- Revenues up 23 percent
- Operating income up 62 percent
- Backlog grew to $494 million, up 65
percent
- FY15 EPS outlook raised to $1.64 to
$1.72
Apogee Enterprises, Inc. (Nasdaq:APOG) today announced fiscal
2015 third-quarter results. Apogee provides distinctive solutions
for enclosing commercial buildings and framing art.
FY15 THIRD QUARTER VS. PRIOR-YEAR PERIOD
- Revenues of $244.4 million were up 23
percent.
- Operating income of $20.6 million was
up 62 percent.
- Earnings per share of $0.47 were up 42
percent.
- Prior year benefitted from a lower tax
rate.
- Backlog of $493.9 million was up 65
percent, or $194 million.
- Cash and short-term investments were
$34.3 million.
COMMENTARY“I am pleased that Apogee again achieved
another quarter of outstanding revenue and earnings growth,” said
Joseph F. Puishys, Apogee chief executive officer. “In our third
quarter, all four segments had double-digit revenue growth, while
all but one segment had strong earnings growth.
“Architectural glass operating income tripled, and the
architectural framing systems and large-scale optical segments each
saw approximately 30 percent growth in operating income,” he said.
“Operating income in the architectural services segment was
impacted by writedowns on a few projects, issues of which were
resolved.
“During the quarter, Apogee improved gross margin by 140 basis
points and operating margin by 200 basis points,” said Puishys. He
added, “At 8.4 percent, our operating margin is at its highest
level in five years. Overall Apogee converted 21 percent of
incremental organic growth to operating margin.
“At the same time, our backlog grew sequentially and year on
year to its highest level in six years, as we continue to win
future work at improving margins,” he said.
“We are expecting a strong finish to fiscal 2015 and have raised
the bottom end of our earnings per share outlook and now expect to
earn $1.64 to $1.72 per share for the year,” Puishys said.
FY15 THIRD-QUARTER SEGMENT AND OPERATING RESULTS VS.
PRIOR-YEAR PERIOD
Architectural Glass
- Revenues of $90.3 million were up 23
percent.
- Operating income grew to $5.8 million,
compared to $1.6 million.
- Operating margin expanded 430 basis
points to 6.5 percent, compared to 2.2 percent.
- As the U.S. non-residential sector
continues to strengthen, the architectural glass segment is
benefitting from operating leverage on volume growth and improved
pricing.
Architectural Services
- Revenues of $56.2 million were up 10
percent.
- Operating income was $0.3 million,
compared to $0.4 million.
- Operating margin was 0.6 percent,
compared to 0.7 percent.
- Operating results were impacted by
writedowns on a few projects, issues of which were resolved.
Architectural Framing Systems
- Revenues of $80.4 million were up 36
percent, with organic growth of 19 percent excluding the Canadian
acquisition in the third quarter of fiscal 2014.
- U.S. businesses in the segment had
double-digit growth.
- Operating income of $7.6 million was up
31 percent from $5.8 million.
- Operating margin was 9.4 percent,
compared to 9.8 percent.
- Good operational performance in the
segment was offset by higher aluminum costs and charges related to
the acquisition of Custom Window assets in fiscal 2014.
Large-Scale Optical Technologies
- Revenues of $25.5 million were up 13
percent, driven by strong orders for all channels, particularly in
retail.
- Operating income of $7.9 million was up
30 percent from $6.1 million.
- Operating margin expanded 410 basis
points to 30.8 percent, compared to 26.7 percent.
- Segment results benefitted from a
richer product mix.
Consolidated Backlog
- Backlog of $493.9 million increased
from $480.2 million in the second quarter and $299.9 million in the
prior-year period.
- Approximately $182 million, or 37
percent, of the backlog is expected to be delivered in fiscal 2015,
and approximately $312 million, or 63 percent, in fiscal 2016 and
beyond.
Financial Condition
- Debt was $22.6 million, compared to
$20.7 million in the prior-year period. Almost all the debt is
long-term, low-interest industrial revenue bonds.
- Cash and short-term investments totaled
$34.3 million, compared to $28.7 million at the end of fiscal 2014
and $22.5 million in the prior-year period.
- Non-cash working capital was $98.5
million, compared to $77.3 million at the end of fiscal 2014 and
$72.1 million in the prior-year period.
