Apogee 2nd Quarter Earnings Per Share Increase 30 Percent; Full-Year EPS Guidance Reconfirmed
MINNEAPOLIS--(BUSINESS WIRE)--Sept. 20, 2006--Apogee Enterprises, Inc. (Nasdaq:APOG) today announced fiscal 2007 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
-- Revenues of $188.6 million were up 9 percent versus the prior-year
period.
-- Earnings of $0.26 per share increased 30 percent from $0.20 per
share a year earlier.
-- As anticipated, the current quarter includes $0.04 per share
from net proceeds of a class action lawsuit settlement with a
flat glass manufacturer covering 1991 to 1995. The proceeds
are included in operating income for each segment.
-- The quarter also includes $0.01 per share expense related to
adoption of FAS123R.
-- Operating margin was 5.6 percent or 4.6 percent excluding the
flat glass settlement. This compares to 4.4 percent in the
prior-year period.
-- Architectural segment revenues were up 15 percent, and operating
income, excluding the flat glass proceeds, doubled compared to the
prior-year period.
-- Large-scale optical segment revenues decreased 24 percent, and
operating income decreased 62 percent versus the unusually strong
prior-year period.
Commentary
"We are pleased with our second quarter results, especially in our core architectural segment which achieved significant earnings growth," said Russell Huffer, Apogee chairman and chief executive officer. "The non-residential construction markets we serve remain strong, as seen in our backlog and bidding activity. We are feeling good about the strength the architectural business is bringing to Apogee's performance this fiscal year.
"The decline in the large-scale optical segment performance compared to the especially strong prior-year period was slightly greater than expected," he said. "Impacting results were an unfavorable framing product mix within value-added glass, along with a softer retail environment and lower pre-framed art sales."
SEGMENT AND OPERATING HIGHLIGHTS
Architectural Products and Services
-- Revenues of $163.2 million were up 15 percent over the prior-year
period due primarily to higher architectural glass volume and
pricing, and increased job flow in the installation business.
-- Operating income was $9.2 million, including flat glass settlement
net proceeds of $1.1 million. Operating income was up 134 percent
from a year ago as pricing and manufacturing operations continued
to improve.
-- Operating margin was 5.6 percent or 5.0 percent excluding the
flat glass settlement. This compares to 2.8 percent in the
prior-year period and 3.4 percent in the first quarter.
-- Segment backlog was $391.0 million, compared to a backlog of
$276.5 million in the prior-year period and $360.4 million at
the end of the first quarter.
Large-Scale Optical Technologies
-- Revenues of $18.5 million were down 24 percent from the strong
prior-year period. Last year's second quarter had an unusually
high value-added product mix due to significant national retail
customer inventory and promotional programs, which
disproportionately impacted the second quarter compared to the
rest of the year. These activities did not occur this year.
-- The current quarter was impacted slightly more than expected
by a less favorable value-added product mix, a softer retail
environment and lower pre-framed art sales.
-- Operating income was $1.9 million, including flat glass settlement
net proceeds of $0.4 million. Operating income was down 62 percent
from the prior-year period primarily due to the less favorable
value-added product mix.
-- Operating margin in the second quarter was 10.2 percent or 8.1
percent excluding the flat glass settlement. This compares to
20.6 percent in the prior-year period, which included the more
favorable product mix.
Automotive Replacement Glass and Services
-- Revenues of $7.0 million decreased 13 percent compared to the
prior-year period. Sales of aftermarket automobile windshields
were slightly lower than expected.
-- The segment was essentially break-even including flat glass
settlement net proceeds of $0.3 million. This compares to an
operating loss of $0.6 million in the prior-year period.
Equity in Affiliates
-- Earnings were $1.5 million from investment in PPG Auto Glass, LLC.
This compares to earnings of $1.3 million in the prior-year
period.
Financial Condition
-- Long-term debt was $56.5 million at the end of the second quarter,
compared to $45.2 million at the end of fiscal 2006 and down from
$59.9 in the first quarter.
-- Long-term debt-to-total-capital ratio was 20.9 percent.
-- Non-cash working capital (current assets, excluding cash, less
current liabilities) was $88.8 million, compared to $90.6 million
at the end of the first quarter and $70.6 million at the end of
fiscal 2006. It increased from the end of the prior year, driven
by growth working capital requirements.
-- Depreciation and amortization were $10.1 million, up slightly from
the prior year.
-- Capital expenditures were $16.1 million year to date, including
investments in architectural glass fabrication capacity
expansions. This compares to capital expenditures of $12.8 million
in the prior-year period.
