Apogee Enterprises 3rd Quarter EPS Increases; Apogee Increases Guidance for Fiscal 2006 to Reflect One-Time Item
MINNEAPOLIS--Dec. 1, 20054, 2005--Apogee Enterprises, Inc. today announced fiscal 2006 third quarter earnings. Apogee develops and delivers value-added glass products and services for the architectural, large-scale optical and automotive industries.
THIRD QUARTER HIGHLIGHTS
-- Earnings from continuing operations were $0.32 per share,
versus $0.20 per share a year earlier.
-- Current-quarter earnings include a $0.07 per share net tax
benefit resulting from the resolution of certain tax
matters.
-- Excluding the tax benefit, earnings were $0.25 per share,
up 25 percent from the prior-year period earnings of $0.20
per share.
-- Operating margin was 5.3 percent, relatively flat compared
to 5.4 percent in the prior-year period.
-- Revenues from continuing operations of $177.4 million were up
13 percent versus the prior-year period.
-- Architectural segment revenues were up 13 percent, and
operating income increased 11 percent versus the prior-year
period.
-- Architectural backlog grew 49 percent to $316.6 million,
compared to the prior-year period.
-- Large-scale optical segment revenues increased 15 percent,
while operating income increased 10 percent versus the
prior-year period.
-- Increased full-year guidance from $0.74 to $0.80 per share, to
$0.81 to $0.87 per share to reflect the net tax benefit of
$0.07 per share in the current quarter.
Commentary
"Continuing our momentum, we have completed another solid quarter. We met our expectations for growth in both revenues and earnings," said Russell Huffer, Apogee chairman and chief executive officer. "We remain optimistic about our outlook for the remainder of the year.
"In the third quarter, our architectural segment continued to grow revenues as it gained market share, while our picture framing business is successfully converting customers to higher value-added products," he said.
SEGMENT AND OPERATING HIGHLIGHTS
Architectural Products and Services
-- Revenues of $146.9 million were up 13 percent over the
prior-year period. The greatest sales increases were in the
two largest architectural segment businesses - installation
and glass fabrication.
-- Operating income was $5.8 million, up 11 percent from a year
ago.
-- Operating margin of 4.0 percent increased from the
first-half margin of 2.7 percent, as expected, and was
flat compared to the prior-year period operating margin of
4.0 percent.
-- Segment backlog was $316.6 million, compared to a backlog
of $212.5 million in the prior-year period and $276.5
million at the end of the second quarter. The majority of
the growth in the backlog from the second quarter is work
scheduled for late fiscal 2007 and early fiscal 2008.
Large-Scale Optical Technologies
-- Revenues of $21.7 million were up 15 percent over the
prior-year period. Sales of higher value-added picture framing
and framed art products continue to grow.
-- Operating income was $3.6 million, up 10 percent from the
prior-year period. Contributing to increased earnings were the
ongoing conversion of the custom framing market to value-added
glass, and improved results from the remaining consumer
electronics products.
-- Operating margin in the third quarter was 16.6 percent,
versus 17.4 percent the prior-year period. The first half
of the current year had an unusually high value-added
product mix, offsetting a portion of the traditionally
stronger second half business.
Automotive Replacement Glass and Services
-- Revenues of $8.9 million increased 11 percent compared to the
prior-year period.
-- Operating income was slightly positive at $0.5 million, as
expected, compared to $0.6 million in the prior-year period.
Equity in Affiliates
-- Earnings were $1.1 million from investment in PPG Auto Glass,
LLC, as expected. This compares to a loss of $0.1 million in
the prior-year period. Volume, pricing and operations continue
to improve.
Financial Condition
-- Long-term debt was $44.0 million at the end of the third
quarter, compared to $39.0 million at the end of the second
quarter and $35.2 million at the end of fiscal 2005.
-- Long-term debt-to-total-capital ratio was 18.5 percent.
-- Non-cash working capital (current assets, excluding cash, less
current liabilities) was $73.7 million, compared to $68.2
million in the second quarter and $61.6 million at the end of
fiscal 2005.
-- Year-to-date depreciation and amortization were $13.5 million,
up 1 percent compared to the prior-year period.
-- Capital expenditures were $22.0 million year-to-date,
including investments in architectural glass capacity
expansions. This compares to capital expenditures of $14.5
million in the same prior-year period.
-- Current-quarter earnings include a $0.07 per share net tax
benefit, resulting from the resolution of certain tax matters,
including completion of various audits and reviews by taxing
authorities.
