- Strong market conditions drive robust
order activity, continued revenue growth and increased cash
flow
- Reported earnings increase to $0.72 per
diluted share, up from $0.60 in the prior year; with adjusted EPS
of $0.75, in-line with last year’s second quarter
- Challenges in ramping-up production to
meet significant demand impacts results in Architectural Glass
- Strong performance in Architectural
Services
- Company updates full-year guidance
Apogee Enterprises, Inc. (Nasdaq: APOG), a leader in the
design and development of value-added glass and metal products and
services for enclosing commercial buildings, framing and displays,
today announced its fiscal 2019 second-quarter results.
Second-Quarter
Highlights
- Second-quarter revenue grew 5.3 percent
to $362.1 million, driven by strong growth in Architectural
Services, partially offset by lower revenue in Architectural
Glass.
- Operating income was $28.7 million,
compared to $27.8 million a year ago. Adjusted operating income was
$29.7 million, compared to $34.1 million in the prior year,
primarily due to lower margins in Architectural Glass, partially
offset by continued margin improvements in Architectural
Services.
- Adjusted EBITDA was $42.1 million,
compared to $47.8 million in last year’s second quarter.
- Earnings per diluted share grew to
$0.72, compared to $0.60 in the prior year period.
- Adjusted earnings were $0.75 per
diluted share, in-line with the prior year.
- Year-to-date cash provided by operating
activities was $47.9 million, up 17 percent over $40.8 million in
the prior year.
- See Reconciliation of Non-GAAP
financial measures at the end of this press release.
Commentary
“In the second quarter, we continued to benefit from strong
market conditions and demand for Apogee’s diverse product and
services offerings, which drove solid top-line growth, adjusted
earnings in-line with prior year, and increased cash flow. However,
challenges ramping-up production in Architectural Glass in a tight
labor market impacted overall results in the quarter,” said Joseph
F. Puishys, Chief Executive Officer. “Apogee’s other three business
segments delivered solid results, as expected, with Architectural
Services achieving over 60 percent revenue growth and robust margin
expansion.”
“Our Glass segment saw much stronger than expected customer
demand and a surge in orders across all segments of the market.
However, we experienced difficulty hiring and training new staff to
meet rapidly rising order volumes. We’ve moved aggressively to
address these issues and made improvements as the quarter
progressed. We expect to fully resolve these issues in the second
half of the fiscal year, as our workforce stabilizes and our
factories reach higher levels of output and productivity.”
Mr. Puishys concluded, “As a result of lower than expected
second quarter results and a reduced second half outlook for
Architectural Glass, we have decreased our guidance for the fiscal
year. Looking ahead, I remain confident in Apogee’s long-term
direction. We continue to see multiple drivers for continued
organic growth, supported by a strong backlog and a positive
outlook for the North American construction industry. We are
pursuing numerous opportunities for margin expansion and we have a
strong balance sheet, which provides flexibility for investing in
our business and driving long-term shareholder value.”
Segment Results
Architectural Framing Systems
Architectural Framing Systems revenue increased slightly to
$189.9 million, compared to $189.0 million in the prior year
quarter.
Operating income was $18.3 million in the second quarter,
compared to $16.5 million in the prior year quarter, with operating
margin improving by 80 basis points compared to last year. Adjusted
operating income was $19.4 million, compared to $19.2 million last
year and adjusted operating margin was 10.2 percent, up slightly
from 10.1 percent in the prior year.
Sequentially, Framing Systems revenue grew 6.0 percent compared
to the first quarter of fiscal 2019 and adjusted operating margin
improved by 170 basis points, reflecting continued progress in the
segment’s growth and margin expansion strategies.
Segment backlog remained strong at $428.4 million, compared to
$427.0 million a quarter ago.
Architectural Glass
Architectural Glass had second quarter revenue of $88.1 million,
down 9.5 percent from the prior year quarter. Order activity grew
substantially during the quarter, with the segment recording its
highest quarterly order volume in 15 years. Sequentially,
Architectural Glass revenue grew 15 percent, compared to $76.9
million in the first quarter of fiscal 2019.
Operating income was $1.7 million in the second quarter and
operating margin was 2.0 percent, down from $10.3 million last year
and 10.5 percent in the prior year, respectively. The lower
operating margin was primarily driven by significantly increased
labor costs, lower productivity, and higher cost of quality, as the
segment was challenged to efficiently ramp-up production to meet
the higher than expected, short lead-time customer demand.
