- Revenues up 16%
- Operating margin up 260 basis
points
- EPS up 54%
- FY17 outlook: ~10% revenue growth; EPS
range raised to $2.80-$2.90
Apogee Enterprises, Inc. (Nasdaq:APOG) today announced fiscal
2017 second-quarter results. Apogee provides distinctive solutions
for enclosing commercial buildings and framing art.
FY17 SECOND QUARTER VS. PRIOR-YEAR PERIOD
- Revenues of $278.5 million were up 16
percent.
- Operating income of $33.0 million was
up 47 percent.
- Operating margin was 11.9 percent, up
260 basis points.
- Earnings per share of $0.77 were up 54
percent.
- Backlog of $447.7 million was down 13
percent.
- Cash and short-term investments were
$94.6 million.
COMMENTARY“Second quarter results were outstanding, as we
delivered record quarterly revenues, operating margin and earnings
per share – revenues grew 16 percent to $279 million, the operating
margin of 11.9 percent was up 260 basis points, and earnings per
share of $0.77 increased 54 percent,” said Joseph F. Puishys,
Apogee chief executive officer. “The strength we are seeing in our
non-residential construction end markets is evident in the results
from our architectural segments. All three architectural segments
grew revenues and operating income, with operating margins all
increasing more than 200 basis points.
“We continue to see strong non-residential construction market
conditions and order activity, and have extensive visibility to
future work, giving us confidence in our outlook for fiscal 2017
and beyond,” he said. “Backlog grew both sequentially and year on
year in our architectural glass and framing systems segments
combined. The decline in the consolidated backlog resulted from the
inconsistent timing of committed architectural services segment
projects progressing to signed contracts in the quarter. This
business continues to have an impressive pipeline of active bids.
As we’ve stated for some time, the architectural services projects
business has uneven quarter-to-quarter revenues and backlog.
“With our strong operational performance in healthy commercial
construction markets, we are once again increasing our earnings per
share outlook range for fiscal 2017 to $2.80 to $2.90, up from
$2.70 to $2.85,” said Puishys.
FY17 SECOND-QUARTER SEGMENT AND OPERATING RESULTS VS.
PRIOR-YEAR PERIOD
Architectural Glass
- Revenues of $99.2 million were up 7
percent, on U.S. volume growth and improved pricing and mix.
- Operating income grew to $9.6 million,
up 43 percent.
- Operating margin expanded 240 basis
points to 9.7 percent, on improved productivity, and pricing and
mix, as well as volume growth.
Architectural Services
- Revenues of $77.7 million were up 49
percent, as project timing drove high revenue levels in the
quarter.
- Operating income more than tripled to
$6.2 million.
- Operating margin expanded 530 basis
points to 8.0 percent, due to leverage on strong volume at better
project margins and good project execution.
Architectural Framing Systems
- Revenues of $92.2 million were up 14
percent, on volume growth in all four businesses, along with
improved pricing and mix.
- Operating income grew to $13.0 million,
up 34 percent.
- Operating margin expanded 210 basis
points to 14.1 percent, as a result of improved operational
performance, volume growth and lower material costs.
Large-Scale Optical Technologies
- Revenues of $21.3 million were down 5
percent, due to timing of customer orders.
- Operating income of $5.0 million was
down 10 percent.
- Operating margin was 23.7 percent,
compared to 25.1 percent, due to lower volume and new market
investments; operational performance remains strong.
Consolidated Backlog
- Backlog of $447.7 million was down 13
percent from $511.9 million in the prior-year period, and down 12
percent from the backlog of $509.7 million in the first quarter of
fiscal 2017.
- Approximately $281 million, or 63
percent, of the backlog is expected to be delivered in the current
fiscal year; and approximately $167 million, or 37 percent, in
fiscal 2018.
Financial Condition
- Cash and short-term investments,
including restricted cash, totaled $94.6 million, compared to $90.6
million at the end of fiscal 2016.
- Non-cash working capital was $86.5
million, compared to $68.8 million at the end of fiscal 2016.
- Capital expenditures year to date were
$31.5 million, compared to $19.4 million in the prior-year
period.
- Debt was $20.4 million, compared to
$20.4 million at the end of fiscal 2016. All the debt is long-term,
low-interest industrial revenue bonds.
- Depreciation and amortization year to
date was $16.0 million.
FY17 OUTLOOK“For fiscal 2017, we expect continued top-
and bottom-line growth, based on our backlog, commitments and
bidding activity,” said Puishys. “We are increasing our earnings
per share outlook range for the year to $2.80 to $2.90, from $2.70
to $2.85, as a result of solid operational performance and
productivity driven by our Lean initiative, as well as continued
market strength. We are maintaining our outlook for revenue growth
of approximately 10 percent.
“Apogee expects mid-single digit U.S. commercial construction
market growth in fiscal 2017, as market activity, the Architecture
Billings Index, office employment and office vacancy rates all show
positive momentum,” he said. “With our internal market visibility
and external metrics moving in the right direction, we see
sustained U.S. non-residential market growth at least through
fiscal 2020.”
