- Full-year revenue increases 6 percent,
the company’s eighth consecutive year of growth
- Robust demand drives strong order flow
and record backlog in Architectural Services
- Continued productivity gains in
Architectural Glass, with 120 basis point sequential operating
margin improvement
- Company announces $45.7 million of
pre-tax charges related to the EFCO acquisition
- Company provides guidance for fiscal
2020
Apogee Enterprises, Inc. (Nasdaq: APOG) today announced
its fiscal 2019 fourth-quarter and full-year results. Revenue in
the fourth quarter was $346.3 million, compared to $353.5 million
in the fourth quarter of fiscal year 2018. The company had a GAAP
net loss of $(0.45) per share in the fourth quarter, which included
pre-tax charges of $42.6 million for increased project-related
charges on contracts that were acquired with the purchase of EFCO
and of $3.1 million for a non-cash impairment of the trade name
acquired with the purchase of EFCO. This compares to GAAP earnings
of $0.78 per diluted share in the fourth quarter of fiscal 2018.
Adjusted earnings1, which exclude the impact of the charges and the
amortization of short-lived acquired intangibles, were $0.85 per
diluted share, compared to $0.96 in the prior-year period. Earnings
and adjusted earnings in the prior-year quarter included a $0.13
per share benefit from U.S. federal tax reform.
Full-year fiscal 2019 revenue grew 5.8 percent to $1.40 billion,
from $1.33 billion in the prior year. Full-year GAAP earnings were
$1.63 per diluted share, compared to $2.76 in fiscal 2018.
Full-year adjusted earnings per share were $2.96, compared to $3.23
in fiscal 2018.
1 Adjusted earnings and adjusted earnings per share are non-GAAP
financial measures. See Use and Reconciliation of Non-GAAP
Financial Measures at the end of this press release for more
information and a reconciliation to the most directly comparable
GAAP measures.
Commentary“Apogee made progress on many fronts in fiscal
2019 and finished the year strong by delivering improved
performance in a number of our businesses,” said Joseph F. Puishys,
Chief Executive Officer. “Unfortunately, our fourth quarter results
were negatively impacted by unusually severe winter weather, which
caused disruptions at some of our manufacturing locations. Despite
several challenges during the year, we achieved another year of
growth, with revenue increasing to a record $1.4 billion. Demand
remained strong in our U.S. architectural end markets, which drove
robust order flow and backlog growth going into fiscal 2020. Our
Architectural Services segment reported record full-year revenue
and operating income and we made significant progress toward
overcoming the labor and productivity issues that impacted
Architectural Glass earlier in the year.”
“As we have discussed previously, a small number of legacy EFCO
projects we inherited from the acquisition have presented
significant challenges,” added Mr. Puishys. “During the fourth
quarter, we made substantial progress toward completion of these
projects and performed detailed updated cost estimates. The charges
announced today are expected to cover the remaining costs related
to these legacy projects and should alleviate any additional impact
on future financial results. We are also actively pursuing
available options to recover these added costs from certain
parties.”
“We are focused on putting these issues behind us and
positioning EFCO for long-term success. In fiscal 2020, we expect
to complete these legacy projects and to continue taking important
steps toward improving EFCO’s productivity and operating margins.
EFCO ended fiscal 2019 with solid orders momentum, which we expect
to continue in fiscal 2020, setting the stage for future profitable
growth.”
“Overall, we’re optimistic about Apogee’s outlook. In fiscal
2020, we expect improved revenue and operating margins in both of
our core Architectural Glass and Framing Systems segments,”
continued Mr. Puishys. “Specifically, in Architectural Glass, we
expect continued operational improvements and we are launching a
strategic growth initiative to expand our presence in the
non-residential market. In our Architectural Services segment,
while we expect lower results in fiscal 2020 due to project
schedules, we remain confident that the segment has never been
stronger, as we ended fiscal 2019 with record backlog and a visible
path to significant growth returning in fiscal 2021. We are
confident in Apogee’s direction and will remain focused on our
strategic initiatives to create long-term value for
shareholders.”
