- Revenues of $343.9 million were up
24%
- EPS of $0.60; adjusted EPS of
$0.75
- Reaffirming FY18 outlook for 24-26%
revenue growth; EPS of $3.05 to $3.25, adjusted EPS of
$3.40-$3.60
Apogee Enterprises, Inc. (Nasdaq:APOG) today announced fiscal
2018 second-quarter results. Apogee provides distinctive solutions
for enclosing commercial buildings and framing and displays.
HIGHLIGHTS
- Revenues of $343.9 million were up 24
percent, vs. prior-year period.
- Operating income of $27.8 million was
down 16 percent before adjustments, vs. prior-year period.
- Adjusted operating income of $34.1
million was up 3 percent, vs. prior-year period.
- Operating margin was 8.1 percent, or
9.9 percent adjusted, vs. 11.9 percent in the prior-year
period.
- Net interest expense increased $1.6
million vs. the prior-year period, as debt was incurred for
acquisitions.
- Earnings per diluted share of $0.60
were down 22 percent, vs. the prior-year period.
- Adjusted EPS was $0.75, down 3 percent,
vs. the prior-year period.
- Completed acquisition of EFCO
Corporation on June 12. It is reported in the architectural framing
systems segment.
- See Reconciliation of Non-GAAP
Financial Measures at the end of this release.
COMMENTARY
“Our architectural framing systems segment, now our largest
segment at more than 50 percent of revenues, is central to our
strategy to deliver more stable future revenue streams and
earnings,” said Joseph F. Puishys, Apogee chief executive officer.
“During this cycle, architectural framing systems revenues have
consistently grown and operating margins have been the strongest
among our architectural segments. In the second quarter, this
segment drove our revenue growth and more importantly, our existing
framing systems businesses . . . excluding our two recent
acquisitions . . . delivered double-digit top- and bottom-line
growth in the quarter.
“We also had double-digit growth in architectural glass segment
mid-size projects, an important step forward as we transform
Apogee’s mix,” he said. “In addition, across Apogee we continue to
diversify our revenues as we grow our retrofit business, introduce
new products and further penetrate newer geographies in our
existing businesses.
“Halfway through fiscal 2018, we’ve completed significant
investments for future growth, including for acquisitions and for
capabilities and productivity in existing businesses. We are well
positioned for a stronger second half and fiscal 2019,” said
Puishys. “Moving forward, our services segment will begin to
execute its large backlog. We’ll also be making progress on our
three-year goal of a double-digit operating margin at EFCO.
“We have internal visibility to continued end-market growth for
the next two to three years, and we are confident Apogee is in a
good position to capitalize on future opportunities,” he said.
“External commercial construction market metrics remain positive,
and our heavy bidding activity has driven backlog growth.”
SECOND-QUARTER SEGMENT AND OPERATING RESULTS VS. PRIOR-YEAR
PERIOD
Architectural Framing Systems
- Revenues of $189.0 million were up 105
percent; excluding the addition of Sotawall and EFCO, revenues were
up 17 percent.
- Operating income grew to $16.5 million,
up 27 percent; adjusted operating income of $19.2 million was up 47
percent.
- Operating margin was 8.7 percent, or
10.1 percent adjusted, compared to 14.1 percent. Operating margins
for existing businesses were up substantially, offset by a lower
operating margin at EFCO, as expected, and a significant foreign
exchange loss at the Canadian curtainwall business.
- Segment backlog grew $240 million to
$495.9 million from the fiscal 2018 first quarter backlog level,
including $216 million from the acquisition of EFCO. This
substantial backlog supports growth in the second half of fiscal
2018 and in fiscal 2019.
Architectural Glass
- Revenues of $97.4 million were down 2
percent, as double-digit mid-size project growth was somewhat
offset by the timing of larger projects.
- Operating income was $10.3 million, up
7 percent.
- Operating margin was 10.5 percent,
compared to 9.7 percent due to improved productivity and cost
management, somewhat offset by mix and price.
Architectural Services
- Revenues of $46.8 million were down 40
percent, compared to the strong prior-year period.
