- Revenue of $357 million with earnings of $0.72 per diluted
share
- Strong year-over-year growth and margin improvement in
Architectural Glass
- Continued backlog growth to record levels in Architectural
Services
- Company reaffirms full-year guidance
Apogee Enterprises, Inc. (Nasdaq: APOG) today announced
its fiscal 2020 second-quarter results. Second-quarter revenue was
$357.1 million, compared to $362.1 million in the second quarter of
fiscal year 2019. Earnings per diluted share were $0.72, equal to
the prior year period. Adjusted earnings1 in last year’s second
quarter were $0.74 per diluted share, which excluded the
amortization of short-lived acquired intangibles and acquired
project profits.
____________________________ 1 Adjusted earnings and adjusted
earnings per share are non-GAAP financial measures. See Use and
Reconciliation of Non-GAAP Financial Measures in this press release
for more information and a reconciliation of non-GAAP financial
measures to the most directly comparable GAAP measures.
Commentary “We delivered solid operational and financial
performance in the second quarter, with results largely in-line
with our expectations,” said Joseph F. Puishys, Chief Executive
Officer. “Our Architectural Glass segment made significant
year-over-year improvements, with increased revenue and margins,
and Architectural Services continued to build on its record
backlog. We also made substantial progress toward completing the
last remaining legacy EFCO project, tracking as expected to our
schedule and cost estimates. We are delivering on our commitments
and see positive momentum in our business.”
“Looking forward, we remain confident that our strategy to
diversify revenue streams, broaden our growth opportunities, and
improve the efficiency and productivity of our operations positions
the company well for future earnings growth and more consistent
operating performance,” continued Mr. Puishys. “During the quarter
we progressed on a number of initiatives to advance this strategy.
We completed a facility upgrade that we expect to significantly
enhance productivity and margins in our EFCO business. We also
began to implement plans to enhance profitability across the entire
Framing Systems segment and took initial steps to increase supply
chain integration, reduce procurement costs, and optimize our
facility footprint. Finally, we made significant progress on a new
operation that will be focused on the short lead-time segment of
the architectural glass market, which continues our efforts to
diversify our business mix and provide new opportunities for
long-term growth.”
Segment Results
Architectural Framing Systems Architectural Framing
Systems revenue in the second quarter was $187.4 million, compared
to $189.9 million in the prior year period. Second-quarter
operating income was $15.5 million, compared to $18.3 million in
the prior year quarter. Last year’s second quarter included $1.1
million of expense for the amortization of short-lived acquired
intangibles. Excluding that expense, adjusted operating income in
the prior year quarter was $19.4 million. Second quarter operating
margin was 8.3 percent, down from 9.6 percent and adjusted
operating margin of 10.2 percent in last year’s second quarter,
primarily due to a less favorable project mix. Segment backlog
stands at $388 million, compared to $407 million a quarter ago.
Architectural Glass Architectural Glass grew 13 percent
in the second quarter, with revenue of $99.1 million compared to
$88.1 million in the prior year quarter, primarily driven by
increased volume and more favorable sales mix. Operating income
improved to $6.5 million and operating margin increased to 6.5
percent, compared to $1.7 million and 2.0 percent respectively in
last year’s second quarter, primarily driven by operating leverage
on the higher volume, more favorable mix, and improved productivity
compared to the prior year, partially offset by start-up costs
related to strategic growth initiatives.
Architectural Services As expected, Architectural
Services’ revenue decreased to $61.6 million in the second quarter,
compared to $76.5 million in the prior-year quarter, on lower
volumes due to the timing of project activity. Second-quarter
operating income was $4.0 million with operating margin of 6.5
percent, compared to $7.6 million and 10.0 percent respectively in
the prior year period, reflecting reduced operating leverage on the
decreased volumes. The segment continued to have strong order flow
during the quarter, with segment backlog increasing to $502
million, from $483 million last quarter.
Large-Scale Optical Large-Scale Optical revenue was $20.8
million, up 2 percent compared to $20.4 million in the second
quarter last year due to improved sales mix. Operating income was
$4.6 million, compared to $4.2 million in the prior year period,
with operating margin improving to 22.3 percent, from 20.8 percent
in the prior year quarter, driven by the more favorable sales
mix.