-- Stock repurchases totaled $2.4 million, or 148,500 shares, in
the quarter.
OUTLOOK
"We have increased our fiscal 2006 guidance to $0.81 to $0.87 per share to reflect the net tax benefits, and management is focused on delivering results in the top half of this range," Huffer said. "We are encouraged by our performance to date and improving market conditions. The timing of project flow in the fourth quarter could impact our performance within the guidance range.
"We have slightly increased our revenue outlook to growth of 10 to 12 percent for the current year," he added.
"In the fourth quarter, we are anticipating a stronger operating performance from our architectural segment, which continues to build momentum," said Huffer. "Markets are strengthening, we're seeing pricing increases in our architectural glass business, and project mix is improving in both our installation and architectural glass operations with the flow of our backlog. The strength of our backlog is also very encouraging, with a solid fourth quarter position and a good base of business going into next year.
"Our full-year outlook for the architectural segment includes slightly stronger revenue growth than previously expected and somewhat lower full-year margins than prior guidance. The margin change results from the carryover effect of unplanned equipment downtime and startup of new equipment earlier in the year," he said.
"In our large-scale optical segment, we are anticipating stronger full year sales versus the prior year, driven by growth in the first half," he said. "We expect that our auto glass manufacturing business will meet guidance of break-even performance for the year, while generating cash.
"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 10 to
12 percent (prior guidance was 9 to 11 percent).
-- Architectural segment revenues are expected to increase 11
to 13 percent for the year (prior guidance was 10 to 12
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
10 to 12 percent, with growth in picture framing glazing
and framed art products continuing to be somewhat offset
by the shift away from certain 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, 3.4 to 3.6 percent (prior guidance was 3.6
to 4.0 percent), down slightly as a result of the carryover
effect of unplanned equipment downtime and startup of new
equipment earlier in the year; large-scale optical,
approximately 16 percent (prior guidance was 15 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 slightly higher than 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 more than $2 million due to increased
volume and operational improvements.
-- Capital expenditures are projected to be approximately $30
million.
-- Depreciation and amortization are estimated at $18 to $19
million for the year (prior guidance was $19 to $20 million).
-- Debt is expected to be approximately $45 to $50 million at
year end (prior guidance was $45 million).
-- The effective tax rate for the full year is anticipated to be
27 to 28 percent (prior guidance was 34 percent), including
the effect of the third quarter net benefit.
-- Earnings per share from continuing operations are expected to
range from $0.81 to $0.87.
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 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) 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, December 15. To participate in the teleconference, call 1-800-901-5247 toll free or 617-786-4501 international, access code 25387860. The replay will be available from noon Central Time on Thursday, December 15, through midnight Central Time on Thursday, December 22 by calling 1-888-286-8010 toll free, access code 89880518. 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 November 26, 2005 November 27, 2004 Change
thousands, except for per
share amounts
----------------- ----------------- -------
Net sales $177,420 $157,146 13%
Cost of goods sold 143,489 127,034 13%
----------------- -----------------
Gross profit 33,931 30,112 13%
Selling, general and
administrative expenses 24,537 21,648 13%
----------------- -----------------
Operating income 9,394 8,464 11%
Interest income 197 348 -43%
Interest expense 624 872 -28%
Other (expense) income,
net (19) 232 N/M
Equity in (loss) income of
affiliated companies 1,124 (82) N/M
----------------- -----------------
Earnings from
continuing
operations
before income
taxes and other
items below 10,072 8,090 24%
Income taxes 1,099 2,533 -57%
----------------- -----------------
Earnings from
continuing
operations 8,973 5,557 61%
Earnings from discontinued
operations - - -
----------------- -----------------
Net earnings $8,973 $5,557 61%
================= =================
Net earnings per share -
basic $0.33 $0.21 57%
Average common shares
outstanding 27,388,701 27,031,979 1%
Net earnings per share -
diluted $0.32 $0.20 60%
Average common and common
equivalent shares
outstanding 28,136,534 27,781,223 1%
Cash dividends per common
share $0.0650 $0.0625 4%
