Apogee Enterprises, Inc. Reports Record Second Quarter Earnings
18 September 1997
Apogee Enterprises, Inc. Reports Record Second Quarter Earnings
* Second quarter earnings increased 21%, mainly on higher operating
profitability.
* An expected decrease in sales at Building Products & Services offset
otherwise solid sales.
* Operating income rose 15% due to strong results at Glass Technologies
and Auto Glass:
-- Glass Technologies operating income rose 103% on 17% sales growth.
-- Auto Glass operating income increased 30%, with 15% higher sales.
-- Building Products & Services posted an operating loss, as losses
mainly related to a single curtainwall project in Europe more than
offset solid profits in the segment's other units.
Second Quarter Fiscal 1998 Highlights
(Amounts in thousands, except per share data and percentages)
Second Quarter Ended % Six Months Ended %
8/30/97 8/31/96 Change 8/30/97 8/31/96 Change
Net Sales $ 253,072$ 253,154 0% $ 497,854 $ 81,762 3%
Net Earnings $ 9,657$ 7,980 21% $ 16,431 $ 12,956 27%
Earnings per
Share $ 0.34$ 0.2 21% $ 0.58 $ 0.47 23%
Average Shares
Outstanding 28,441 28,015 2% 28,475 27,839 2%
Operating Income
(Loss) $ 16,631$ 14,524 15% $ 29,959 $ 24,881 20%
-- Glass
Technologies $ 7,907$ 3,904 103% $ 13,184 $ 7,927 66%
-- Auto Glass $ 11,417$ 8,769 30% $ 17,762 $ 14,974 19%
-- Building Products
& Services $ (2,374)$ 2,125 N/M $ (640) $ 2,686 N/M
-- Corporate and
other $ (319)$ (274) 16% $ (347) $ (706) (51)%
"Apogee's strategy will continue to focus on growing the Glass
Technologies and Auto Glass business units while we dramatically downsize our
New Construction curtainwall business. Apogee's second quarter results
clearly demonstrate that we are on the right course. We are downsizing and
restructuring our curtainwall operations to focus on our core markets -- the
United States and the United Kingdom -- and significantly improve the unit's
profitability."
-- Donald W. Goldfus, Chairman, Chief Executive Officer and President
MINNEAPOLIS, Minn., Sept. 18 -- Continued strong growth in
Glass Technologies and solid Auto Glass results led to record earnings for
Apogee Enterprises, Inc. in the second quarter of fiscal 1998.
Net earnings for the second quarter ended August 30, 1997, rose 21 percent
to $9.7 million from $8.0 million in last year's second quarter. Earnings per
share increased 21 percent to $0.34 from $0.28 in the year-ago quarter,
reflecting Apogee's 2:1 stock split effective February 14, 1997.
The earnings growth was driven by a 15 percent increase in operating
income to $16.6 million, led by solid growth at Glass Technologies and Auto
Glass. Productivity gains at most of Apogee's operations, significantly lower
insurance costs due to improved claims experience and a change in sales mix
away from the low-margin curtainwall construction activity of the New
Construction unit of Building Products & Services combined to produce an
improvement in overall gross margin. A lower effective income tax rate also
contributed to the earnings improvement. Consolidated sales were $253.1
million, essentially even with last year's second quarter, as double-digit
growth at Glass Technologies and Auto Glass were matched by a large, expected
decrease in sales in the New Construction curtainwall unit of Building
Products & Services.
"Apogee's strategy will continue to focus on growing the Glass
Technologies and Auto Glass business units while we dramatically downsize our
New Construction curtainwall business. Apogee's second quarter results
clearly demonstrate that we are on the right course," said Donald W. Goldfus,
Chairman, Chief Executive Officer and President. "We are downsizing and
restructuring our curtainwall operations to focus on our core markets -- the
United States and the United Kingdom -- and significantly improve the unit's
profitability."
Goldfus noted Apogee's August 21 release announcing a restructuring of the
company's New Construction curtainwall unit, which is part of its Building
Products & Services segment. Apogee anticipates taking a third-quarter charge
of between $11 million and $16 million to exit its Asian operations and
rationalize its excess manufacturing capacity in Europe.