Financial Condition Fiscal year-to-date, cash provided by
operating activities is $17.8 million, compared to $47.9 million
through the first half of fiscal 2019. The year-over-year
difference primarily reflects increased working capital related to
legacy EFCO projects, as disclosed in previous quarters. Capital
expenditures through the first half of the fiscal year were $22.6
million, compared to $24.2 million in the prior year period, as the
company continued to make investments in growth and productivity
improvement initiatives. Fiscal year-to-date, the company has
returned $29.2 million of cash to shareholders through share
repurchases and dividend payments, up from $8.8 million in the
prior year period. During the quarter, the company reduced its
total debt by $20 million to $273 million, compared to $293 million
at the end of the first quarter.
Outlook The company reaffirmed its guidance for fiscal
2020. For the full-year the company continues to expect:
- Revenue growth of 1 to 3 percent, with growth in three of the
company’s segments, partially offset by a decline in Architectural
Services due to the execution schedules for projects in
backlog.
- Operating margins between 8.2 to 8.6 percent, with margin
improvement in Architectural Glass and Architectural Framing
Systems, offset by reduced margins in Architectural Services due to
reduced leverage on lower volumes and less favorable project
maturity compared to fiscal 2019. Margins will also be negatively
impacted by start-up costs related to the strategic growth
investment in Architectural Glass, costs associated with supply
chain initiatives, and increased corporate costs from higher legal
and other advisory expenses.
- Diluted earnings per share in the range of $3.00 to $3.20,
which excludes the possible benefit of any potential expense
recovery associated with the EFCO-related charges the company
recorded in the previous fiscal year.
- Tax rate of approximately 24.5 percent.
- Capital expenditures of $60 to $65 million.
Conference Call Information The company will host a
conference call today at 8:00 a.m. Central Time to discuss its
financial results and outlook. This call will be webcast and is
available in the Investor Relations section of the company’s
website at https://www.apog.com/events-and-presentations. The
webcast also will be archived for replay on the company’s
website.
About Apogee Enterprises Apogee Enterprises, Inc.
(Nasdaq: APOG) delivers distinctive solutions for enclosing
commercial buildings and framing art. Headquartered in Minneapolis,
MN, we are a leader in architectural products and services,
providing architectural glass, aluminum framing systems and
installation services for buildings, as well as value-added glass
and acrylic for custom picture framing and displays. For more
information, visit www.apog.com.
Use of Non-GAAP Financial Measures
This 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 used by the company to
provide meaningful supplemental information about its operating
performance by excluding amounts that are not considered part of
core operating results to enhance comparability of results from
period to period. Examples of items excluded to arrive at this
adjusted measure include: the impact of acquisition-related costs,
amortization of short-lived acquired intangibles associated with
backlog, restructuring costs, non-cash goodwill and other
intangible impairment costs, and unusual project-related
charges.
- Backlog represents the dollar amount of revenues Apogee expects
to recognize from firm contracts or orders. The company uses
backlog as one of the metrics to evaluate sales trends in its long
lead-time operating segments.
- Free cash flow is defined as net cash provided by operating
activities, minus capital expenditures. The company considers this
measure an indication of its financial strength.
- Adjusted EBITDA is equal to the sum of adjusted operating
income depreciation and amortization expenses. We believe this
metric provides useful information to investors and analysts about
the Company's performance because it eliminates the effects of
period-to-period changes in taxes, interest expense, and costs
associated with capital investments and acquired companies.
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 a substitute
for, the reported financial results of the company prepared in
accordance with GAAP. Other companies may calculate these measures
differently, limiting the usefulness of the measures for comparison
with other companies.
Forward-Looking Statements This press release 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) loss of
key personnel and inability to source sufficient labor; (F) product
performance, reliability and quality issues; (G) project management
and installation issues that could result in losses on individual
contracts; (H) changes in consumer and customer preference, or
architectural trends and building codes; (I) dependence on a
relatively small number of customers in certain business segments;
(J) revenue and operating results that could differ from market
expectations; (K) self-insurance risk related to a material product
liability or other event for which the company is liable; (L)
dependence on information technology systems and information
security threats; (M) cost of compliance with and changes in
environmental regulations; (N) commodity price fluctuations, trade
policy impacts, and supply availability; and (O) integration of
recent acquisitions and management of acquired contracts. 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. More information
concerning potential factors that could affect future financial
results is included in the company’s Annual Report on Form 10-K for
the fiscal year ended March 2, 2019 and in subsequent filings with
the U.S. Securities and Exchange Commission.
Apogee Enterprises,
Inc.