Puishys said that fiscal 2017 capital expenditures are
anticipated to be approximately $70 million, increased from the
prior outlook of $60 million, as Apogee invests primarily to
increase capabilities and productivity. Gross margin is expected to
be approximately 26.5 percent and operating margin approximately
11.3 percent.
“Longer term, we are reaffirming that our strategies to grow
through new geographies, new products and new markets, along with
our backlog, bidding activity and focus on better project
selection, productivity and operational improvements, support our
fiscal 2018 goals of a 12 to 13 percent operating margin on
revenues of $1.2 to $1.3 billion,” Puishys said.
TELECONFERENCE AND SIMULTANEOUS WEBCASTApogee will host a
teleconference and webcast at 9 a.m. Central Time tomorrow,
September 15. To participate in the teleconference, call (866)
525-3151 toll free or (330) 863-3393 international, access code
63474098. To listen to the live conference call over the internet,
go to the Apogee web site at http://www.apog.com and click on
investors, then overview and then the webcast link on that page.
The webcast also will be archived for replay on the company’s web
site.
ABOUT APOGEE ENTERPRISESApogee Enterprises, Inc.,
headquartered in Minneapolis, is a leader in technologies involving
the design and development of value-added glass products and
services. The company is organized in four segments, with three of
the segments serving the commercial construction market:
- Architectural Glass segment consists of
Viracon, the leading fabricator of coated, high-performance
architectural glass for global markets.
- Architectural Services segment consists
of Harmon, Inc., one of the largest U.S. full-service building
glass installation companies.
- Architectural Framing Systems segment
businesses design, engineer, fabricate and finish the aluminum
frames for window, curtainwall and storefront systems that comprise
the outside skin of buildings. Businesses in this segment are:
Wausau Window and Wall Systems, a manufacturer of custom aluminum
window systems and curtainwall; Tubelite, a fabricator of aluminum
storefront, entrance and curtainwall products; Alumicor, a
fabricator of aluminum storefront, entrance, curtainwall and window
products for Canadian markets; 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 primarily for
the custom picture framing market.
USE OF NON-GAAP FINANCIAL MEASURESThis news release and
other financial communications may contain the following non-GAAP
measures:
- Constant currency revenue excludes the
impact of fluctuations in foreign currency on Apogee’s
international operations. The company believes providing constant
currency information provides valuable supplemental information
regarding our results of operations, consistent with how we
evaluate our performance. Constant currency percentages are
calculated by converting prior-period local currency results using
the current period exchange rates and comparing these converted
amounts to current period reported results.
- Backlog represents the dollar amount of
revenues Apogee expects to recognize in the near-term from firm
contracts or orders. The company uses backlog as one of the metrics
to evaluate near-term sales trends in our business.
- Free cash flow is defined as net cash
provided by operating activities, minus capital expenditures. The
company considers this measure an indication of the financial
strength of the company.
- Non-cash working capital is defined as
current assets, excluding cash and short-term securities, less
current liabilities, excluding current portion of long-term debt.
The company considers this a useful metric in measuring working
capital management over time.
- Days working capital is defined as
average working capital (current assets less current liabilities)
multiplied by the number of days in the period and then divided by
net sales in the period. This is considered a useful metric in
monitoring our performance in managing working capital.
Apogee believes that these non-GAAP measures provide enhanced
transparency with respect to revenue growth, cash management and
operational management. These non-GAAP measures should be viewed in
addition to, and not as an alternative to, the reported financial
results of the company prepared in accordance with GAAP. Other
companies may calculate these measures differently than Apogee,
limiting the usefulness of the measure for comparison with other
companies.
FORWARD-LOOKING STATEMENTSThe discussion above 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: (A) global
economic conditions and the cyclical nature of the North American
and Latin American commercial construction industries, which impact
our three architectural segments, and consumer confidence and the
conditions of the U.S. economy, which impact our large-scale
optical segment; (B) fluctuations in foreign currency exchange
rates; (C) actions of new and existing competitors; (D) ability to
effectively utilize and increase production capacity;
(E) product performance, reliability and quality issues; (F)
project management and installation issues that could result in
losses on individual contracts; (G) changes in consumer and
customer preference, or architectural trends and building codes;
(H) dependence on a relatively small number of customers in certain
business segments; (I) revenue and operating results that could
differ from market expectations; (J) self-insurance risk related to
a material product liability or other event for which the company
is liable; (K) dependence on information technology systems and
information security threats; (L) cost of compliance with and
changes in environmental regulations; (M) interruptions in glass
supply; and (N) loss of key personnel and inability to source
sufficient labor. The company cautions investors that actual future
results could differ materially from those described in the
forward-looking statements, and 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 27, 2016.