Architectural Services
As expected, Architectural Services revenue grew sharply
compared to the second quarter of last year, increasing 63.4
percent to $76.5 million, as the business continued to execute on
the substantial backlog booked over the past several quarters.
The segment posted strong profitability improvements, with
operating income increasing to $7.6 million and operating margin of
10.0 percent, compared to $0.8 million and 1.7 percent respectively
in the prior year period, due to leverage on higher volumes and
strong project execution.
Segment backlog stands at $404.9 million, compared to $439.1
million a quarter ago and $323.0 million a year ago. This backlog,
along with current bidding and award activity, provides solid
visibility for the segment into fiscal 2020.
Large-Scale Optical
Large-Scale Optical continued to deliver strong operating
results, in-line with expectations. Segment revenue was $20.4
million, compared to $20.3 million in the prior year quarter.
Year-to-date, segment revenue has grown 5.8 percent over the prior
year.
Operating income was $4.2 million and operating margin was 20.8
percent, comparable to the prior year period.
Financial Condition
The company ended the quarter with total debt of $225 million.
Year-to-date cash provided by operating activities increased 17
percent to $47.9 million. Capital expenditures for the first six
months of the fiscal year were $24.2 million, compared to $26.8
million in the prior year period, as the company continued its
disciplined investments in growth and productivity improvement
initiatives. Fiscal year-to-date, Apogee has returned $8.8 million
of cash to shareholders through dividend payments.
Outlook
The company is reducing its outlook for the full year, primarily
due to lower than expected second quarter results and decreased
profit expectations for Architectural Glass.
The company’s updated outlook for fiscal 2019 includes:
- Revenue growth of 8 to 10 percent,
compared to approximately 10 percent previously.
- Operating margin of 8.3 to 8.8 percent,
compared to 8.9 to 9.4 percent previously.
- Adjusted operating margin of 8.6 to 9.1
percent, compared to 9.2 to 9.7 percent previously.
- Earnings of $3.00 to $3.20 per diluted
share, compared to $3.35 to $3.55 previously.
- Adjusted EPS of $3.13 to $3.33,
compared to $3.48 to $3.68 previously.
- Adjusted fiscal 2019 earnings guidance
excludes the after-tax impact of amortization of short-lived
acquired intangibles associated with the acquired backlog of
Sotawall and EFCO of $3.8 million ($0.13 per diluted share).
- Capital expenditures of $60 to $65
million.
- Tax rate of approximately 24
percent.
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. The call
will be webcast and is available in the Investor Relations section
of the company’s website at ir.apog.com/investor-relations. The webcast also
will be archived for replay on the company’s web site.
About Apogee Enterprises
Apogee 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
Measures
This 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
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 these adjusted measures include the impact of
acquisition-related costs, amortization of short-lived acquired
intangibles associated with backlog, and non-recurring
restructuring costs.
- 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.
- 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.
- EBITDA is defined as net earnings
excluding income taxes, interest, other income and depreciation and
amortization expenses. Adjusted EBITDA excludes items listed in the
adjusted net earnings per share description above. 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 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 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. 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
Twenty-Six Twenty-Six Weeks Ended Weeks Ended % Weeks Ended Weeks
Ended % In thousands, except per share amounts