Consolidated Condensed
Statements of Income
(Unaudited)
Thirteen
Thirteen
Twenty-Six
Twenty-Six
Weeks Ended
Weeks Ended
Weeks Ended
Weeks Ended
August 31,
September 1,
%
August 31,
September 1,
%
In thousands, except per share amounts
2019
2018
Change
2019
2018
Change
Net sales
$
357,058
$
362,133
(1
)%
$
712,424
$
698,664
2
%
Cost of sales
270,851
277,667
(2
)%
545,250
533,468
2
%
Gross profit
86,207
84,466
2
%
167,174
165,196
1
%
Selling, general and administrative
expenses
58,631
55,806
5
%
116,558
114,542
2
%
Operating income
27,576
28,660
(4
)%
50,616
50,654
—
%
Interest and other expense, net
2,203
1,727
28
%
4,813
3,467
39
%
Earnings before income taxes
25,373
26,933
(6
)%
45,803
47,187
(3
)%
Income tax expense
6,094
6,420
(5
)%
11,081
11,300
(2
)%
Net earnings
$
19,279
$
20,513
(6
)%
$
34,722
$
35,887
(3
)%
Earnings per share - basic
$
0.73
$
0.73
—
%
$
1.31
$
1.28
2
%
Average common shares outstanding
26,413
28,128
(6
)%
26,505
28,127
(6
)%
Earnings per share - diluted
$
0.72
$
0.72
—
%
$
1.30
$
1.26
3
%
Average common and common equivalent
shares outstanding
26,736
28,379
(6
)%
26,789
28,377
(6
)%
Cash dividends per common share
$
0.1750
$
0.1575
11
%
$
0.3500
$
0.3150
11
%
Business Segment
Information
(Unaudited)
Thirteen
Thirteen
Twenty-Six
Twenty-Six
Weeks Ended
Weeks Ended
Weeks Ended
Weeks Ended
August 31,
September 1,
%
August 31,
September 1,
%
In thousands
2019
2018
Change
2019
2018
Change
Sales
Architectural Framing Systems
$
187,394
$
189,850
(1
)%
$
367,916
$
368,887
—
%
Architectural Glass
99,138
88,084
13
%
199,429
165,009
21
%
Architectural Services
61,597
76,496
(19
)%
126,744
147,223
(14
)%
Large-Scale Optical
20,785
20,383
2
%
42,045
41,145
2
%
Eliminations
(11,856
)
(12,680
)
(6
)%
(23,710
)
(23,600
)
—
%
Total
$
357,058
$
362,133
(1
)%
$
712,424
$
698,664
2
%
Operating income (loss)
Architectural Framing Systems
$
15,523
$
18,312
(15
)%
$
27,796
$
30,650
(9
)%
Architectural Glass
6,460
1,739
271
%
12,859
3,317
288
%
Architectural Services
3,976
7,621
(48
)%
8,549
12,775
(33
)%
Large-Scale Optical
4,630
4,236
9
%
8,807
9,218
(4
)%
Corporate and other
(3,013
)
(3,248
)
(7
)%
(7,395
)
(5,306
)
39
%
Total
$
27,576
$
28,660
(4
)%
$
50,616
$
50,654
—
%
Apogee Enterprises,
Inc.
Consolidated Condensed Balance
Sheets
(Unaudited)
In thousands
August 31,
2019
March 2,
2019
Assets
Current assets
$
391,334
$
371,898
Net property, plant and equipment
319,234
315,823
Other assets
428,258
380,447
Total assets
$
1,138,826
$
1,068,168
Liabilities and shareholders'
equity
Current liabilities
$
215,862
$
227,512
Current debt
155,400
—
Long-term debt
117,385
245,724
Other liabilities
147,098
98,615
Shareholders' equity
503,081
496,317
Total liabilities and shareholders'
equity
$
1,138,826
$
1,068,168
Consolidated Condensed
Statement of Cash Flows
(Unaudited)
Twenty-Six
Twenty-Six
Weeks Ended
Weeks Ended
In thousands
August 31,
2019
September 1,
2018
Net earnings
$
34,722
$
35,887
Depreciation and amortization
22,759
26,457
Other, net
16,964
13,735
Changes in operating assets and
liabilities
(56,643
)
(28,150
)
Net cash provided by operating
activities
17,802
47,929
Capital expenditures
(22,559
)
(24,241
)
Net purchases of marketable securities
—
(4,123
)
Other, net
(451
)
(1,435
)
Net cash used by investing activities
(23,010
)
(29,799
)
Borrowings on line of credit, net
27,000
8,500
Repurchase and retirement of common
stock
(20,010
)
—
Dividends paid
(9,203
)
(8,823
)
Other, net
(2,493
)
(935
)
Net cash used by financing activities
(4,706
)
(1,258
)
(Decrease) increase in cash and cash
equivalents
(9,914
)
16,872
Effect of exchange rates on cash
118
(266
)
Cash, cash equivalents and restricted cash
at beginning of year
29,241
19,359
Cash, cash equivalents and restricted cash
at end of period
$
19,445
$
35,965
Apogee Enterprises,
Inc.