Segment Results
Architectural Framing SystemsArchitectural Framing
Systems revenue in the fourth quarter was $170.6 million, down from
$183.5 million in the prior year quarter, primarily due to lower
volumes. Fourth-quarter operating income was $6.1 million which
includes the $3.1 million charge for the EFCO trade name
impairment, down from $12.1 million in the prior year quarter,
primarily driven by the lower volumes and a less favorable mix of
work. Adjusted operating income in the fourth quarter was $9.5
million with adjusted operating margin of 5.6 percent, compared to
$15.0 million and 8.2 percent respectively in the prior year
quarter. Segment backlog increased slightly to $408.5 million,
compared to $407.9 million a quarter ago and $405.7 million a year
ago.
Architectural GlassArchitectural Glass delivered 13
percent growth in the fourth quarter, with revenue of $103.7
million compared to $92.1 million in the prior year quarter, as the
segment improved its productivity and executed against the strong
order volumes booked earlier in the fiscal year. Operating income
was $7.3 million, compared to $4.1 million in last year’s fourth
quarter. The prior year quarter included $3.0 million of
restructuring-related costs. In the current quarter, both revenue
and operating income were negatively affected by the impact of
production interruptions caused by unusually severe winter
weather.
Architectural Glass operating margin in the fourth quarter was
7.1 percent, a 120 basis point sequential increase from 5.9 percent
in the third quarter of fiscal 2019, as the segment benefited from
operating leverage on higher sales and made further progress toward
overcoming the labor and productivity issues that reduced its
profitability in the first half of the fiscal year. This
improvement was partially offset by the impact of severe winter
weather.
Architectural ServicesArchitectural Services’ revenue was
$66.3 million in the fourth quarter, compared to $67.7 million in
the prior-year quarter. The segment posted strong profitability
improvements, with operating income increasing to $9.1 million and
operating margin of 13.7 percent, compared to $6.3 million and 9.3
percent respectively in the prior year period, as a number of
projects came to completion with strong execution and lower than
expected costs. The segment had strong order flow during the
quarter, with segment backlog increasing to $444.0 million, from
$419.2 million last quarter and $426.3 million a year ago.
Large-Scale OpticalLarge-Scale Optical revenue was $24.0
million, compared to $23.4 million in the fourth quarter last year.
Operating income was $7.2 million, compared to $7.0 million in the
prior year period, with operating margin improving to 29.9 percent,
from 29.8 percent in the prior year quarter.
Financial ConditionThe company ended the fiscal year with
$245.7 million of long-term debt. Net cash provided by operating
activities in fiscal 2019 was $96.4 million. Capital expenditures
for the fiscal year were $60.7 million, compared to $53.2 million
in fiscal 2018, as the company continued to make investments in
growth and productivity improvement initiatives. During the fourth
quarter, the company repurchased 657,983 shares of stock for $20.0
million. For the full fiscal year, Apogee returned $61.2 million of
cash to shareholders through dividend payments and share
repurchases, a 22 percent increase compared to fiscal year
2018.
OutlookThe company provided its financial outlook for
fiscal 2020. The company expects:
- 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 already 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 negative leverage on lower volumes
and less favorable project maturity compared to fiscal 2019. The
company also expects margins will be negatively impacted by
start-up costs related to the strategic growth investment in
Architectural Glass 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 current quarter.
- Tax rate of approximately 24.5
percent.
- Capital expenditures of $60 to $65
million.
Conference Call InformationThe company will host a
conference call today at 8:00 a.m. Central Time to discuss its
financial results and outlook. The call will be webcast and is
available in the Investor Relations section of the company’s
website at http://ir.apog.com/events-and-presentations. The
webcast also will be archived for replay on the company’s
website.
About Apogee EnterprisesApogee Enterprises, Inc.,
headquartered in Minneapolis, is a leader in the design and
development of value-added glass and metal products and services
for enclosing commercial buildings, framing and displays. The
company is organized in four segments, with three of the segments
serving the commercial construction market:
- 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 Glass segment consists of
Viracon, the leading fabricator of coated, high-performance
architectural glass for global markets.
- Architectural Services segment consists
of Harmon, one of the largest U.S. full-service building glass
installation companies.