He concluded, "When this restructuring process is completed, our
curtainwall business will be the right size and in the right markets to have
the potential for attractive returns. Going forward, after the restructuring,
this unit should be less than 12 percent of Apogee's total revenues and it is
our expectation that it will be profitable. With the other units in Building
Products & Services already solidly profitable, and with ongoing improvements
in our Auto Glass business and strong growth in Glass Technologies, Apogee may
finally be in a position to generate solid returns on all cylinders."
Glass Technologies -- Operating Profit Climbs 103 Percent
Second quarter operating income in the Glass Technologies segment climbed
103 percent to $7.9 million, as sales rose 17 percent to $58.0 million.
Viracon turned in a solid quarter, with stronger margins and product shipments
that better reflected ongoing customer demand. Goldfus noted that Viracon's
first quarter results were hampered by delays in the timing of customer
orders.
The segment's operating income gained a positive boost from Viratec, which
had a small loss in last year's second quarter. While Viratec's flat glass
operations continued to do well, the main improvement in profitability was due
to the coating of curved glass surfaces of cathode ray tubes (CaRT(R)), which
operated at a modest profit during the quarter compared with a loss in the
year-ago quarter. Goldfus said the increase in CaRT volumes is positive and
builds on the progress that began in the first quarter, but he emphasized that
significantly higher volumes are needed to achieve attractive returns from
this operation.
Auto Glass -- Portland Acquisition Boosts Results
Auto Glass sales increased 15 percent in the second quarter to $97.3
million. Approximately half of the sales growth was due to the fourth quarter
fiscal 1997 acquisition of Portland Glass. Improved margins, mainly as a
result of increased selling prices, contributed to a 30 percent rise in
operating income to $11.4 million.
Goldfus said margins could be significantly higher in the Auto Glass
segment, particularly at Harmon AutoGlass, the segment's largest business, and
this continues to be a priority for improvement. During the second quarter,
Harmon's same-store sales rose slightly from the year-ago quarter. Harmon had
323 shops in over 40 states at the close of the second quarter.
Building Products & Services -- Loss Mainly Due to Single Curtainwall
Project in Europe
The Building Products & Services segment reported an operating loss of
$2.4 million compared with operating income of $2.1 million in the year-ago
quarter. Goldfus said the loss was principally due to a single curtainwall
project in Europe. On this European project, Apogee recognized a loss of
approximately $10 million during the quarter. This more than offset excellent
results at the segment's Architectural Products unit, Detention/Security unit
and Full Service unit, although the New Construction's domestic curtainwall
operations posted a modest profit during the second quarter.
As expected, the segment's sales decreased 18 percent to $100.5 million
during the second quarter, as the company continues to focus its New
Construction unit on curtainwall projects with lower risk and higher return
potential. All of the sales decrease was in the curtainwall business; the
other units in Building Products & Services showed an increase in revenues of
5 percent quarter over quarter and operating income was up substantially more.
As a result, Building Products & Services sales decreased to less than 40
percent of Apogee's total in the second quarter, the lowest percentage in
several years. Goldfus said New Construction sales will decrease further in
the quarters ahead with the restructuring that is planned to begin in the
third quarter. He added that once the restructuring is completed, the
Building Products & Services segment may see some modest growth in revenues
due to the ongoing growth of the segment's Architectural Products,
Detention/Security and Full Service units.
Six-Month Results
For the six-month period ended August 30, 1997, Apogee's net earnings
increased 27 percent to $16.4 million or $0.58 per share, compared with $13.0
million or $0.47 per share, reflecting Apogee's 2:1 stock split effective
February 14, 1997. Most of the improvement was due to a 20 percent rise in
operating income to $30.0 million, led by 66 percent growth in Glass
Technologies and a 19 percent increase in Auto Glass. After a strong first-
quarter comparison, Building Products & Services had a small operating loss
for the six-month period due to large losses in its European curtainwall
operations during the second quarter, principally as a result of a single
project. Consolidated sales increased 3 percent to $497.9 million for the
six-month period. Double-digit sales growth in both Glass Technologies and
Auto Glass was offset by an 11 percent decrease at Building Products &
Services.