Reconciliation of Non-GAAP
Financial Measures
(Unaudited)
Adjusted Net Earnings and
Adjusted Earnings per Diluted Common Share
Thirteen
Thirteen
Twenty-Six
Twenty-Six
Weeks Ended
Weeks Ended
Weeks Ended
Weeks Ended
In thousands
August 31, 2019
September 1, 2018
August 31, 2019
September 1, 2018
Net earnings
$
19,279
$
20,513
$
34,722
$
35,887
Amortization of short-lived acquired
intangibles
—
1,068
—
3,938
Acquired project profits (1)
—
(448
)
—
(1,013
)
Income tax impact on above adjustments
—
(148
)
—
(708
)
Adjusted net earnings
$
19,279
$
20,985
$
34,722
$
38,104
Thirteen
Thirteen
Twenty-Six
Twenty-Six
Weeks Ended
Weeks Ended
Weeks Ended
Weeks Ended
August 31, 2019
September 1, 2018
August 31, 2019
September 1, 2018
Earnings per diluted common share
$
0.72
$
0.72
$
1.30
$
1.26
Amortization of short-lived acquired
intangibles
—
0.04
—
0.14
Acquired project profits (1)
—
(0.01
)
—
(0.04
)
Income tax impact on above adjustments
—
(0.01
)
—
(0.02
)
Adjusted earnings per diluted common
share
$
0.72
$
0.74
$
1.30
$
1.34
(1) Adjustment for profits recognized
during fiscal 2019 on contracts that were acquired with the
purchase of EFCO.
Adjusted Operating Income and
Adjusted Operating Margin
Thirteen Weeks Ended August
31, 2019
Framing Systems
Segment
Corporate
Consolidated
In thousands
Operating income
Operating margin
Operating loss
Operating income
Operating margin
Operating income (loss)
$
15,523
8.3
%
$
(3,013
)
$
27,576
7.7
%
Thirteen Weeks Ended September
1, 2018
Framing Systems
Segment
Corporate
Consolidated
In thousands
Operating income
Operating margin
Operating loss
Operating income
Operating margin
Operating income (loss)
$
18,312
9.6
%
$
(3,248
)
$
28,660
7.9
%
Amortization of short-lived acquired
intangibles
1,068
0.6
—
1,068
0.3
Acquired project profits (1)
—
—
(448
)
(448
)
(0.1
)
Adjusted operating income
$
19,380
10.2
%
$
(3,696
)
$
29,280
8.1
%
Twenty-Six Weeks Ended August
31, 2019
Framing Systems
Segment
Corporate
Consolidated
In thousands
Operating income
Operating margin
Operating income (loss)
Operating income
Operating margin
Operating income (loss)
$
27,796
7.6
%
$
(7,395
)
$
50,616
7.1
%
Twenty-Six Weeks Ended
September 1, 2018
Framing Systems
Segment
Corporate
Consolidated
In thousands
Operating income
Operating margin
Operating income (loss)
Operating income
Operating margin
Operating income (loss)
$
30,650
8.3
%
$
(5,306
)
$
50,654
7.3
%
Amortization of short-lived acquired
intangibles
3,938
1.1
—
3,938
0.6
Acquired project profits (1)
—
—
(1,013
)
(1,013
)
(0.1
)
Adjusted operating income
$
34,588
9.4
%
$
(6,319
)
$
53,579
7.7
%
EBITDA and Adjusted
EBITDA
Thirteen
Thirteen
Twenty-Six
Twenty-Six
Weeks Ended
Weeks Ended
Weeks Ended
Weeks Ended
In thousands
August 31, 2019
September 1, 2018
August 31, 2019
September 1, 2018
Net earnings
$
19,279
$
20,513
$
34,722
$
35,887
Income tax expense
6,094
6,420
11,081
11,300
Interest and other expense, net
2,203
1,727
4,813
3,467
Depreciation and amortization
11,657
12,407
22,759
26,457
EBITDA
$
39,233
$
41,067
$
73,375
$
77,111
Acquired project profits (1)
—
(448
)
—
(1,013
)
Adjusted EBITDA
$
39,233
$
40,619
$
73,375
$
76,098
(1) Adjustment for profits recognized
during fiscal 2019 on contracts that were acquired with the
purchase of EFCO.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190917005303/en/
Jeff Huebschen Vice President, Investor Relations &
Communications 952.487.7538 ir@apog.com
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