- Growth strategies, operational
excellence fueled strong sales, earnings gains in FY17
- FY17 full-year EPS increased 34% to
$2.97 on revenues of $1.1 billion, up 14%
- FY17 Q4 EPS rose 16% to $0.80 on
revenues of $314 million, up 20%
- Apogee provides FY18 outlook for
continued growth
Apogee Enterprises, Inc. (Nasdaq:APOG) today announced fiscal
2017 full-year and fourth-quarter results. Apogee provides
distinctive solutions for enclosing commercial buildings and
framing art.
FULL-YEAR HIGHLIGHTS
- Revenues of $1.1 billion were up 14
percent vs. prior-year period.
- Operating income of $122.2 million was
up 25 percent vs. prior-year period.
- Operating margin was 11.0 percent, up
110 basis points vs. prior-year period.
- Earnings per diluted share of $2.97
were up 34 percent vs. prior-year period.
- Generated $121.0 million in cash flow
from operations.
- Increased credit facility to fund
strategic acquisitions that expand market opportunities.
- Acquired significant framing systems
business.
FOURTH-QUARTER HIGHLIGHTS
- Revenues of $314.1 million were up 20
percent vs. prior-year period.
- Operating income of $29.7 million was
up 3 percent vs. prior-year period.
- Operating margin was 9.4 percent vs.
11.0 percent in the prior-year period.
- Earnings per diluted share of $0.80
were up 16 percent vs. prior-year period.
- Acquired the assets of Sotawall Inc.,
an approximately $100 million annual revenue framing systems
business serving North American commercial construction
projects.
- Increased cash dividend 12
percent.
COMMENTARY“As we execute our growth and operational
excellence strategies, we delivered another year of increased
revenues and earnings, with strong cash generation in fiscal 2017,”
said Joseph F. Puishys, Apogee chief executive officer. “We once
again drove revenue growth in all four segments by leveraging new
geographies, products and markets for better than market growth. We
also achieved margin improvement in our three architectural
segments through our ongoing Lean, productivity, automation,
project selection and pricing initiatives.
“Collectively, our four business segments performed well in the
fourth quarter, with double-digit operating income growth versus
last year,” said Puishys. “Their performance was partly offset by
increased corporate costs for insurance, warranty and compensation,
as well as costs related to our fourth-quarter acquisition and
other strategic growth initiatives, including M&A where we
continue to be very active; in addition, we experienced higher raw
material prices.
“Our full-year results, with revenues growing 14 percent and
earnings per share up 34 percent, reflect successful execution of
key strategies in commercial construction markets,” he said. “We
are delivering on initiatives to better position Apogee over a
cycle, including growing our share of mid-size projects in
architectural glass, expanding our geographic presence and product
offerings, further penetrating the retrofit market and executing
acquisitions. We continue to have confidence in our ability to
outperform our end markets, and again intend to do what we say we
will do - further grow revenues and earnings in fiscal 2018.”
FY17 SEGMENT AND OPERATING RESULTS VS. PRIOR-YEAR
PERIOD
Architectural Glass
- Full-year revenues were up 9 percent on
strong U.S. growth especially in the mid-size project sector.
- Full-year operating income was up 26
percent and operating margin grew 140 basis points to 10.8 percent
on increased volume, pricing, mix and productivity.
- Fourth-quarter revenues of $112.3
million were up 14 percent, on strong U.S. growth in the mid-size
project sector.
- Fourth-quarter operating income was
$13.8 million, up 14 percent.
- Operating margin was 12.3 percent,
comparable to the prior-year period.
- Segment backlog was $66.4 million,
compared to $75.9 million in the fiscal 2017 third quarter.
- Revenue growth in architectural glass
does not require an increase in backlog as it is a short lead-time
business with a high level of book and bill activity within
quarters. The segment continues to have the greatest visibility to
future projects due to its daily interaction with architects.
Architectural Framing Systems
- Full-year revenues were up 25 percent
on expanded geographic penetration and introduction of new
products.
- Full-year operating income was up 40
percent and the operating margin grew 130 basis points to 11.6
percent on increases in productivity, volume, project selection and
price.
- Fourth-quarter revenues of $121.8
million were up 53 percent, with volume growth in all four ongoing
businesses.
- Growth, excluding revenues from
Sotawall which was acquired during the quarter, was 31
percent.
- Fourth-quarter operating income grew to
$9.7 million, up 26 percent.
- Operating margin was 8.0 percent,
compared to 9.7 percent, due to increased raw material costs and
project mix compared to the prior-year period, as well as the
addition of Sotawall at lower margins as a result of
acquisition-related amortization costs.
- Segment backlog grew $81 million in the
fourth quarter to $245.4 million.