- Large-Scale Optical segment, which
leverages the same coating technologies used in the company’s
Architectural Glass segment, consists of Tru Vue, a value-added
glass and acrylic manufacturer primarily for framing and display
applications.
Use of Non-GAAP Financial MeasuresThis 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 StatementsThis 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 3, 2018 and in subsequent filings with
the U.S. Securities and Exchange Commission.
Apogee Enterprises, Inc. Consolidated Condensed
Statements of Income (Unaudited)
Thirteen
Thirteen Fifty-two Fifty-two Weeks Ended Weeks Ended % Weeks Ended
Weeks Ended % In thousands, except per share amounts
March 2,
2019 March 3, 2018 Change
March 2, 2019 March
3, 2018 Change Net sales $ 346,255 $ 353,453 (2 )% $ 1,402,637
$ 1,326,173 6 % Cost of sales 301,976 267,789
13 % 1,109,072 992,655 12 % Gross profit
44,279 85,664 (48 )% 293,565 333,518 (12 )% Selling, general and
administrative expenses 59,057 57,795 2 %
226,281 219,234 3 % Operating (loss) income
(14,778 ) 27,869 N/M 67,284 114,284 (41 )% Interest income 155 148
5 % 355 538 (34 )% Interest expense 2,454 1,819 35 % 8,449 5,508 53
% Other (expense) income, net (69 ) 6 N/M (528
) 566 N/M (Loss) earnings before income taxes (17,146 )
26,204 N/M 58,662 109,880 (47 )% Income tax (benefit) expense
(5,062 ) 3,875 N/M 12,968 30,392
(57 )% Net (loss) earnings $ (12,084 ) $ 22,329 N/M $ 45,694
$ 79,488 (43 )% (Loss) earnings per share - basic $ (0.45 )
$ 0.79 N/M $ 1.64 $ 2.79 (41 )% Average common shares outstanding
27,117 28,298 (4 )% 27,802 28,534 (3 )% (Loss) earnings per share -
diluted $ (0.45 ) $ 0.78 N/M $ 1.63 $ 2.76 (41 )% Average common
and common equivalent shares outstanding 27,117 28,619 (5 )% 28,082
28,804 (3 )% Cash dividends per common share $ 0.1750 $ 0.1575 11 %
$ 0.6475 $ 0.5775 12 %
Business Segment
Information (Unaudited)
Thirteen Thirteen
Fifty-two Fifty-two Weeks Ended Weeks Ended % Weeks Ended Weeks
Ended % In thousands
March 2, 2019 March 3, 2018
Change
March 2, 2019 March 3, 2018 Change
Sales Architectural Framing Systems $ 170,636 $ 183,527 (7
)% $ 720,829 $ 677,198 6 % Architectural Glass 103,670 92,110 13 %
367,203 384,137 (4 )% Architectural Services 66,264 67,700 (2 )%
286,314 213,757 34 % Large-Scale Optical 23,971 23,406 2 % 88,493
88,303 — % Eliminations (18,286 ) (13,290 ) 38 %
(60,202 ) (37,222 ) 62 % Total $ 346,255 $
353,453 (2 )% $ 1,402,637 $ 1,326,173 6 %
Operating (loss) income Architectural Framing Systems $
6,107 $ 12,073 (49 )% $ 49,660 $ 59,031 (16 )% Architectural Glass
7,334 4,077 80 % 16,503 32,764 (50 )% Architectural Services 9,074
6,318 44 % 30,509 10,420 193 % Large-Scale Optical 7,158 6,978 3 %
23,003 22,000 5 % Corporate and other (44,451 )
(1,577 ) 2,719 % (52,391 ) (9,931 ) 428 % Total $
(14,778 ) $ 27,869 N/M $ 67,284 $ 114,284 (41
)%
Apogee Enterprises, Inc. Consolidated
Condensed Balance Sheets (Unaudited) In thousands
March 2, 2019 March 3, 2018
Assets Current assets $ 371,898 $ 336,278 Net property,
plant and equipment 315,823 304,063 Other assets 380,447
381,979 Total assets $ 1,068,168 $ 1,022,320
Liabilities
and shareholders' equity Current liabilities $ 227,512 $