OUTLOOK
"Our strong first-half performance, due to robust commercial construction markets and continued improvement in architectural segment operations, positions us for solid earnings growth in fiscal 2007," said Huffer. "We are maintaining our fiscal 2007 earnings guidance range of $0.88 to $0.94 per share, which includes $0.05 per share for the non-cash expensing of options. This would be strong earnings growth compared to fiscal 2006, which at $0.85 per share included the impact of one-time net tax benefits of $0.07 per share.
"Our strong architectural backlog of $391 million with improving margins gives us confidence in our outlook for the year," he said, adding that approximately $224 million of the backlog is currently scheduled for fiscal 2007.
"Our outlook for the large-scale optical segment has declined slightly," said Huffer. "We are seeing some reduced demand due to softness in national retail accounts, partially offset by increases in picture framing glass sales to distributors. In addition, as certain markets adjust their value-added offerings, it is resulting in a less favorable product mix in fiscal 2007 compared to the prior year.
"We are pleased to have received net proceeds of $1.8 million from a class action lawsuit settlement with a flat glass manufacturer covering 1991 to 1995," he said. "As we indicated last quarter, these proceeds have been included in our current earnings outlook and are somewhat offset by higher health care costs for the year under our self-insured programs."
The following statements are based on current expectations for
fiscal 2007. These statements are forward-looking, and actual results
may differ materially.
-- Overall fiscal 2007 revenues for the year are expected to increase
13 to 17 percent (prior guidance was 11 to 15 percent).
-- Architectural segment revenues are expected to increase 17 to
21 percent (prior guidance was 14 to 18 percent).
-- Growth is expected due to market improvement and some
market share gain despite capacity constraints.
-- Large-scale optical segment revenues are expected to be down
slightly (prior guidance was flat to slightly down).
-- Auto glass segment revenues are expected to be down 5 to 10
percent (prior guidance was for flat revenues).
-- Annual gross margins are expected to be approximately 18 percent
as higher costs for wages, health care, energy, materials and
freight are somewhat offset by pricing, operational improvements
and cost reductions.
-- Selling, general and administrative expenses as a percent of sales
are projected to be approximately 13.5 percent, including the
impact of expensing options.
-- Expected annual operating margins by segment are: architectural,
4.5 to 4.7 percent; large-scale optical, approximately 11 percent
(prior guidance was 11 to 12 percent); and auto glass,
approximately breakeven.
-- 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 $3 million.
-- Capital expenditures are projected to be $40 to $45 million,
including an estimated $25 million related to building the new
architectural glass fabrication plant.
-- Depreciation and amortization are estimated at $20 million for the
year.
-- Debt is expected to be approximately $50 to $60 million at year
end, reflecting borrowings for the new architectural glass
facility.
-- The effective tax rate for the full year is anticipated to be
approximately 35 percent.
-- Earnings per share from continuing operations are expected to
range from $0.88 to $0.94, including the $0.05 per share expense
related to adoption of FAS123R and the $0.04 per share benefit
from the flat glass class action settlement.
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) 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 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; 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 the second quarter of 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) self-insurance risk related to a material product liability event and to health insurance programs; 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 Item 1A of the company's Annual Report on Form 10-K for the fiscal year ended February 25, 2006.
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 21. To participate in the teleconference, call 1-866-713-8562 toll free or 617-597-5310 international, access code 62721479. The replay will be available from noon Central Time on Thursday, September 21, through midnight Central Time on Thursday, September 28 by calling 1-888-286-8010 toll free, access code 83267268. 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 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, except September 2, August 27, Change
for per share amounts 2006 2005
------------ ----------- -------
Net sales $188,642 $173,730 9%
Cost of goods sold 153,380 141,681 8%
------------ -----------
Gross profit 35,262 32,049 10%
Selling, general and administrative
expenses 24,792 24,381 2%
------------ -----------
Operating income 10,470 7,668 37%
Interest income 279 206 35%
Interest expense 812 565 44%
Other income (expense), net 30 73 -59%
Equity in income of affiliated