- Acquisition of Sotawall in the fourth
quarter added $69 million to the framing systems backlog.
Architectural Services
- Full-year revenues were up 10
percent.
- Full-year operating income was up 58
percent and the operating margin grew 200 basis points to 6.8
percent, on flow through of projects at higher margins, good
execution and volume growth.
- Fourth-quarter revenues of $66.0
million were down 14 percent on the timing of project
activity.
- Fourth-quarter operating income was
$4.2 million, down 26 percent.
- Operating margin was 6.3 percent,
compared to 7.3 percent, due to lower volume and project mix.
- Segment backlog grew $60 million in the
fourth quarter to $255.1 million.
- As expected, several projects entered
backlog in the quarter, with the majority of these additions
anticipated to generate revenue in fiscal 2019 and beyond. Segment
backlog is expected to continue to grow early in fiscal 2018,
although backlog trends in this segment are uneven.
Large-Scale Optical Technologies
- Full-year revenues were up 1 percent,
and the segment operating margin remained strong at 25.0 percent,
down slightly as the segment continues to pursue new market
opportunities.
- Fourth-quarter revenues of $26.3
million were up 22 percent on the timing of customer orders.
- Fourth-quarter operating income of $6.9
million was up 42 percent.
- Operating margin expanded 370 basis
points to 26.0 percent due to a mix of higher-margin products and
volume leverage.
Financial ConditionApogee’s capital allocation strategy -
rooted in strong cash flow - supports cash returns to shareholders
and investments in future growth. Apogee generated $121 million in
cash from operations during fiscal 2017, and has liquidity and
flexibility under its expanded revolving credit facility. Apogee
invested $135 million from cash and the credit facility in a
fourth-quarter acquisition, and capital expenditures for the year
were $68 million, primarily for increased capabilities and
productivity. Also reflecting Apogee’s ongoing commitment to
enhancing shareholder return, share buybacks and cash dividends
totaled more than $25 million during fiscal 2017.
FY18 OUTLOOK“For fiscal 2018, we expect continued top-
and bottom-line growth as we execute our strategies to grow through
new geographies, new products and new markets. We also anticipate
margin improvement through our ongoing focus on operational
performance, productivity and project selection,” said Puishys. “We
expect to drive revenue growth of approximately 10 percent and
deliver earnings of $3.35 to $3.55 per diluted share.”
Fiscal 2018 gross margin is expected to be approximately 28
percent and operating margin approximately 12.5 percent. Capital
expenditures are anticipated to be $50 to $60 million, as Apogee
invests primarily to increase capabilities and productivity.
“Apogee expects mid-single digit U.S. commercial construction
market growth in fiscal year 2018, as market activity, the
Architecture Billings Index, office employment and office vacancy
rates all show positive momentum,” Puishys said. “With our internal
market visibility from backlog, commitments and bidding activity
and external metrics moving in the right direction, we see
sustained U.S. non-residential market growth.”
TELECONFERENCE AND SIMULTANEOUS WEBCASTApogee will host a
teleconference and webcast at 8 a.m. Central Time today, April 13.
To participate in the teleconference, call (866) 525-3151 toll free
or (330) 863-3393 international, access code 85978786. 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 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, a manufacturer of custom aluminum window systems and
curtainwall; Sotawall, a manufacturer of unitized curtainwall
systems; 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.
- Architectural Services segment consists
of Harmon, one of the largest U.S. full-service building glass
installation companies.
- Large-Scale Optical segment consists of
Tru Vue, a value-added glass and acrylic manufacturer primarily for
framing and display applications.
USE OF NON-GAAP FINANCIAL MEASURESThis news release and
other financial communications may contain the following non-GAAP
measures:
- 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 its 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.
- 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. The company considers this a useful metric
in monitoring its performance in managing working capital.
- 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 its results of operations, consistent with how it
evaluates its 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.