208,152 Long-term debt 245,724 215,860 Other liabilities 98,615
86,953 Shareholders' equity 496,317 511,355 Total
liabilities and shareholders' equity $ 1,068,168 $ 1,022,320
Consolidated Condensed Statement of Cash Flows
(Unaudited) Fifty-two Fifty-two Weeks
Ended Weeks Ended In thousands
March 2, 2019 March 3,
2018 Net earnings $ 45,694 $ 79,488 Depreciation and
amortization 49,798 54,843 Share-based compensation 6,286 6,205
Proceeds from new markets tax credit transaction, net of deferred
costs 8,850 — Other, net (7,019 ) 2,801 Changes in operating assets
and liabilities (7,186 ) (15,874 ) Net cash provided
by operating activities 96,423 127,463
Capital expenditures (60,717 ) (53,196 ) Proceeds on sale of
property 12,333 1,394 Acquisition of businesses and intangibles —
(182,849 ) Other, net (5,312 ) 1,083 Net cash
used in investing activities (53,696 ) (233,568 )
Borrowings on line of credit, net 30,000 149,960 Repurchase and
retirement of common stock (43,326 ) (33,676 ) Dividends paid
(17,864 ) (16,393 ) Other, net (1,136 ) (1,557 ) Net
cash (used in) provided by financing activities (32,326 )
98,334 Increase (decrease) in cash and cash
equivalents 10,401 (7,771 ) Effect of exchange rates on cash (519 )
(167 ) Cash, cash equivalents and restricted cash at beginning of
year 19,359 27,297 Cash, cash
equivalents and restricted cash at end of period $ 29,241 $
19,359
Apogee Enterprises, Inc.
Reconciliation of Non-GAAP Financial Measures Adjusted
Net Earnings and Adjusted Earnings per Diluted Common Share
(Unaudited)
Thirteen Thirteen Fifty-two Fifty-two Weeks Ended Weeks Ended Weeks
Ended Weeks Ended In thousands
March 2, 2019 March 3,
2018 March 2, 2019 March 3, 2018 Net (loss)
earnings $ (12,084 ) $ 22,329 $ 45,694 $ 79,488 Amortization of
short-lived acquired intangibles 239 2,913 4,894 10,521
Project-related charges (1) 42,598 — 40,948 — Impairment charge
3,141 — 3,141 — Acquisition-related costs — 258 — 5,098
Restructuring-related costs — 3,026 — 3,026 Income tax impact on
above adjustments (10,851 ) (917 ) (11,560 )
(5,157 ) Adjusted net earnings $ 23,043 $ 27,609
$ 83,117 $ 92,976 Thirteen Thirteen
Fifty-two Fifty-two Weeks Ended Weeks Ended Weeks Ended Weeks Ended
March 2, 2019 March 3, 2018 March 2,
2019 March 3, 2018 (Loss) earnings per diluted common
share $ (0.45 ) $ 0.78 $ 1.63 $ 2.76 Amortization of short-lived
acquired intangibles 0.01 0.10 0.17 0.37 Project-related charges
(1) 1.57 — 1.46 — Impairment charge 0.12 — 0.11 —
Acquisition-related costs — 0.01 — 0.18 Restructuring-related costs
— 0.11 — 0.11 Income tax impact on above adjustments (0.40 )
(0.03 ) (0.41 ) (0.18 ) Adjusted earnings per
diluted common share $ 0.85 $ 0.96 $ 2.96 $
3.23
EBITDA and Adjusted EBITDA
Thirteen Thirteen Fifty-two Fifty-two Weeks Ended Weeks Ended Weeks
Ended Weeks Ended In thousands
March 2, 2019 March 3,
2018 March 2, 2019 March 3, 2018 Net (loss)
earnings $ (12,084 ) $ 22,329 $ 45,694 $ 79,488 Income tax
(benefit) expense (5,062 ) 3,875 12,968 30,392 Other expense
(income), net 69 (6 ) 528 (566 ) Interest expense, net 2,299 1,671
8,094 4,970 Depreciation and amortization 11,420
15,069 49,798 54,843
EBITDA (3,358 ) 42,938 117,082
169,127 Project-related charges (1) 42,598 — 40,948 —