- Capital expenditures year to date were
$18.7 million, compared to $17.3 million in the prior-year
period.
- Depreciation and amortization year to
date was $21.6 million.
OUTLOOK“We are confident about the fourth quarter and
have raised our outlook for the full year to earnings of $1.64 to
$1.72 per share, from $1.62 to $1.72 per share,” said Puishys. “We
continue to expect revenue growth of at least 20 percent for fiscal
2015.
“Our backlog for fiscal 2016 and beyond is strong, and with our
robust bidding and quoting activity, we believe our backlog will
again grow sequentially in the fourth quarter,” he said. “The
strength we are seeing in our architectural business combined with
positive forecasts for our commercial construction markets give us
continued confidence in sustained growth for Apogee.
“Regarding our architectural services segment, we expect that
the full year will show improvement in operating margin compared to
fiscal 2014. We anticipate that the segment’s fourth quarter
operating margin will improve significantly from the third quarter,
but will be down slightly compared to the prior-year period based
on expected project timing,” he said.
“We expect that capital spending for fiscal 2015 will be
approximately $35 million, including capacity expansions underway
in architectural glass and architectural finishing,” he said. “We
again expect to be free cash flow positive after this level of
investments.” He added that the fiscal 2015 gross margin is
anticipated to be approximately 22 percent.
“Our strategies to grow through new geographies, new products
and new markets along with our focus on productivity and
operational improvements are delivering results,” Puishys said. “We
have extended our long-term outlook to fiscal 2018 expectations for
revenues of $1.3 billion at 12 percent operating margin.”
TELECONFERENCE AND SIMULTANEOUS WEBCASTApogee will host a
teleconference and webcast at 9 a.m. Central Time tomorrow,
December 18. To participate in the teleconference, call
1-877-703-6108 toll free or 857-244-7307 international, access code
20304620. The replay will be available from noon Central Time on
December 18 through midnight Central Time on January 9, 2015, by
dialing 1-888-286-8010, access code 83682857. To listen to the live
conference call over the internet, go to the Apogee web site at
http://www.apog.com and click on “investor relations” and then the
webcast link at the top of that page. The webcast also will be
archived 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 Services segment consists
of Harmon, Inc., one of the largest U.S. full-service building
glass installation and renovation companies.
- 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 Window and Wall Systems, a manufacturer of custom aluminum
window systems and curtainwall; Tubelite, a fabricator of aluminum
storefront, entrance and curtainwall products; Alumicor, a
fabricator of aluminum storefront, entrance, curtainwall and window
products for Canadian markets; and Linetec, a paint and anodizing
finisher of window frames and PVC shutters.
- Large-Scale Optical segment consists of
Tru Vue, a value-added glass and acrylic manufacturer primarily for
the custom picture framing market.
USE OF NON-GAAP FINANCIAL MEASURESIn addition to
financial measures prepared in accordance with generally accepted
accounting principles (GAAP), this news release also contains
non-GAAP financial measures. Specifically, Apogee has presented
backlog, free cash flow, non-cash working capital and organic
growth. Backlog is defined as the dollar amount of revenues Apogee
expects to recognize in the future from firm contracts or orders
received, as well as those that are in progress. Free cash flow is
defined as net cash flow provided by operating activities, minus
capital expenditures. Non-cash working capital is defined as
current assets, excluding cash and short-term available for sale
securities, short-term restricted investments and current portion
of long-term debt, less current liabilities. The organic growth
rate is defined as growth excluding that from Alumicor, Apogee’s
Canadian storefront business. Apogee believes that use of these
non-GAAP financial measures enhances communications as they provide
more transparency into management’s performance with respect to
cash, current assets and liabilities, and revenue growth without
the extraordinary effect of recent acquisitions. Non-GAAP financial
measures should be viewed in addition to, and not as an alternative
to, the reported operating results or cash flows from operations or
any other measure of performance prepared in accordance with
GAAP.