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; (N) loss of key personnel and inability to source
sufficient labor; and (O) integration of recent acquisition. 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 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)
Fourteen Thirteen Fifty-three Fifty-two
Weeks Ended Weeks Ended % Weeks Ended Weeks Ended % In
thousands, except per share amounts
March 4,2017
February 27,2016
Change
March 4,2017
February 27,2016
Change Net sales $ 314,126 $ 262,149 20
%
$ 1,114,533 $ 981,189 14
%
Cost of sales 231,930 193,292 20
%
822,510 737,619 12
%
Gross profit 82,196 68,857 19
%
292,023 243,570 20
%
Selling, general and administrative expenses 52,528 39,969
31
%
169,798 146,177 16
%
Operating income 29,668 28,888 3
%
122,225 97,393 25
%
Interest income 210 219 (4 )% 1,008 981 3
%
Interest expense 477 116 311
%
971 593 64
%
Other income (expense), net 193 (338 ) N/M 543 (457 )
N/M Earnings before income taxes 29,594 28,653 3
%
122,805 97,324 26
%
Income tax expense 6,475 8,718 (26 )% 37,015
31,982 16
%
Net earnings $ 23,119 $ 19,935 16
%
$ 85,790 $ 65,342 31
%
Earnings per share - basic $ 0.81 $ 0.69 17
%
$ 2.98 $ 2.25 32
%
Average common shares outstanding 28,705 28,819 — % 28,781 29,058
(1 )% Earnings per share - diluted $ 0.80 $ 0.69 16
%
$ 2.97 $ 2.22 34
%
Average common and common equivalent shares outstanding 28,834
29,063 (1 )% 28,893 29,375 (2 )% Cash dividends per common share $
0.1400 $ 0.1250 12
%
$ 0.5150 $ 0.4550 13
%
Business Segments Information
(Unaudited) Fourteen Thirteen Fifty-three Fifty-two Weeks
Ended Weeks Ended % Weeks Ended Weeks Ended % In thousands
March 4,2017
February 27,2016
Change
March 4,2017
February 27,2016
Change
Sales Architectural Glass $ 112,314 $ 98,644 14
%
$ 411,881 $ 377,713 9
%
Architectural Framing Systems 121,767 79,603 53
%
385,978 308,593 25
%
Architectural Services 66,003 76,842 (14 )% 270,937 245,935 10
%
Large-Scale Optical 26,328 21,667 22
%
89,710 88,541 1
%
Eliminations (12,286 ) (14,607 ) (16 )% (43,973 ) (39,593 ) 11
%
Total $ 314,126 $ 262,149 20
%
$ 1,114,533 $ 981,189 14
%
Operating income (loss) Architectural Glass $ 13,801 $
12,099 14
%
$ 44,656 $ 35,504 26
%
Architectural Framing Systems 9,698 7,714 26
%
44,768 31,911 40
%
Architectural Services 4,158 5,624 (26 )% 18,494 11,687 58
%
Large-Scale Optical 6,854 4,831 42
%
22,467 22,963 (2 )% Corporate and other (4,843 ) (1,380 ) 251
%
(8,160 ) (4,672 ) 75
%
Total $ 29,668 $ 28,888 3
%
$ 122,225 $ 97,393 25
%
Consolidated Condensed Balance Sheets
(Unaudited) In thousands
March 4,2017
February 27,2016
Assets Current assets $ 300,527 $ 336,793 Net property,
plant and equipment 246,748 202,462 Other assets 237,383
118,185 Total assets $ 784,658 $ 657,440
Liabilities and shareholders' equity Current liabilities $
186,058 $ 177,381 Long-term debt 65,400 20,400 Other liabilities
62,623 53,464 Shareholders' equity 470,577 406,195
Total liabilities and shareholders' equity $ 784,658 $
657,440
Apogee Enterprises, Inc. &
Subsidiaries Consolidated Condensed Statement of Cash
Flows (Unaudited) Fifty-three Fifty-two
Weeks Ended Weeks Ended In thousands
March 4,2017
February 27,2016
Net earnings $ 85,790 $ 65,342 Depreciation and amortization 35,607
31,248 Share-based compensation 5,986 4,923 Proceeds from new
markets tax credit transaction, net of deferred costs 5,109 —
Other, net (5,847 ) (5,320 ) Changes in operating assets and
liabilities (5,695 ) 32,750 Net cash provided by operating
activities 120,950 128,943 Capital expenditures
(68,061 ) (42,037 ) Acquisition of businesses and intangibles
(134,953 ) — Change in restricted cash (7,834 ) — Net sales
(purchases) of marketable securities 32,728 (31,767 ) Other, net
(2,659 ) (4,052 ) Net cash used in investing activities (180,779 )
(77,856 ) Borrowings on line of credit, net 44,988 — Repurchase and
retirement of common stock (10,817 ) (24,911 ) Dividends paid
(14,667 ) (13,184 ) Other, net (842 ) (3,310 ) Net cash provided by
(used in) financing activities 18,662 (41,405 ) (Decrease)
increase in cash and cash equivalents (41,167 ) 9,682 Effect of
exchange rates on cash 160 (1,397 ) Cash and cash equivalents at
beginning of year 60,470 52,185 Cash and cash
equivalents at end of period $ 19,463 $ 60,470
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170413005225/en/
Apogee Enterprises, Inc.Mary Ann Jackson, 952-487-7538Investor
Relationsmjackson@apog.com
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