- Operating income was $0.8 million, down
88 percent.
- Operating margin was 1.7 percent,
compared to 8.0 percent, due to lower volume leverage on project
management, engineering and manufacturing capacity.
- Segment backlog grew $30 million to
$323.0 million from the fiscal 2018 first-quarter backlog level.
- The longer-term outlook for this
segment remains positive, with additions to backlog in the last
three quarters anticipated to generate strong revenue growth in
fiscal 2019.
Large-Scale Optical Technologies
- Revenues of $20.3 million were down 5
percent on the timing of customer orders.
- Operating income of $4.2 million was
down 16 percent.
- Operating margin was 20.9 percent,
compared to 23.7 percent, due to lower volume.
Financial Condition
Apogee’s capital allocation strategy supports future growth and
margin improvement. Year-to-date capital expenditures, primarily
for productivity and capabilities, were $26.8 million. Debt at the
end of the second quarter was $257.8 million, and includes $192
million incurred for the acquisition of EFCO. Year-to-date net
interest expense was $1.8 million, compared to net interest income
of $0.2 million in the prior-year period.
FY18 OUTLOOK
“We are transforming Apogee for more stable performance
throughout an economic cycle,” said Puishys. “The addition of
Sotawall and EFCO accelerate this transformation and complement our
strategies to grow revenues through new geographies, new products
and new markets, and improve margins through operations excellence,
productivity, project selection and cost management
initiatives.
“We expect top- and bottom-line growth in fiscal 2018, with a
strong second half. Looking ahead to fiscal 2019, we anticipate
double-digit revenue growth and triple-digit basis-point operating
margin improvement, based on bidding, our order pipeline and
backlog already booked for the year,” he said. “Our outlook is
supported by internal market visibility and positive external
metrics, including forecasts for mid-single digit U.S. commercial
construction market growth.”
Apogee is maintaining the full-year fiscal 2018 outlook provided
on August 23. This outlook incorporates the June 12 acquisition of
EFCO, as well as acquisition-related charges and amortization of
short-lived intangibles associated with Sotawall and EFCO acquired
backlogs.
- Revenue growth of 24 to 26
percent.
- Operating margin of 10.0 to 10.5
percent, with the addition of EFCO revenues at a mid-single digit
operating margin.
- Adjusted operating margin of 11.0 to
11.5 percent.
- Earnings of $3.05 to $3.25 per diluted
share.
- Adjusted EPS of $3.40 to $3.60.
- 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 $7.0 million ($0.24 per diluted share).
- Acquisition-related costs for EFCO of
$3.1 million ($0.11 per diluted share).
- Capital expenditures of approximately
$60 million.
TELECONFERENCE AND SIMULTANEOUS WEBCAST
Apogee will host a teleconference and webcast at 8 a.m. Central
Time today, September 19. To participate in the teleconference,
call (866) 525-3151 toll free or (330) 863-3393 international,
access code 82483017. 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 under upcoming events.
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 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, and
value-added glass and acrylic for picture 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 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 when assessing
performance to 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 STATEMENTS
The 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.
