- Revenues of $272.3 million were up
10%
- EPS of $0.56; adjusted EPS of
$0.62
- FY18 guidance prior to acquisition
reaffirmed
- Updated FY18 outlook is for 26-28%
revenue growth; EPS of $3.31 to $3.51, adjusted EPS of
$3.65-$3.85
Apogee Enterprises, Inc. (Nasdaq:APOG) today announced fiscal
2018 first-quarter results. Apogee provides distinctive solutions
for enclosing commercial buildings and framing and displays.
HIGHLIGHTS
- Revenues of $272.3 million were up 10
percent, vs. prior-year period.
- Operating income of $24.1 million was
down 8 percent before adjustments, vs. prior-year period.
- Adjusted operating income of $26.8
million was up 2 percent, vs. prior-year period.
- Operating margin was 8.9 percent, or
9.9 percent adjusted, vs. 10.6 percent in the prior-year
period.
- Earnings per diluted share of $0.56
were down 8 percent, vs. the prior-year period.
- Adjusted EPS was $0.62, up 2 percent,
vs. the prior-year period.
- Completed acquisition of EFCO
Corporation on June 12. EFCO has annual revenues of more than $250
million and will be reported in the architectural framing systems
segment.
- Adjusted fiscal 2018 first-quarter
results exclude $0.07 per share of amortization of short-lived
intangibles associated with the acquired backlog of Sotawall; and
$0.02 per share of acquisition-related charges for Sotawall and
EFCO; these costs were offset by $0.03 per share of tax impact. See
Reconciliation of Non-GAAP Financial Measures at the end of this
release.
COMMENTARY“In the first quarter, we continued to
reposition Apogee to deliver more stable future revenue streams and
growth through M&A activity and startup of new capabilities,”
said Joseph F. Puishys, Apogee chief executive officer. “Revenues
grew 10 percent, and adjusted earnings per share grew 2 percent
compared to the prior-year period.
“Quarterly results were impacted by factors that were largely
anticipated, including lower architectural services revenues,” he
said. “We also experienced planned startup costs for the new
architectural glass capabilities, which are now largely behind us.
The first shipments from this new line occurred on schedule late in
the quarter.
“Early in the second quarter, we closed on the acquisition of
EFCO, which will accelerate our product and geographic growth
strategies,” Puishys said. “We are already pursuing operational
best practices to capture $10 to $15 million in annual synergies at
EFCO by fiscal 2020.
“In the last six months we’ve made significant progress in our
journey to deliver consistently solid performance regardless of
economic conditions,” he said. “We’ve completed acquisitions of
EFCO and Sotawall, while growing our position in the mid-size
building and retrofit sectors. We also continue to introduce new
products and our existing businesses have been further penetrating
newer geographies.
“Our end markets remain strong based on visibility from our
businesses and external metrics, giving us confidence in fiscal
2018 and beyond,” said Puishys. “Our updated fiscal 2018 outlook,
which now contains EFCO, includes growth from existing businesses
as well as from the acquisition.”
FIRST-QUARTER SEGMENT AND OPERATING RESULTS VS. PRIOR-YEAR
PERIOD
Architectural Glass
- Revenues of $97.7 million were up 5
percent, on mid-size project growth in the United States.
- Operating income was $9.3 million, down
2 percent.
- Operating margin was 9.5 percent,
compared to 10.2 percent. Planned costs related to the startup of
oversize glass production impacted the operating margin by 100
basis points.
Architectural Framing Systems
- Revenues of $110.5 million were up 36
percent, including the addition of Sotawall and 8 percent growth
from the other segment businesses.
- Operating income grew to $12.0 million,
up 17 percent; adjusted operating income of $14.0 million was up 37
percent.
- Operating margin was 10.8 percent, or
12.7 percent adjusted, compared to 12.6 percent. Both the fiscal
2018 operating margin and adjusted operating margin were negatively
impacted by approximately $1.1 million or 100 basis points due to a
receivable write off related to a customer bankruptcy.
- Segment backlog grew $10 million from
the fiscal 2017 fourth quarter to $255.1 million.
Architectural Services
- Revenues of $50.2 million were down 20
percent, as expected, on the timing of project activity.
- Operating income was $0.8 million, down
75 percent.
- Operating margin was 1.6 percent,
compared to 5.1 percent, due to lower volume leverage on project
management, engineering and manufacturing capacity.
- Segment backlog grew almost $40 million
from the fiscal 2017 fourth quarter to $292.9 million.
- The longer-term outlook for this
segment remains positive, with further backlog expansion
anticipated in the second quarter. These first-half additions are
anticipated to generate revenue in fiscal 2019 and beyond.
Large-Scale Optical Technologies
- Revenues of $18.6 million were down 7
percent on the timing of customer orders.
- Operating income of $4.1 million was
down 13 percent.
- Operating margin was 21.8 percent,
compared to 23.2 percent due to the lower volume.
