Apogee Reports Improved Q4 and Full-Year Earnings of $0.19 and $0.85 Per Share, Respectively; Apogee Well-Positioned for FY07 Growth
MINNEAPOLIS--April 5, 2006--Apogee Enterprises, Inc. today announced fiscal 2006 fourth quarter and full-year earnings. Apogee develops and delivers value-added glass products and services for the architectural, large-scale optical and automotive industries.
FY06 FULL YEAR HIGHLIGHTS
-- Revenues increased 11 percent to $696.7 million.
-- Earnings were $0.85 per share, up significantly from earnings
of $0.60 per share a year ago.
-- Earnings include a one-time net tax benefit of $0.07 per
share in the third quarter.
-- Architectural segment revenues were up 11 percent, and
operating income increased 18 percent versus the prior-year
period.
-- Large-scale optical segment revenues increased 14 percent, and
operating income increased 53 percent versus the prior-year
period.
FY06 FOURTH QUARTER HIGHLIGHTS
-- Revenues of $181.5 million were up 4 percent versus the strong
prior-year period.
-- Earnings were $0.19 per share versus $0.13 per share a year
earlier.
-- Architectural segment revenues were up 6 percent, and
operating income more than doubled versus the prior-year
period.
-- As expected, large-scale optical segment revenues declined 3
percent, and operating income decreased 21 percent versus the
strong prior-year period.
Commentary
"We built momentum throughout fiscal 2006, as our architectural markets further strengthened, and we are solidly positioned for fiscal 2007," said Russell Huffer, Apogee chairman and chief executive officer. "We saw strong growth in revenues and earnings due to improved results in our strategic architectural and picture framing businesses.
"Our full-year expectations for the architectural segment operating margin fell slightly short at 3.2 percent, versus our guidance of 3.4 to 3.6 percent," he said. "Although we had improved operational performance in the rest of the architectural segment, our margin was adversely impacted by the glass installation business. As certain glass installation projects neared completion late in the year, our project costs were higher than anticipated, and we also had a higher mix of lower margin, older projects in this business. We are confident that our improved project selection process and improved market conditions will help us deliver better performance in fiscal 2007.
"Our architectural segment overall did see continued improvement in operations, commercial construction markets and pricing in the fourth quarter," said Huffer. "Large-scale optical segment results for the quarter reflected the unusual first-half inventory and promotion activities at some of our national retail accounts. Our fourth quarter picture framing sales and earnings were down compared to the prior-year period as the strong fiscal 2006 first half displaced value-added sales in the current quarter."
FOURTH QUARTER SEGMENT AND OPERATING HIGHLIGHTS
Architectural Products and Services
-- Revenues of $153.1 million were up 6 percent over the strong
prior-year period primarily due to higher pricing.
-- Operating income was $5.1 million, more than double that of a
year ago as improved pricing and product mix offset the higher
costs of materials, energy and health insurance.
-- Fiscal 2006 fourth quarter operating margin was 3.3
percent, compared to 1.8 percent in the prior-year period.
-- The prior-year period included a pre-tax charge of $0.6
million for disposition of certain assets.
-- Segment backlog was $321.0 million, compared to a backlog
of $220.1 million in the prior-year period and $316.6
million at the end of the third quarter.
-- Apogee's new architectural glass plant, which is expected to
begin operations in the first quarter of fiscal 2008, will be
located in St. George, Utah, to serve the robust demand in the
Southwest market for value-added glass. At a cost of
approximately $30 million, it is expected to add approximately
$40 million of additional annual sales capacity to Apogee's
glass fabrication at full production.
Large-Scale Optical Technologies
-- Revenues of $22.6 million were down 3 percent from the strong
prior-year period.
-- As expected, operating income was $3.4 million, down 21
percent from the prior-year period.
-- Operating margin in the fourth quarter was 15.2 percent,
versus 18.6 percent the prior-year period. In a shift from
traditional seasonality, the first half of the current
year had an unusually high value-added product mix,
reducing higher-margin product sales in the fourth
quarter.
Automotive Replacement Glass and Services
-- Revenues of $5.8 million decreased 25 percent compared to the
prior-year period. Sales of aftermarket automobile windshields
were lower.
-- There was an operating loss of $0.7 million, compared to
operating income of $0.3 million in the prior-year period.
Equity in Affiliates
-- Earnings were $0.1 million from investment in PPG Auto Glass,
LLC. This compares to a loss of $0.7 million in the prior-year
period. Volume, pricing and operations continue to improve.
Financial Condition
-- Long-term debt was $45.2 million at the end of the fourth
quarter, compared to $44.0 million at the end of the third
quarter and $35.2 million at the end of fiscal 2005.
-- Long-term debt-to-total-capital ratio remained at 18.5
percent compared to the third quarter and was up slightly
compared to the prior-year period.
-- Non-cash working capital (current assets, excluding cash, less
current liabilities) was $71.1 million, compared to $73.7
million in the third quarter and $61.6 million at the end of
fiscal 2005.