Apogee Enterprises, Inc. & Subsidiaries
Consolidated Condensed Statement of Income
(Unaudited)
Dollar amounts and share counts in
thousands,
Thirteen
Thirteen
Twenty-Six
Twenty-Six
except for per share amounts
Weeks Ended
Weeks Ended
%
Weeks Ended
Weeks Ended
%
August 27, 2016 August 29, 2015 Change August 27, 2016
August 29, 2015 Change Net sales $278,455 $240,754 16
% $526,335 $480,716 9 % Cost of sales 205,924 184,055
12 % 389,377 368,429 6 % Gross profit 72,531 56,699
28 % 136,958 112,287 22 % Selling, general and administrative
expenses 39,483 34,276 15 % 77,661 71,640
8 % Operating income 33,048 22,423 47 % 59,297 40,647 46 %
Interest income 252 267 -5 % 528 504 5 % Interest expense 188 150
25 % 345 318 9 % Other income (expense), net 254 (93 ) N/M
509 (43 ) N/M Earnings before income taxes
33,366 22,447 49 % 59,989 40,790 47 % Income tax expense 10,969
7,687 43 % 19,870 13,904 43 % Net
earnings $22,397 $14,760 52 % $40,119 $26,886
49 % Earnings per share - basic $0.78 $0.51 53 %
$1.39 $0.92 51 % Average common shares outstanding 28,891
29,187 -1 % 28,797 29,116 -1 % Earnings per share - diluted
$0.77 $0.50 54 % $1.39 $0.91 53 % Average common and common
28,963 29,492 -2 % 28,932 29,486 -2 % equivalent shares outstanding
Cash dividends per common share $0.125 $0.110 14 % $0.250
$0.220 14 %
Business Segments Information
(Unaudited)
Thirteen
Thirteen
Twenty-Six
Twenty-Six
Weeks Ended
Weeks Ended
%
Weeks Ended
Weeks Ended
%
August 27, 2016 August 29, 2015 Change August 27, 2016 August 29,
2015 Change
Sales Architectural Glass $99,205 $92,433
7 % $192,565 $193,608 -1 % Architectural Services 77,734 52,197 49
% 140,554 107,849 30 % Architectural Framing Systems 92,229 80,671
14 % 173,362 152,571 14 % Large-Scale Optical 21,270 22,444 -5 %
41,298 42,663 -3 % Eliminations (11,983 ) (6,991 ) -71 % (21,444 )
(15,975 ) -34 % Total $278,455 $240,754 16 % $526,335
$480,716 9 %
Operating income (loss)
Architectural Glass $9,616 $6,738 43 % $19,147 $15,021 27 %
Architectural Services 6,236 1,419 340 % 9,418 2,361 299 %
Architectural Framing Systems 13,001 9,692 34 % 23,232 14,953 55 %
Large-Scale Optical 5,051 5,642 -10 % 9,703 10,512 -8 % Corporate
and other (856 ) (1,068 ) 20 % (2,203 ) (2,200 ) 0 % Total $33,048
$22,423 47 % $59,297 $40,647 46 %
Consolidated Condensed Balance Sheets
(Unaudited) August 27, 2016 February 27, 2016
Assets Current assets $358,599 $336,793 Net property, plant
and equipment 218,261 202,462 Other assets 124,747 118,185
Total assets $701,607 $657,440
Liabilities and shareholders' equity Current liabilities
$177,516 $177,381 Long-term debt 20,400 20,400 Other liabilities
57,435 53,464 Shareholders' equity 446,256 406,195
Total liabilities and shareholders' equity $701,607 $657,440
Apogee Enterprises, Inc. &
Subsidiaries Consolidated Condensed Statement of Cash
Flows (Unaudited) Twenty-Six
Twenty-Six Weeks Ended Weeks Ended In thousands August 27, 2016
August 29, 2015 Net earnings $ 40,119 $ 26,886
Depreciation and amortization 15,955 15,502 Share-based
compensation 2,935 2,414 Proceeds from new markets tax credit
transaction, net of deferred costs 5,109 - Other, net (5,261 )
(6,634 ) Changes in operating assets and liabilities (17,649
) 23,930 Net cash provided by operating
activities 41,208 62,098
Capital expenditures (31,474 ) (19,366 ) Change in
restricted cash (16,949 ) - Net purchases of marketable securities
(551 ) (53,234 ) Other, net (331 ) (892
) Net cash used in investing activities (49,305 )
(73,492 ) Dividends paid (7,133 ) (6,431 )
Other, net 1,362 2,489
Net cash used in financing activities (5,771 )
(3,942 ) Decrease in cash and cash equivalents
(13,868 ) (15,336 ) Effect of exchange rates on cash 374 (659 )
Cash and cash equivalents at beginning of year 60,470
52,185 Cash and cash equivalents at end
of period $ 46,976 $ 36,190
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160914006310/en/
Apogee Enterprises, Inc.Mary Ann Jackson, 952-487-7538Investor
Relationsmjackson@apog.com
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