September 1, 2018
September 2, 2017
Change
September 1, 2018
September 2, 2017
Change Net sales $ 362,133 $ 343,907 5 % $ 698,664 $ 616,214 13 %
Cost of sales 277,667 257,906 8 % 533,468
459,919 16 % Gross profit 84,466 86,001 (2 )% 165,196
156,295 6 % Selling, general and administrative expenses 55,806
58,227 (4 )% 114,542 104,415 10 %
Operating income 28,660 27,774 3 % 50,654 51,880 (2 )% Interest
income 680 117 481 % 910 284 220 % Interest expense 2,624 1,650 59
% 4,573 2,095 118 % Other income, net 217 77 182 %
196 256 (23 )% Earnings before income taxes 26,933
26,318 2 % 47,187 50,325 (6 )% Income tax expense 6,420
8,909 (28 )% 11,300 16,813 (33 )% Net earnings
$ 20,513 $ 17,409 18 % $ 35,887 $ 33,512
7 % Earnings per share - basic $ 0.73 $ 0.60 22 % $
1.28 $ 1.16 10 % Average common shares outstanding 28,128 28,850 (3
)% 28,127 28,850 (3 )% Earnings per share - diluted $ 0.72 $ 0.60
20 % $ 1.26 $ 1.16 9 % Average common and common equivalent shares
outstanding 28,379 28,908 (2 )% 28,377 28,885 (2 )% Cash dividends
per common share $ 0.1575 $ 0.1400 13 % $ 0.3150 $ 0.2800 13 %
Business Segment Information (Unaudited)
Thirteen Thirteen Twenty-Six Twenty-Six Weeks Ended Weeks Ended %
Weeks Ended Weeks Ended % In thousands
September 1, 2018
September 2, 2017
Change
September 1, 2018
September 2, 2017
Change
Sales Architectural Framing Systems $ 189,850 $
189,023 — % $ 368,887 $ 299,515 23 % Architectural Glass 88,084
97,351 (10 )% 165,009 195,086 (15 )% Architectural Services 76,496
46,829 63 % 147,223 96,979 52 % Large-Scale Optical 20,383 20,291 —
% 41,145 38,894 6 % Eliminations (12,680 ) (9,587 ) 32 % (23,600 )
(14,260 ) 65 % Total $ 362,133 $ 343,907 5 % $
698,664 $ 616,214 13 %
Operating income (loss)
Architectural Framing Systems $ 18,312 $ 16,542 11 % $ 30,650 $
28,506 8 % Architectural Glass 1,739 10,258 (83 )% 3,317 19,581 (83
)% Architectural Services 7,621 774 885 % 12,775 1,555 722 %
Large-Scale Optical 4,236 4,248 — % 9,218 8,298 11 % Corporate and
other (3,248 ) (4,048 ) (20 )% (5,306 ) (6,060 ) (12 )% Total $
28,660 $ 27,774 3 % $ 50,654 $ 51,880
(2 )%
Apogee Enterprises, Inc. Consolidated
Condensed Balance Sheets (Unaudited) In thousands
September 1, 2018
March 3, 2018
Assets Current assets $ 361,193 $ 336,278 Net property,
plant and equipment 308,314 304,063 Other assets 404,110
381,979 Total assets $ 1,073,617 $ 1,022,320
Liabilities and shareholders' equity Current liabilities $
209,216 $ 208,152 Long-term debt 224,881 215,860 Other liabilities
100,664 86,953 Shareholders' equity 538,856 511,355
Total liabilities and shareholders' equity $ 1,073,617 $
1,022,320
Consolidated Condensed Statement
of Cash Flows (Unaudited)
Twenty-Six Twenty-Six Weeks Ended Weeks Ended In thousands
September 1, 2018
September 2, 2017
Net earnings $ 35,887 $ 33,512 Depreciation and amortization 26,457
25,062 Share-based compensation 3,119 3,063 Proceeds from new
markets tax credit transaction, net of deferred costs 6,052 —
Other, net 4,564 (1,956 ) Changes in operating assets and
liabilities (28,150 ) (18,872 ) Net cash provided by operating
activities 47,929 40,809 Capital expenditures (24,241
) (26,825 ) Proceeds on sale of property 774 64 Acquisition of
businesses and intangibles — (184,826 ) Net (purchases) sales of
marketable securities (4,123 ) (1,165 ) Other, net (2,209 ) 1,099
Net cash used in investing activities (29,799 ) (211,653 )
Borrowings on line of credit, net 8,500 190,200 Shares withheld for
taxes, net of stock issued to employees (1,431 ) (1,612 )
Repurchase and retirement of common stock — (10,833 ) Dividends
paid (8,823 ) (7,994 ) Other, net 496 1,759 Net cash
(used in) provided by financing activities (1,258 ) 171,520
Increase in cash and cash equivalents 16,872 676 Effect of exchange
rates on cash (266 ) 1,555 Cash, cash equivalents and restricted
cash at beginning of year 19,359 27,297 Cash, cash
equivalents and restricted cash at end of period $ 35,965 $
29,528
Apogee Enterprises, Inc.