Financial ConditionApogee’s capital allocation strategy
supports cash returns to shareholders and investments in future
growth. Cash dividends in the quarter totaled $4 million, and
first-quarter capital expenditures, primarily for productivity and
capabilities, were $11.4 million. Debt at the end of the first
quarter was $71.4 million, and Apogee expanded its revolving credit
facility early in the fiscal 2018 second quarter to fund the $192
million acquisition of EFCO.
FY18 OUTLOOK“With our strategies to grow through new
geographies, new products and new markets, our operations
excellence, productivity and product selection initiatives, as well
as our outlook for strong free cash flow, we expect continued top-
and bottom-line growth in fiscal 2018,” said Puishys. “Our outlook
is supported by internal market visibility from backlog,
commitments and bidding activity, and positive external metrics,
including forecasts for mid-single digit U.S. commercial
construction market growth this year.”
Apogee is updating its full-year fiscal 2018 outlook to
incorporate the June 12 acquisition of EFCO as well as Sotawall and
EFCO acquisition-related charges and amortization of short-lived
intangibles associated with backlog.
- Revenue growth of 26 to 28
percent.
- Operating margin of 10.5 to 11.0
percent, with addition of EFCO revenues at a mid-single digit
operating margin.
- Adjusted operating margin of 11.5 to
12.0 percent.
- Earnings of $3.31 to $3.51 per diluted
share.
- Adjusted EPS of $3.65 to $3.85.
- Adjusted earnings guidance excludes the
after-tax impact of:
- Amortization of short-lived acquired
intangibles associated with the acquired backlog of Sotawall and
EFCO of $7 million ($0.24 per diluted share).
- Acquisition-related costs for Sotawall
and EFCO of $2.9 million ($0.10 per diluted share).
- Capital expenditures of approximately
$60 million.
“In fiscal 2018, we look forward to accelerating our growth
strategies with the addition of Sotawall and EFCO, while continuing
to position Apogee for more stable performance throughout an
economic cycle,” said Puishys.
TELECONFERENCE AND SIMULTANEOUS WEBCASTApogee will host a
teleconference and webcast at 8 a.m. Central Time today, June 22.
To participate in the teleconference, call (866) 525-3151 toll free
or (330) 863-3393 international, access code 37467550. 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 investors home and then the webcast link on that
page. Slides, providing supplementary information related to the
webcast, are available at the webcast link. 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; EFCO, a manufacturer of aluminum window, curtainwall,
storefront and entrance systems; Tubelite, a manufacturer of
aluminum storefront, entrance and curtainwall products; Alumicor, a
manufacturer 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:
- Adjusted operating income, adjusted
operating margin, adjusted net earnings and adjusted earnings per
diluted share (“adjusted earnings per share or adjusted EPS”) are
included in the Reconciliation of Non-GAAP Financial Measures
tables that appear after the accompanying financial tables. The
company uses these measures to provide meaningful supplemental
information about its operating performance because they exclude
amounts that are not considered part of core operating results when
assessing performance, and they improve comparability of results
from period to period. Examples of items excluded to arrive at
these adjusted measures include the impact of acquisition-related
costs and amortization of short-lived acquired intangibles
associated with backlog.
- 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.
Management uses these non-GAAP measures to evaluate the
company’s historical and prospective financial performance, measure
operational profitability on a consistent basis, and provide
enhanced transparency to the investment community. 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, 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 acquisitions. 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 March 4, 2017.
Apogee Enterprises, Inc. Consolidated Condensed
Statements of Income (Unaudited) Thirteen
Thirteen Weeks Ended Weeks Ended % In
thousands, except per share amounts
June 3, 2017 May 28,
2016 Change Net sales $ 272,307 $ 247,880 10 % Cost of sales
202,013 183,452 10 % Gross profit 70,294 64,428 9 %
Selling, general and administrative expenses 46,188
38,179 21 % Operating income 24,106 26,249 (8 )% Interest income
167 275 (39 )% Interest expense 444 157 183 % Other income, net
179 256 (30 )% Earnings before income taxes 24,008
26,623 (10 )% Income tax expense 7,904 8,901 (11 )%
Net earnings $ 16,104 $ 17,722 (9 )% Earnings per share -
basic $ 0.56 $ 0.62 (10 )% Average common shares outstanding 28,851
28,702 1 % Earnings per share - diluted $ 0.56 $ 0.61 (8 )% Average
common and common equivalent shares outstanding 28,861 28,895 — %
Cash dividends per common share $ 0.1400 $ 0.1250 12 %
Business Segment Information (Unaudited)
Thirteen Thirteen Weeks
Ended Weeks Ended % In thousands
June 3, 2017 May 28,
2016 Change
Sales Architectural Glass $ 97,735 $ 93,360
5 % Architectural Framing Systems 110,492 81,132 36 % Architectural
Services 50,150 62,820 (20 )% Large-Scale Optical 18,603 20,028 (7
)% Eliminations (4,673 ) (9,460 ) (51 )% Total $
272,307 $ 247,880 10 %
Operating income
(loss) Architectural Glass $ 9,322 $ 9,531 (2 )% Architectural
Framing Systems 11,964 10,232 17 % Architectural Services 782 3,181
(75 )% Large-Scale Optical 4,050 4,652 (13 )% Corporate and other
(2,012 ) (1,347 ) 49 % Total $ 24,106 $ 26,249
(8 )%
Apogee Enterprises, Inc.