Impairment charge 3,141 — 3,141 — Acquisition-related costs — 258 —
5,098 Restructuring-related costs — 3,026
— 3,026 Adjusted EBITDA $ 42,381
$ 46,222 $ 161,171 $ 177,251
Adjusted Operating Income and Adjusted Operating
Margin (Unaudited)
Thirteen Weeks Ended March
2, 2019 Framing Systems Segment
Architectural Glass Segment Corporate
Consolidated In thousands
Operatingincome
Operatingmargin
Operatingincome
Operatingmargin
Operatingincome (loss)
Operatingincome
Operatingmargin
Operating income (loss) $ 6,107 3.6 % $ 7,334 7.1 % $
(44,451 ) $ (14,778 ) (4.3 )% Amortization of short-lived acquired
intangibles 239 0.1 — — — 239 0.1 Project-related charges (1) — — —
— 42,598 42,598 12.3 Impairment charge 3,141 1.8
— — — 3,141 0.9
Adjusted operating income (loss) $ 9,487 5.6 % $ 7,334 7.1 % $
(1,853 ) $ 31,200 9.0 %
Thirteen Weeks Ended March
3, 2018 Framing Systems Segment Architectural Glass
Segment Corporate Consolidated In
thousands
Operatingincome
Operatingmargin
Operatingincome
Operatingmargin
Operatingincome (loss)
Operatingincome
Operatingmargin
Operating income (loss) $ 12,073 6.6 % $ 4,077 4.4 % $ (1,577 ) $
27,869 7.9 % Amortization of short-lived acquired intangibles 2,913
1.6 — — — 2,913 0.8 Acquisition-related costs — — — — 258 258 0.1
Restructuring-related costs — — 3,026 3.3
— 3,026 0.9 Adjusted
operating income (loss) $ 14,986 8.2 %
$
7,103 7.7 % $ (1,319 ) $ 34,066 9.6 %
Fifty-Two
Weeks Ended March 2, 2019 Framing Systems Segment
Architectural Glass Segment Corporate
Consolidated In thousands
Operatingincome
Operatingmargin
Operatingincome
Operatingmargin
Operatingincome (loss)
Operatingincome
Operatingmargin
Operating income (loss) $ 49,660 6.9 % $ 16,503 4.5 % $ (52,391 ) $
67,284 4.8 % Amortization of short-lived acquired intangibles 4,894
0.7 — — — 4,894 0.3 Project-related charges (1) — — — — 40,948
40,948 2.9 Impairment charge 3,141 0.4 — —
— 3,141 0.2 Adjusted
operating income (loss) $ 57,695 8.0 % $ 16,503 4.5 % $ (11,443 ) $
116,267 8.3 %
Fifty-Two Weeks Ended March 3,
2018 Framing Systems Segment Architectural Glass
Segment Corporate Consolidated In
thousands
Operatingincome
Operatingmargin
Operatingincome
Operatingmargin
Operatingincome (loss)
Operatingincome
Operatingmargin
Operating income (loss) $ 59,031 8.7 % $ 32,764 8.5 % $ (9,931 ) $
114,284 8.6 % Amortization of short-lived acquired intangibles
10,521 1.6 — — — 10,521 0.8 Acquisition-related costs — — — — 5,098
5,098 0.4 Restructuring-related costs — —
3,026 0.8 — 3,026 0.2
Adjusted operating income (loss) $ 69,552 10.3 % $ 35,790 9.3 % $
(4,833 ) $ 132,929 10.0 % (1) The adjustment for
project-related charges for the fifty-two weeks ended March 2, 2019
includes an adjustment for profits recognized during the first
three quarters of fiscal 2019 on contracts that were acquired with
the purchase of EFCO. The amounts included in operating income are
$565, $448 and $637, and EPS are $0.02, $0.01 and $0.02, for the
thirteen weeks ended June 2, 2018, September 1, 2018 and December
1, 2018, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190411005118/en/
Jeff HuebschenVice President, Investor Relations &
Communications952.487.7538ir@apog.com
Apogee Enterprises (NASDAQ:APOG)
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