-- Year-to-date depreciation and amortization were $17.9 million,
up slightly from the prior year.
-- Capital expenditures for fiscal year 2006 were $30.2 million,
including investments in architectural glass capacity
expansions. This compares to capital expenditures of $26.4
million in the prior year, which included spending for an
architectural glass expansion and a $6.8 million acquisition.
-- Stock repurchases totaled $1.6 million, or 101,500 shares, in
the quarter.
OUTLOOK
"We are looking forward to another year of improved performance, as commercial construction markets continue to strengthen and we provide value-added products and services to meet energy-efficient, hurricane- and blast-resistant building requirements," said Huffer. "Our strong architectural backlog of more than $300 million in work, which is almost half of our expected fiscal 2007 architectural revenues, gives us confidence in our outlook for the year.
"We are poised for strong improvement in architectural segment operating margins in fiscal 2007," he said. "Strong markets and backlog, combined with our new capacity and improved factory operations, support our achievement of higher margins. In addition, we expect improved execution and project selection in our glass installation business.
"We also anticipate another year of solid performance in our large-scale optical segment, with continued conversion of the market to value-added picture framing glass that reduces fading and reflection," said Huffer. "We are seeing some recent changes in national retail chains that offer custom framing, which raise some uncertainty as we enter fiscal 2007.
"We are anticipating earnings of $0.88 to $0.94 per share for fiscal 2007, which includes $0.05 per share for the non-cash expensing of options. This is strong earnings growth compared to fiscal 2006, which included the impact of one-time net tax benefits of $0.07 per share in the third quarter," he said. "These anticipated earnings are based on expected revenue growth of 5 to 9 percent. This outlook will help us achieve our longer-term goals of 8 percent annual growth in revenues and 20 percent growth in earnings per share over our current five-year strategic plan."
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 5 to 9 percent.
-- Architectural segment revenues are expected to increase 6
to 9 percent for the year.
-- Growth is expected due to market improvement and some
market share gain despite capacity constraints.
-- Large-scale optical segment revenues are expected to be up
3 to 5 percent, with continued mix shift in picture
framing glazing products.
-- Auto glass segment revenues are expected to be flat
compared to fiscal 2006.
-- Annual gross margins are expected to be up in fiscal 2007 from
fiscal 2006 as pricing, operational improvements and cost
reductions are somewhat offset by higher costs for wages,
energy, materials and freight.
-- Expected annual operating margins by segment are:
architectural, 4.4 to 4.6 percent; large-scale optical,
approximately 14 percent; and auto glass, slightly better
than breakeven.
-- Selling, general and administrative expenses as a percent of
sales are projected to continue to be slightly more than 14
percent, including the impact of expensing options.
-- 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 due to increased
volume and operational improvements.
-- Capital expenditures are projected to be $40 to $45 million,
including an estimated $25 million related to building the new
architectural glass plant.
-- Depreciation and amortization are estimated at $19 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
impact of expensing options.
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) 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, April 6. To participate in the teleconference, call 1-800-299-6183 toll free or 617-801-9713 international, access code 79492126. The replay will be available from noon Central Time on Thursday, April 6, through midnight Central Time on Thursday, April 13 by calling 1-888-286-8010 toll free, access code 39108767. 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)
Dollar amounts in Thirteen Thirteen
thousands, except for per Weeks Ended Weeks Ended %
share amounts February 25, 2006 February 26, 2005 Change
----------------- ----------------- ------
Net sales $181,451 $174,809 4%
Cost of goods sold 147,219 143,161 3%
----------------- -----------------
Gross profit 34,232 31,648 8%
Selling, general and
administrative expenses 27,263 25,063 9%
----------------- -----------------
Operating income 6,969 6,585 6%
Interest income 215 77 179%
Interest expense 674 571 18%
Other income, net 46 36 28%
Equity in income (loss) of
affiliated companies 53 (724) N/M
----------------- -----------------
Earnings from continuing
operations before income
taxes and other items
below 6,609 5,403 22%
Income taxes 1,263 1,792 -30%
----------------- -----------------
Earnings from continuing
operations 5,346 3,611 48%
Earnings from discontinued
operations - - -
----------------- -----------------
Net earnings $5,346 $3,611 48%
================= =================
Net earnings per share -
basic: $0.20 $0.13 54%
Average common shares
outstanding 27,365,065 27,082,692 1%
Net earnings per share -
diluted: $0.19 $0.13 46%