Consolidated Condensed Balance Sheets (Unaudited) In
thousands
June 3, 2017 March
4, 2017 Assets Current assets $ 297,272 $ 297,461 Net
property, plant and equipment 250,979 246,748 Other assets
230,247 240,449 Total assets $ 778,498 $ 784,658
Liabilities and shareholders' equity Current liabilities $
173,496 $ 186,058 Long-term debt 71,400 65,400 Other liabilities
51,773 62,623 Shareholders' equity 481,829 470,577
Total liabilities and shareholders' equity $ 778,498 $ 784,658
Consolidated Condensed Statement of Cash Flows
(Unaudited) Thirteen Thirteen Weeks
Ended Weeks Ended In thousands
June 3, 2017 May 28,
2016 Net earnings $ 16,104 $ 17,722 Depreciation and
amortization 11,423 7,720 Share-based compensation 1,403 1,390
Other, net 1,317 2 Changes in operating assets and liabilities
(24,335 ) (27,318 ) Net cash provided by (used in)
operating activities 5,912 (484 ) Capital
expenditures (11,430 ) (17,725 ) Change in restricted cash 5,151 —
Net sales (purchases) of marketable securities 1,685 (751 ) Other,
net 1,742 (1,842 ) Net cash used in investing
activities (2,852 ) (20,318 ) Borrowings on line of
credit, net 6,000 — Shares withheld for taxes, net of stock issued
to employees (1,596 ) (1,198 ) Dividends paid (4,002 ) (3,560 )
Other, net — 1,893 Net cash provided by
(used in) financing activities 402 (2,865 )
Increase (decrease) in cash and cash equivalents 3,462 (23,667 )
Effect of exchange rates on cash 47 164 Cash and cash equivalents
at beginning of year 19,463 60,470 Cash
and cash equivalents at end of period $ 22,972 $ 36,967
Apogee Enterprises, Inc.
Reconciliation of Non-GAAP Financial Measures
Adjusted Net Earnings and Adjusted Earnings per Diluted Common
Share (Unaudited) Thirteen Thirteen
Weeks Ended Weeks Ended In thousands, except per share amounts
June 3, 2017 May 28, 2016 % Change Net
earnings $ 16,104 $ 17,722 (9 )% Amortization of short-lived
acquired intangibles 2,054 — N/M Acquisition-related costs 680 —
N/M Income tax impact on above adjustments (1) (899 )
— N/M Adjusted net earnings $ 17,938 $ 17,722 1 %
Thirteen Thirteen Weeks Ended Weeks Ended In thousands,
except per share amounts
June 3, 2017 May 28, 2016
% Change Earnings per diluted common share $ 0.56 $ 0.61 (8
)% Amortization of short-lived acquired intangibles 0.07 — N/M
Acquisition-related costs 0.02 — N/M Income tax impact on above
adjustments (1) (0.03 ) — N/M Adjusted
earnings per diluted common share $ 0.62 $ 0.61 2 %
(1) Income tax impact on adjustments was calculated using the
quarterly effective income tax rate of 32.9%.
Adjusted Operating Income and Adjusted Operating Margin
(Unaudited)
Thirteen Weeks Ended June 3,
2017 Framing Systems Segment
Corporate Consolidated In thousands
Operatingincome
Operating margin
Operatingincome (loss)
Operatingincome
Operating margin Operating income (loss) $ 11,964
10.8 % $ (2,012 ) $ 24,106 8.9 % Amortization of short-lived
acquired intangibles 2,054 1.9 % — 2,054 0.8 % Acquisition-related
costs — — % 680 680 0.2 % Adjusted
operating income (loss) $ 14,018 12.7 % $ (1,332 ) $ 26,840 9.9 %
Thirteen Weeks Ended May 28, 2016 Framing Systems
Segment Corporate Consolidated In thousands
Operatingincome
Operating margin
Operatingincome (loss)
Operatingincome
Operating margin Operating income (loss) (1) $ 10,232 12.6 % $
(1,347 ) $ 26,249 10.6 % (1) Expenses related to
amortization of short-lived acquired intangibles and
acquisition-related costs are not applicable to the period ended
May 28, 2016, and therefore no adjustments have been made.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170622005169/en/
Apogee Enterprises, Inc.Mary Ann Jackson,
952-487-7538Investor Relationsmjackson@apog.com
Apogee Enterprises (NASDAQ:APOG)
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