,730 12%
--------------- ---------------
Operating income 13,854 11,228 23%
Interest income 393 1,538 -74%
Interest expense 1,182 1,776 -33%
Other income (expense), net 39 (36) N/M
Equity in income (loss) of
affiliated companies 1,446 (466) N/M
--------------- ---------------
Earnings from continuing
operations
before income taxes
and other items below 14,550 10,488 39%
Income taxes 5,102 3,078 66%
--------------- ---------------
Earnings from continuing
operations 9,448 7,410 28%
Earnings from discontinued
operations - 67 -100%
--------------- ---------------
Net earnings $9,448 $7,477 26%
=============== ===============
Earnings per share - basic:
Earnings from continuing
operations $0.34 $0.27 26%
Earnings from discontinued
operations $- $0.01 -100%
Net earnings $0.34 $0.28 21%
Average common shares
outstanding 27,432,382 27,085,220 1%
Earnings per share - diluted:
Earnings from continuing
operations $0.34 $0.27 26%
Earnings from discontinued
operations $- $- -
Net earnings $0.34 $0.27 26%
Average common and common
equivalent shares
outstanding 27,912,327 27,708,792 1%
Cash dividends per common
share $0.1250 $0.1200 4%
----------------------------------------------------------------------
Business Segments Information
(Unaudited)
Thirteen Thirteen
Weeks Ended Weeks Ended %
August 27, 2005 August 28, 2004 Change
--------------- --------------- -------
Sales
Architectural $141,339 $125,212 13%
Large-Scale Optical 24,333 17,706 37%
Auto Glass 8,110 8,045 1%
Eliminations (52) (6) N/M
--------------- ---------------
Total $173,730 $150,957 15%
=============== ===============
Operating income (loss)
Architectural $3,925 $4,631 -15%
Large-Scale Optical 5,024 1,674 200%
Auto Glass (555) 1,239 N/M
Corporate and other (726) (613) -18%
--------------- ---------------
Total $7,668 $6,931 11%
=============== ===============
Twenty-six Twenty-six
Weeks Ended Weeks Ended %
August 27, 2005 August 28, 2004 Change
--------------- --------------- -------
Sales
Architectural $276,168 $242,761 14%
Large-Scale Optical 45,099 36,254 24%
Auto Glass 16,720 17,864 -6%
Eliminations (125) (22) N/M
--------------- ---------------
Total $337,862 $296,857 14%
=============== ===============
Operating income (loss)
Architectural $7,531 $7,807 -4%
Large-Scale Optical 8,106 2,249 260%
Auto Glass (481) 2,379 N/M
Corporate and other (1,302) (1,207) -8%
--------------- ---------------
Total $13,854 $11,228 23%
=============== ===============
----------------------------------------------------------------------
Consolidated Condensed Balance Sheets
(Unaudited)
August 27, February 26,
2005 2005
--------------- ----------------
Assets
Current assets $190,268 $187,106
Net property, plant and
equipment 104,652 100,539
Other assets 81,182 80,820
--------------- ----------------
Total assets $376,102 $368,465
=============== ================
Liabilities and shareholders'
equity
Current liabilities $115,580 $119,492
Long-term debt 39,000 35,150
Other liabilities 33,601 35,743
Shareholders' equity 187,921 178,080
--------------- ----------------
Total liabilities and
shareholders' equity $376,102 $368,465
=============== ================
N/M = Not meaningful
Apogee Enterprises, Inc. & Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
Twenty-six Twenty-six
Weeks Ended Weeks Ended
Dollar amounts in thousands August 27, 2005 August 28, 2004
---------------- ----------------
Net earnings $9,448 $7,477
Net earnings from discontinued
operations - (67)
Depreciation and amortization 9,337 9,040
Results from equity investments (1,446) 466
Other, net 1,033 272
Changes in operating assets and
liabilities (7,150) (7,261)
---------------- ----------------
Net cash provided by continuing
operating activities 11,222 9,927
---------------- ----------------
Capital expenditures and acquisition
of intangible assets (12,768) (10,539)
Proceeds on sale of property 4 86
Net purchases of marketable
securities (154) (411)
Other investing activities - (12)
---------------- ----------------
Net cash used in investing
activities (12,918) (10,876)
---------------- ----------------
Net proceeds from long-term debt and
revolving credit agreement 3,700 3,542
Proceeds from issuance of common
stock, net of cancellations 2,596 327
Repurchase and retirement of common
stock - (1,909)
Dividends paid (3,478) (3,292)
Other, net (271) -
---------------- ----------------
Net cash provided by (used in)
financing activities 2,547 (1,332)
---------------- ----------------
Cash used in discontinued operations (308) (89)
---------------- ----------------
Increase (decrease) in cash and cash
equivalents 543 (2,370)
Cash and cash equivalents at
beginning of year 5,967 7,822
---------------- ----------------
Cash and cash equivalents at end of
period $6,510 $5,452
================ ================
SOURCE: Apogee Enterprises, Inc.
Apogee Enterprises, Inc., Minneapolis
Investor Relations:
Mary Ann Jackson, 952-487-7538
mjackson@apog.com