Average common and common
equivalent shares
outstanding 28,107,836 27,663,312 2%
Cash dividends per common
share $0.0650 $0.0625 4%
Dollar amounts in Fifty-two Fifty-two
thousands, except for per Weeks Ended Weeks Ended %
share amounts February 25, 2006 February 26, 2005 Change
----------------- ----------------- ------
Net sales $696,733 $628,813 11%
Cost of goods sold 566,671 513,095 10%
----------------- -----------------
Gross profit 130,062 115,718 12%
Selling, general and
administrative expenses 99,845 89,440 12%
----------------- -----------------
Operating income 30,217 26,278 15%
Interest income 805 1,963 -59%
Interest expense 2,480 3,218 -23%
Other income, net 66 230 -71%
Equity in income (loss) of
affiliated companies 2,623 (1,272) N/M
----------------- -----------------
Earnings from continuing
operations before income
taxes and other items
below 31,231 23,981 30%
Income taxes 7,463 7,403 1%
----------------- -----------------
Earnings from continuing
operations 23,768 16,578 43%
Earnings from discontinued
operations - 67 -100%
----------------- -----------------
Net earnings $23,768 $16,645 43%
================= =================
Net earnings per share -
basic: $0.87 $0.61 43%
Average common shares
outstanding 27,406,504 27,071,278 1%
Net earnings per share -
diluted: $0.85 $0.60 42%
Average common and common
equivalent shares
outstanding 28,003,040 27,715,530 1%
Cash dividends per common
share $0.2550 $0.2450 4%
----------------------------------------------------------------------
Business Segments Information
(Unaudited)
Thirteen Thirteen
Weeks Ended Weeks Ended %
February 25, 2006 February 26, 2005 Change
----------------- ----------------- ------
Sales
Architectural $153,105 $143,789 6%
Large-Scale Optical 22,554 23,331 -3%
Auto Glass 5,808 7,696 -25%
Eliminations (16) (7) -129%
----------------- -----------------
Total $181,451 $174,809 4%
================= =================
Operating income (loss)
Architectural $5,060 $2,517 101%
Large-Scale Optical 3,420 4,333 -21%
Auto Glass (691) 274 N/M
Corporate and other (820) (539) -52%
----------------- -----------------
Total $6,969 $6,585 6%
================= =================
Fifty-two Fifty-two
Weeks Ended Weeks Ended %
February 25, 2006 February 26, 2005 Change
----------------- ----------------- ------
Sales
Architectural $576,189 $516,879 11%
Large-Scale Optical 89,313 78,399 14%
Auto Glass 31,404 33,581 -6%
Eliminations (173) (46) -276%
----------------- -----------------
Total $696,733 $628,813 11%
================= =================
Operating income (loss)
Architectural $18,424 $15,575 18%
Large-Scale Optical 15,122 9,862 53%
Auto Glass (677) 3,237 N/M
Corporate and other (2,652) (2,396) -11%
----------------- -----------------
Total $30,217 $26,278 15%
================= =================
----------------------------------------------------------------------
Consolidated Condensed Balance Sheets
(Unaudited)
February 25, February 26,
2006 2005
----------------- -----------------
Assets
Current assets $203,134 $187,106
Net property, plant and
equipment 113,198 100,539
Other assets 87,252 80,820
----------------- -----------------
Total assets $403,584 $368,465
================= =================
Liabilities and
shareholders' equity
Current liabilities $127,336 $119,492
Long-term debt 45,200 35,150
Other liabilities 31,995 35,743
Shareholders' equity 199,053 178,080
----------------- -----------------
Total liabilities and
shareholders' equity $403,584 $368,465
================= =================
N/M = Not meaningful
Apogee Enterprises, Inc. & Subsidiaries
Consolidated Condensed Statement of Cash Flows
(Unaudited)
Fifty-two Fifty-two
Weeks Ended Weeks Ended
Dollar amounts in thousands February 25, 2006 February 26, 2005
----------------- -----------------
Net earnings $23,768 $16,645
Net loss from discontinued
operations - (67)
Depreciation and amortization 17,871 17,501
Results from equity investments (2,623) 1,272
Other, net 1,068 1,003
Changes in operating assets and
liabilities (9,627) (2,904)
----------------- -----------------
Net cash provided by continuing
operating activities 30,457 33,450
----------------- -----------------
Capital expenditures and
acquisition of intangibles (29,739) (19,618)
Proceeds on sale of property 200 1,044
Acquisition of businesses, net of
cash acquired (420) (6,804)
Net purchases of marketable
securities (4,127) (149)
Other investing activities - (12)
----------------- -----------------
Net cash used in investing
activities (34,086) (25,539)
----------------- -----------------
Net proceeds from (payments on)
long-term debt and revolving
credit agreement 9,900 (4,658)
Proceeds from issuance of common
stock, net of cancellations 4,685 831
Repurchase and retirement of
common stock (4,044) (1,859)
Dividends paid (7,093) (6,695)
Other, net (350) -
----------------- -----------------
Net cash provided by (used in)
financing activities 3,098 (12,381)
----------------- -----------------
Cash (used in) provided by
discontinued operations (760) 2,615
----------------- -----------------
Decrease in cash and cash
equivalents (1,291) (1,855)
Cash and cash equivalents at
beginning of year 5,967 7,822
----------------- -----------------
Cash and cash equivalents at end
of period $4,676 $5,967
================= =================