Balance Sheet Review
During the second quarter, Apogee reduced its long-term debt by $15.2
million from the prior quarter. At the close of the second quarter, long-term
debt was $125.2 million or 38 percent of total invested capital. Working
capital was $119.7 million compared with $101.7 million in the year-ago
quarter. Shareholders' equity was $181.9 million, or $6.54 per share,
compared with $150.2 million or $5.50 per share in the same quarter last year,
reflecting the 2:1 stock split.
Cautionary Statement
The discussion above contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. A number of
factors should be considered in conjunction with the above forward-looking
statements, including changes in economic and market conditions, factors
related to competitive pricing, commercial building market conditions,
management of growth, the integration of acquisitions, the realization of
expected economies gained through expansion and information systems
technology, and other factors are set forth in the cautionary statements
included in Exhibit 99 to Apogee's Form 10-K filed with the Securities and
Exchange Commission. Apogee wishes to caution investors and others to review
the statements set forth in Exhibit 99 and that other factors may prove to be
important in affecting Apogee's business or results of operations.
Apogee Enterprises, Inc. is a leading fabricator, distributor and
installer of value-added glass products and systems. The company is organized
into three operating segments: Building Products & Services (BPS), Glass
Technologies (GT) and Auto Glass (AG). Headquartered in Minneapolis, the
company's stock is traded on the Nasdaq Stock Market under the symbol APOG.
For more information on Apogee Enterprises, Inc. via facsimile at no cost,
simply dial 1-800-PRO-INFO and enter the company code ticker APOG.
Apogee Enterprises, Inc.
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Unaudited)
Thirteen Thirteen Pct. Twenty-six Twenty-six Pct.
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
Aug. 30, Aug. 31, Aug. 30, Aug. 31,
Net sales $253,072 $253,154 0% $497,854 $481,762 3%
Cost of goods sold204,220 205,865 (1%) 403,321 397,942 1%
Gross profit 48,852 47,289 3% 94,533 83,820 13%
Selling, general
and administrative
expenses 32,220 32,765 (2%) 64,574 58,939 10%
Operating income 16,632 14,524 15% 29,959 24,881 20%
Interest expense, net1,755 1,901 (8%) 4,059 4,256 (5%)
Other income -- -- N/M -- -- N/M
Earnings before income taxes
and other items
below 14,877 12,623 18% 25,900 20,625 26%
Income taxes 5,065 4,629 9% 9,065 7,583 20%
Equity in net
loss of affiliates 154 -- N/M 404 60 573%
Minority interest -- 14 (100%) -- 26 (100%)
Net earnings $9,658 $7,980 21% $16,431 $12,956 27%
Earnings per share $0.34 $0.28 21% $0.58 $0.47 23%
Average common and common
equivalent shares
outstanding 28,441,118 28,015,052 2% 28,475,263 27,838,650 2%
Cash dividends
per common share $0.045 $0.040 13% $0.090 $0.080 13%
BUSINESS SEGMENTS INFORMATION
(Unaudited)
Thirteen Thirteen Pct. Twenty-six Twenty-six Pct.
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
Aug. 30, Aug. 31, Aug. 30, Aug. 31,
Sales
Building products
& services $100,464 $122,012 (18%) $205,187 $231,202 (11%)
Glass technologies58,005 49,474 17% 110,050 93,743 17%
Auto glass 97,296 84,429 15% 187,553 162,847 15%
Eliminations (2,693) (2,761) (3%) (4,936) (6,030) (18%)
Total $253,072 $253,154 0% $497,854 $481,762 3%
Operating Income (Loss)
Building products
& services ($2,374) $2,125 N/M ($640) $2,686 N/M
Glass technologies 7,907 3,904 103% 13,184 7,927 66%
Auto glass 11,417 8,769 30% 17,762 14,974 19%
Corporate and other(319) (274) 0.16 (347) (706) (0.51)
Total $16,631 $14,524 0.15 $29,959 $24,881 0.2
SOURCE Apogee Enterprises