Thirty-nine Thirty-nine
Weeks Ended Weeks Ended %
Dollar amounts in November 26, 2005 November 27, 2004 Change
thousands, except for per
share amounts
----------------- ----------------- -------
Net sales $515,281 $454,004 13%
Cost of goods sold 419,453 369,934 13%
----------------- -----------------
Gross profit 95,828 84,070 14%
Selling, general and
administrative expenses 72,580 64,378 13%
----------------- -----------------
Operating income 23,248 19,692 18%
Interest income 590 1,886 -69%
Interest expense 1,807 2,647 -32%
Other (expense) income,
net 21 195 -89%
Equity in (loss) income of
affiliated companies 2,570 (548) N/M
----------------- -----------------
Earnings from
continuing
operations
before income
taxes and other
items below 24,622 18,578 33%
Income taxes 6,200 5,611 10%
----------------- -----------------
Earnings from
continuing
operations 18,422 12,967 42%
Earnings from discontinued
operations - 67 -100%
----------------- -----------------
Net earnings $18,422 $13,034 41%
================= =================
Net earnings per share -
basic $0.67 $0.48 40%
Average common shares
outstanding 27,420,317 27,067,473 1%
Net earnings per share -
diluted $0.66 $0.47 40%
Average common and common
equivalent shares
outstanding 27,968,108 27,732,936 1%
Cash dividends per common
share $0.1900 $0.1825 4%
----------------------------------------------------------------------
Business Segments Information
(Unaudited)
Thirteen Thirteen
Weeks Ended Weeks Ended %
November 26, 2005 November 27, 2004 Change
----------------- ----------------- -------
Sales
Architectural $146,916 $130,329 13%
Large-Scale Optical 21,660 18,814 15%
Auto Glass 8,876 8,021 11%
Eliminations (32) (18) -78%
----------------- -----------------
Total $177,420 $157,146 13%
================= =================
Operating income (loss)
Architectural $5,833 $5,251 11%
Large-Scale Optical 3,596 3,280 10%
Auto Glass 496 584 -15%
Corporate and other (531) (651) 18%
----------------- -----------------
Total $9,394 $8,464 11%
================= =================
Thirty-nine Thirty-nine
Weeks Ended Weeks Ended %
November 26, 2005 November 27, 2004 Change
----------------- ----------------- -------
Sales
Architectural $423,084 $373,090 13%
Large-Scale Optical 66,759 55,069 21%
Auto Glass 25,596 25,885 -1%
Eliminations (158) (40) -295%
----------------- -----------------
Total $515,281 $454,004 13%
================= =================
Operating income (loss)
Architectural $13,364 $13,058 2%
Large-Scale Optical 11,702 5,530 112%
Auto Glass 14 2,963 -100%
Corporate and other (1,832) (1,859) 1%
----------------- -----------------
Total $23,248 $19,692 18%
================= =================
----------------------------------------------------------------------
Consolidated Condensed Balance Sheets
(Unaudited)
November 26, February 26,
2005 2005
============= ============
Assets
Current assets $198,994 $187,106
Net property, plant and equipment 109,551 100,539
Other assets 83,137 80,820
------------- ------------
Total assets $391,682 $368,465
============= ============
Liabilities and shareholders' equity
Current liabilities $121,524 $119,492
Long-term debt 44,000 35,150
Other liabilities 32,454 35,743
Shareholders' equity 193,704 178,080
------------- ------------
Total liabilities and shareholders' equity $391,682 $368,465
============= ============
N/M = Not meaningful
Apogee Enterprises, Inc. & Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
Thirty-nine Thirty-nine
Weeks Ended Weeks Ended
Dollar amounts in thousands November 26, 2005 November 27, 2004
------------------ -----------------
Net earnings $18,422 $13,034
Net (income) loss from
discontinued operations - (67)
Depreciation and amortization 13,526 13,415
Equity in (income) loss of
affiliated companies (2,570) 548
Other, net (994) (1,888)
Changes in operating assets and
liabilities (11,268) (3,250)
------------------ -----------------
Net cash provided by operating
activities 17,116 21,792
------------------ -----------------
Capital expenditures and
acquisition of intangible assets (22,494) (14,515)
Proceeds on sale of property 369 4,450
Net (purchases) sales of
marketable securities (794) 796
Other investing activities - (12)
------------------ -----------------
Net cash used in investing
activities (22,919) (9,281)
------------------ -----------------
Proceeds from (payments on) long-
term debt and revolving credit
agreement 8,700 (4,658)
Proceeds from issuance of common
stock, net of cancellations 2,888 792
Repurchase and retirement of
common stock (2,397) (1,909)
Dividends paid (5,282) (4,988)
Other, net (350) -
------------------ -----------------
Net cash provided by (used in)
financing activities 3,559 (10,763)
------------------ -----------------
(Decrease) increase in cash and
cash equivalents (2,244) 1,748
Cash and cash equivalents at
beginning of year 5,967 7,822
------------------ -----------------
Cash and cash equivalents at end
of period 3,723 $9,570
================== =================