companies 1,473 1,256 17%
------------ -----------
Earnings before income taxes 11,440 8,638 32%
Income taxes 4,107 3,130 31%
------------ -----------
Net earnings $7,333 $5,508 33%
============ ===========
Net earnings per share - basic $0.27 $0.20 35%
Average common shares outstanding 27,586,396 27,591,362 0%
Net earnings per share - diluted $0.26 $0.20 30%
Average common and common
equivalent shares outstanding 27,993,684 28,017,502 0%
Cash dividends per common share $0.0650 $0.0625 4%
Twenty-seven Twenty-six
Weeks Ended Weeks Ended %
Dollar amounts in thousands, except September 2, August 27, Change
for per share amounts 2006 2005
------------ ----------- -------
Net sales $383,707 $337,862 14%
Cost of goods sold 315,088 275,964 14%
------------ -----------
Gross profit 68,619 61,898 11%
Selling, general and administrative
expenses 50,179 48,044 4%
------------ -----------
Operating income 18,440 13,854 33%
Interest income 601 393 53%
Interest expense 1,649 1,182 40%
Other income (expense), net (29) 39 N/M
Equity in income of affiliated
companies 1,283 1,446 -11%
------------ -----------
Earnings before income taxes 18,646 14,550 28%
Income taxes 6,571 5,102 29%
------------ -----------
Net earnings $12,075 $9,448 28%
============ ===========
Net earnings per share - basic $0.44 $0.34 29%
Average common shares outstanding 27,594,934 27,436,125 1%
Net earnings per share - diluted $0.43 $0.34 26%
Average common and common
equivalent shares outstanding 28,007,686 27,884,099 0%
Cash dividends per common share $0.1300 $0.1250 4%
----------------------------------------------------------------------
Business Segments Information
(Unaudited)
Thirteen Thirteen
Weeks Ended Weeks Ended %
September 2, August 27, Change
2006 2005
------------ ----------- -------
Sales
Architectural $163,242 $141,339 15%
Large-Scale Optical 18,513 24,333 -24%
Auto Glass 7,021 8,110 -13%
Eliminations (134) (52) -158%
------------ -----------
Total $188,642 $173,730 9%
============ ===========
Operating income (loss)
Architectural $9,193 $3,925 134%
Large-Scale Optical 1,892 5,024 -62%
Auto Glass 38 (555) N/M
Corporate and other (653) (726) 10%
------------ -----------
Total $10,470 $7,668 37%
============ ===========
Twenty-seven Twenty-six
Weeks Ended Weeks Ended %
September 2, August 27, Change
2006 2005
------------ ----------- -------
Sales
Architectural $328,505 $276,168 19%
Large-Scale Optical 40,278 45,099 -11%
Auto Glass 15,084 16,720 -10%
Eliminations (160) (125) -28%
------------ -----------
Total $383,707 $337,862 14%
============ ===========
Operating income (loss)
Architectural $14,760 $7,531 96%
Large-Scale Optical 5,025 8,106 -38%
Auto Glass (137) (481) 72%
Corporate and other (1,208) (1,302) 7%
------------ -----------
Total $18,440 $13,854 33%
============ ===========
----------------------------------------------------------------------
Consolidated Condensed Balance Sheets
(Unaudited)
September 2, February 25,
2006 2006
------------- -------------
Assets
Current assets $214,884 $203,134
Net property, plant and equipment 119,285 113,198
Other assets 88,029 87,626
------------- -------------
Total assets $422,198 $403,958
============= =============
Liabilities and shareholders' equity
Current liabilities $121,406 $127,809
Long-term debt 56,500 45,200
Other liabilities 30,920 31,896
Shareholders' equity 213,372 199,053
------------- -------------
Total liabilities and shareholders' equity $422,198 $403,958
============= =============
Apogee Enterprises, Inc. & Subsidiaries
Consolidated Condensed Statement of Cash Flows
(Unaudited)
Twenty-seven Twenty-six
Weeks Ended Weeks
Ended
Dollar amounts in thousands September 2, August 27,
2006 2005
------------ ----------
Net earnings $12,075 $9,448
Depreciation and amortization 10,113 9,111
Stock-based compensation 2,449 676
Results from equity investments (1,283) (1,446)
Other, net (2,298) (272)
Changes in operating assets and liabilities (20,028) (6,294)
------------ ----------
Net cash provided by continuing operating
activities 1,028 11,223
------------ ----------
Capital expenditures and acquisition of
intangible assets (16,066) (12,768)
Proceeds on sale of property 1,573 197
Net purchases of marketable securities (235) (154)
Other investing activities 5,000 -
------------ ----------
Net cash used in investing activities (9,728) (12,725)
------------ ----------
Net proceeds from long-term debt and revolving
credit agreement 11,300 3,700
Proceeds from issuance of common stock, net of
cancellations 2,050 2,596
Dividends paid (5,474) (3,478)
Other, net 1,282 (271)
------------ ----------
Net cash provided by financing activities 9,158 2,547
------------ ----------
Cash used by discontinued operations (445) (501)
------------ ----------
Increase in cash and cash equivalents 13 544
Cash and cash equivalents at beginning of year 4,676 5,967
------------ ----------
Cash and cash equivalents at end of period $4,689 $6,511
============ ==========
CONTACT: Apogee Enterprises, Inc., Minneapolis
Investor Relations:
Mary Ann Jackson, 952-487-7538
mjackson@apog.com
SOURCE: Apogee Enterprises, Inc.