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) operational
risks: i) the cyclical nature and market conditions of the North
American and Latin American commercial construction industries,
which impact our three architectural segments; ii) consumer
confidence and the conditions of the U.S. economy, which impact our
large-scale optical segment; iii) actions of competitors or new
market entrants; iv) ability to fully and efficiently utilize
production capacity; v) product performance, reliability,
execution or quality problems; vi) installation project management
issues that could result in losses on individual contracts; vii)
changes in consumer and customer preference, or architectural
trends and building codes; and viii) dependence on a relatively
small number of customers in certain business segments; (B)
financial risks: i) revenue and operating results that are
volatile; and ii) financial market disruption, which could impact
company, customer and supplier credit availability; (C)
self-insurance risk related to a material product liability or
other event for which the company is liable; (D) cost of compliance
with environmental regulations; (E) potential impact on financial
results if one or more senior executives were no longer active with
the company; and (F) integration of two 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 such 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 1, 2014.
Apogee Enterprises, Inc. & Subsidiaries
Consolidated Condensed Statement of Income
(Unaudited) Thirteen
Thirteen Thirty-nine
Thirty-nine Weeks Ended Weeks Ended % Weeks Ended
Weeks Ended % Dollar amounts in thousands, except for per share
amounts November 29, 2014 November 30, 2013
Change
November 29, 2014 November 30, 2013
Change
Net sales $244,410 $199,430 23% $687,238 $557,028 23 % Cost
of goods sold 187,757 156,042 20% 539,826 438,719 23 % Gross
profit 56,653 43,388 31% 147,412 118,309 25 % Selling, general and
administrative expenses 36,028 30,681 17% 103,474 90,129 15
% Operating income 20,625 12,707 62% 43,938 28,180 56 % Interest
income 243 206 18% 706 593 19 % Interest expense 357 228 57% 774
973 -20 % Other (expense) income, net (16 ) 107 N/M 1,461 72 1929 %
Earnings before income taxes 20,495 12,792 60% 45,331 27,872 63 %
Income tax expense 6,759 3,124 116% 8,703 7,924 10 % Net
earnings $13,736 $9,668 42% $36,628 $19,948 84 %
Earnings per share - basic $0.47 $0.34 38% $1.27 $0.70 81 %
Average common shares outstanding 28,725,412 28,483,460 1%
28,758,986 28,439,421 1 % Earnings per share - diluted $0.47
$0.33 42% $1.25 $0.68 84 % Average common and common
equivalent shares outstanding 29,357,729 29,376,301 0% 29,349,533
29,308,095 0 % Cash dividends per common share $0.1000
$0.0900 11% $0.3000 $0.2700 11 %
Business Segments
Information (Unaudited) Thirteen
Thirteen Thirty-nine
Thirty-nine Weeks Ended Weeks Ended %
Weeks Ended Weeks Ended % November 29, 2014 November 30, 2013
Change
November 29, 2014 November 30, 2013
Change
Sales Architectural Glass $90,268 $73,365 23 % $254,138
$218,142 17 % Architectural Services 56,178 51,167 10 % 167,146
139,820 20 % Architectural Framing Systems 80,411 58,981 36 %
221,369 152,877 45 % Large-scale Optical 25,546 22,699 13 % 64,969
61,917 5 % Eliminations (7,993 ) (6,782 ) -18 % (20,384 ) (15,728 )
-30 % Total $244,410 $199,430 23 % $687,238
$557,028 23 %
Operating income (loss)
Architectural Glass $5,836 $1,641 256 % $11,935 $3,782 216 %
Architectural Services 323 351 -8 % 2,279 (1,401 ) N/M
Architectural Framing Systems 7,596 5,782 31 % 16,974 13,026 30 %
Large-scale Optical 7,879 6,058 30 % 15,990 16,072 -1 % Corporate
and other (1,009 ) (1,125 ) 10 % (3,240 ) (3,299 ) 2 % Total
$20,625 $12,707 62 % $43,938 $28,180 56
%
Consolidated Condensed Balance Sheets
(Unaudited) November 29,
March 1,
2014 2014
Assets Current assets $276,084 $242,792 Net
property, plant and equipment 192,053 193,946 Other assets 123,993
128,619 Total assets $592,130 $565,357
Liabilities and
shareholders' equity Current liabilities $143,351 $136,834
Long-term debt 22,505 20,659 Other liabilities 52,074 55,234
Shareholders' equity 374,200 352,630 Total liabilities and
shareholders' equity $592,130 $565,357 N/M = Not meaningful
Apogee Enterprises, Inc.Mary Ann Jackson,
952-487-7538Investor Relationsmjackson@apog.com
Apogee Enterprises (NASDAQ:APOG)
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