Reconciliation of Non-GAAP Financial Measures Adjusted
Net Earnings and Adjusted Earnings per Diluted Common Share
(Unaudited)
Thirteen Thirteen Twenty-Six Twenty-Six Weeks Ended Weeks Ended
Weeks Ended Weeks Ended In thousands
September 1, 2018
September 2, 2017
September 1, 2018
September 2, 2017
Net earnings $ 20,513 $ 17,409 $ 35,887 $ 33,512 Amortization of
short-lived acquired intangibles 1,068 2,630 3,938 4,684
Acquisition-related costs — 3,737 — 4,417 Income tax impact on
above adjustments (1) (254 ) (2,158 ) (953 ) (3,040 ) Adjusted net
earnings $ 21,327 $ 21,618 $ 38,872 $ 39,573
Thirteen Thirteen Twenty-Six Twenty-Six Weeks Ended
Weeks Ended Weeks Ended Weeks Ended
September 1, 2018
September 2, 2017 September 1, 2018 September 2,
2017 Earnings per diluted common share $ 0.72 $ 0.60 $ 1.26 $
1.16 Amortization of short-lived acquired intangibles 0.04 0.09
0.14 0.16 Acquisition-related costs — 0.13 — 0.15 Income tax impact
on above adjustments (1) (0.01 ) (0.07 ) (0.03 ) (0.11 ) Adjusted
earnings per diluted common share $ 0.75 $ 0.75 $
1.37 $ 1.37 (1) Income tax impact on adjustments was
calculated using the estimated quarterly effective income tax rate
of 23.8% in the current year and 33.9% in the prior year and for
the year-to-date period using the estimated annual effective income
tax rate of 24.2% in the current year and 33.4% in the prior year.
EBITDA and Adjusted EBITDA Thirteen
Thirteen Twenty-Six Twenty-Six Weeks Ended Weeks Ended Weeks Ended
Weeks Ended In thousands
September 1, 2018 September 2,
2017 September 1, 2018 September 2, 2017 Net
earnings $ 20,513 $ 17,409 $ 35,887 $ 33,512 Income tax expense
6,420 8,909 11,300 16,813 Other income, net (217 ) (77 ) (196 )
(256 ) Interest expense, net 1,944 1,533 3,663 1,811 Depreciation
and amortization 12,407 13,639 26,457 25,062
EBITDA 41,067 41,413 77,111 76,942
Amortization of short-lived acquired intangibles 1,068 2,630
3,938 4,684 Acquisition-related costs — 3,737 —
4,417 Adjusted EBITDA $ 42,135 $ 47,780
$ 81,049 $ 86,043
Adjusted Operating
Income and Adjusted Operating Margin (Unaudited)
Thirteen Weeks Ended September 1, 2018 Framing Systems
Segment Corporate
Consolidated
In thousands
Operatingincome
Operatingmargin
Operatingincome (loss)
Operatingincome
Operatingmargin
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 % Adjusted operating income (loss) $
19,380 10.2 % $ (3,248 ) $ 29,728 8.2 %
Thirteen Weeks Ended September 2, 2017 Framing Systems
Segment Corporate Consolidated In thousands
Operatingincome
Operatingmargin
Operatingincome (loss)
Operatingincome
Operatingmargin
Operating income (loss) $ 16,542 8.8 % $ (4,048 ) $ 27,774 8.1 %
Amortization of short-lived acquired intangibles 2,630 1.4 % —
2,630 0.8 % Acquisition-related costs — — % 3,737
3,737 1.1
%
Adjusted operating income (loss) $ 19,172 10.1 % $ (311 ) $
34,141 9.9 %
Twenty-Six Weeks Ended September 1,
2018 Framing Systems Segment Corporate
Consolidated In thousands
Operatingincome
Operatingmargin
Operatingincome (loss)
Operatingincome
Operatingmargin
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 % Adjusted operating income (loss) $
34,588 9.4 % $ (5,306 ) $ 54,592 7.8 %
Twenty-Six Weeks Ended September 2, 2017 Framing Systems
Segment Corporate Consolidated In thousands
Operatingincome
Operatingmargin
Operatingincome (loss)
Operatingincome
Operatingmargin
Operating income (loss) $ 28,506 9.5 % $ (6,060 ) $ 51,880 8.4 %
Amortization of short-lived acquired intangibles 4,684 1.6 % —
4,684 0.8 % Acquisition-related costs — — % 4,417
4,417 0.7 % Adjusted operating income (loss) 33,190
11.1 % (1,643 ) $ 60,981 9.9 %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180918005286/en/
Apogee Enterprises, Inc.Jeff Huebschen, 952-487-7538Vice
President, Investor Relations & Communicationsir@apog.com
Apogee Enterprises (NASDAQ:APOG)
Historical Stock Chart
From Mar 2024 to Apr 2024
Apogee Enterprises (NASDAQ:APOG)
Historical Stock Chart
From Apr 2023 to Apr 2024