(Tables follow)
Apogee Enterprises, Inc.Consolidated Condensed
Statements of Income(Unaudited)
In thousands, except per share amounts
ThirteenWeeks EndedSeptember
2,2017
ThirteenWeeks EndedAugust
27,2016
%Change
Twenty-sixWeeks EndedSeptember
2,2017
Twenty-sixWeeks EndedAugust
27,2016
%Change
Net sales $ 343,907 $ 278,455 24 % $ 616,214 $ 526,335 17 % Cost of
sales 257,906 205,924 25 % 459,919 389,377
18 % Gross profit 86,001 72,531 19 % 156,295 136,958 14 %
Selling, general and administrative expenses 58,227 39,483
47 % 104,415 77,661 34 % Operating income
27,774 33,048 (16 )% 51,880 59,297 (13 )% Interest income 117 252
(54 )% 284 528 (46 )% Interest expense 1,650 188 778 % 2,095 345
507 % Other income, net 77 254 (70 )% 256 509
(50 )% Earnings before income taxes 26,318 33,366 (21 )%
50,325 59,989 (16 )% Income tax expense 8,909 10,969
(19 )% 16,813 19,870 (15 )% Net earnings $ 17,409
$ 22,397 (22 )% $ 33,512 $ 40,119 (16
)% Earnings per share - basic $ 0.60 $ 0.78 (23 )% $ 1.16 $
1.39 (17 )% Average common shares outstanding 28,850 28,891 — %
28,850 28,797 — % Earnings per share - diluted $ 0.60 $ 0.77 (22 )%
$ 1.16 $ 1.39 (17 )% Average common and common equivalent shares
outstanding 28,908 28,960 — % 28,885 28,927 — % Cash dividends per
common share $ 0.1400 $ 0.1250 12 % $ 0.2800 $ 0.2500 12 %
Business Segment Information(Unaudited) In thousands
ThirteenWeeks EndedSeptember
2,2017
ThirteenWeeks EndedAugust
27,2016
%Change
Twenty-sixWeeks EndedSeptember
2,2017
Twenty-sixWeeks EndedAugust
27,2016
%Change
Sales Architectural Framing Systems $ 189,023 $ 92,229 105 %
$ 299,515 $ 173,362 73 % Architectural Glass 97,351 99,205 (2 )%
195,086 192,565 1 % Architectural Services 46,829 77,734 (40 )%
96,979 140,554 (31 )% Large-Scale Optical 20,291 21,270 (5 )%
38,894 41,298 (6 )% Eliminations (9,587 ) (11,983 ) (20 )% (14,260
) (21,444 ) (34 )% Total $ 343,907 $ 278,455 24 % $
616,214 $ 526,335 17 %
Operating income (loss)
Architectural Framing Systems $ 16,542 $ 13,001 27 % $ 28,506 $
23,232 23 % Architectural Glass 10,258 9,616 7 % 19,581 19,147 2 %
Architectural Services 774 6,236 (88 )% 1,555 9,418 (83 )%
Large-Scale Optical 4,248 5,051 (16 )% 8,298 9,703 (14 )% Corporate
and other (4,048 ) (856 ) 373 % (6,060 ) (2,203 ) 175 % Total $
27,774 $ 33,048 (16 )% $ 51,880 $ 59,297
(13 )%
Apogee Enterprises, Inc.Consolidated
Condensed Balance Sheets(Unaudited) In thousands
September 2,2017
March 4,2017
Assets Current assets $ 368,746 $ 297,461 Net property,
plant and equipment 299,974 246,748 Other assets 370,656
240,449 Total assets $ 1,039,376 $ 784,658
Liabilities and shareholders' equity Current liabilities $
197,808 $ 186,058 Long-term debt 257,806 65,400 Other liabilities
82,388 62,623 Shareholders' equity 501,374 470,577
Total liabilities and shareholders' equity $ 1,039,376 $
784,658
Consolidated Condensed Statement of Cash
Flows(Unaudited) In thousands Twenty-sixWeeks
Ended
September 2, 2017 Twenty-sixWeeks Ended
August
27, 2016 Net earnings $ 33,512 $ 40,119 Depreciation and
amortization 25,062 15,955 Share-based compensation 3,063 2,935
Proceeds from new markets tax credit transaction, net of deferred
costs — 5,109 Other, net (1,956 ) (2,927 ) Changes in operating
assets and liabilities (18,872 ) (17,649 ) Net cash provided by
operating activities 40,809 43,542 Capital
expenditures (26,825 ) (31,474 ) Acquisition of businesses and
intangibles (184,826 ) — Change in restricted cash 7,834 (16,949 )
Other, net (2 ) (882 ) Net cash used in investing activities
(203,819 ) (49,305 ) Borrowings on line of credit, net 191,902 —
Shares withheld for taxes, net of stock issued to employees (1,612
) — Repurchase and retirement of common stock (10,833 ) — Dividends
paid (7,994 ) (7,133 ) Other, net 57 (972 ) Net cash
provided by (used in) financing activities 171,520 (8,105 )
Increase (decrease) in cash and cash equivalents 8,510 (13,868 )
Effect of exchange rates on cash 1,555 374 Cash and cash
equivalents at beginning of year 19,463 60,470 Cash
and cash equivalents at end of period $ 29,528 $ 46,976
Apogee Enterprises, Inc.Reconciliation of
Non-GAAP Financial Measures Adjusted Net Earnings and
Adjusted Earnings per Diluted Common Share(Unaudited) In
thousands ThirteenWeeks Ended
September 2, 2017
ThirteenWeeks Ended
August 27, 2016 % Change
Net earnings $ 17,409 $ 22,397 (22.3 )% Amortization of short-lived
acquired intangibles 2,630 — N/M Acquisition-related costs 3,737 —
N/M Income tax impact on above adjustments (1) (2,158 ) —
N/M Adjusted net earnings $ 21,618 $ 22,397 (3.5 )%
ThirteenWeeks Ended
September 2, 2017
ThirteenWeeks Ended
August 27, 2016 % Change Earnings
per diluted common share $ 0.60 $ 0.77 (22.1 )% Amortization of
short-lived acquired intangibles 0.09 — N/M Acquisition-related
costs 0.13 — N/M Income tax impact on above adjustments (1) (0.07 )
— N/M Adjusted earnings per diluted common share $ 0.75
$ 0.77 (2.6 )% (1) Income tax impact on adjustments
was calculated using the estimated quarterly effective income tax
rate of 33.9%. In thousands Twenty-sixWeeks
Ended
September 2, 2017 Twenty-sixWeeks Ended
August 27,
2016 % Change Net earnings $ 33,512 $ 40,119 (16.5 )%
Amortization of short-lived acquired intangibles 4,684 — N/M
Acquisition-related costs 4,417 — N/M Income tax impact on above
adjustments (1) (3,040 ) — N/M Adjusted net earnings $
39,573 $ 40,119 (1.4 )% Twenty-sixWeeks
Ended
September 2, 2017 Twenty-sixWeeks Ended
August 27,
2016 % Change Earnings per diluted common share $ 1.16 $
1.39 (16.5 )% Amortization of short-lived acquired intangibles 0.16
— N/M Acquisition-related costs 0.15 — N/M Income tax impact on
above adjustments (1) (0.11 ) — N/M Adjusted earnings per
diluted common share $ 1.37 $ 1.39 (1.4 )% (1) Income
tax impact on adjustments was calculated using the estimated annual
effective income tax rate of 33.4%.
Adjusted Operating
Income and Adjusted Operating Margin(Unaudited)
Thirteen Weeks Ended September 2, 2017 Framing Systems
Segment Corporate Consolidated In
thousands
Operatingincome
Operating margin
Operatingincome (loss)
Operatingincome
Operating margin Operating income (loss) $ 16,542 8.7 % $
(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 %
Thirteen Weeks Ended August 27, 2016 Framing
Systems Segment Corporate Consolidated In
thousands
Operatingincome
Operating margin
Operatingincome (loss)
Operatingincome
Operating margin Operating income (loss) (1) $ 13,001 14.1 %
$ (856 ) $ 33,048 11.9 %
Twenty-Six Weeks Ended
September 2, 2017 Framing Systems Segment
Corporate Consolidated In thousands
Operatingincome
Operating margin
Operatingincome (loss)
Operatingincome
Operating margin 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 %
Twenty-Six Weeks Ended August 27, 2016 Framing Systems
Segment Corporate Consolidated In thousands
Operatingincome
Operating margin
Operatingincome (loss)
Operatingincome
Operating margin Operating income (loss) (1) $ 23,232 13.4 %
$ (2,203 ) $ 59,297 11.3 % (1) Expenses related to
amortization of short-lived acquired intangibles and
acquisition-related costs are not applicable to the prior year
periods, and therefore no adjustments have been made.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170919005500/en/
Apogee Enterprises, Inc.Mary Ann Jackson, 952-487-7538Investor
Relationsmjackson@apog.com
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