- Third-quarter revenue grows 10 percent, to $368 million
- Third-quarter earnings increase to $1.07 per diluted share
- Strong cash flow, with $54 million of cash from operations in
the third quarter
- Full year adjusted earnings guidance narrowed to a range of
$3.90 to $4.05 per diluted share
Apogee Enterprises, Inc. (Nasdaq: APOG) today announced
its fiscal 2023 third quarter results. Third-quarter revenue grew
10.1 percent to $367.8 million, compared to $334.2 million in the
third quarter of fiscal year 2022, led by Architectural Framing
Systems and Architectural Glass. Earnings per diluted share
increased to $1.07, compared to $0.44 per diluted share in the
prior-year quarter. Earnings in the prior-year quarter included
$6.4 million of pre-tax restructuring and impairment costs.
Excluding these costs, adjusted earnings in last year’s third
quarter were $0.63 per diluted share.1
“Our team continued to deliver impressive results this quarter,
with double-digit revenue growth, significant margin expansion, and
strong cash flow,” said Ty R. Silberhorn, Chief Executive Officer.
“The execution of our strategy is transforming Apogee into a higher
performing, more resilient company. Over the past year, we’ve made
significant, sustainable cost and productivity improvements,
strengthened our focus on differentiated products and services, and
fostered a results-driven culture to deliver value for our
customers.”
Mr. Silberhorn continued, “The margin gains and earnings growth
we’ve achieved over the past four quarters have established a new
baseline of performance for the company. As we move forward, we
expect to drive continued progress toward our margin and ROIC
goals. We’re also investing to develop the talent and capabilities
that we’ll need to enable sustained above-market growth.”
Segment Results
Architectural Framing Systems
Architectural Framing Systems revenue grew 17 percent, to $165.0
million, from $141.5 million in the prior-year period, primarily
driven by inflation-related pricing. Operating income increased to
$22.1 million, compared to $12.1 million in last year’s third
quarter, primarily driven by improved pricing and mix, which more
than offset the impact of inflation. Segment backlog at the end of
the quarter was $246 million, compared to $286 million at the end
of the second quarter and $269 million one year ago. Framing
Systems’ prior year results have been recast to reflect the move of
the Sotawall business to the Architectural Services segment, which
was effective at the beginning of this fiscal year.
Architectural Services
Architectural Services revenue in the third quarter was $102.0
million, compared to $105.4 million in the prior-year quarter.
Operating income was $6.0 million, compared to $7.8 million in the
prior-year period, reflecting lower profitability on legacy
Sotawall projects and costs related to investments to support
future growth. Segment backlog at the end of the quarter was $741
million, compared to $785 million at the end of the second quarter
and $722 million one year ago. Prior-year results for Architectural
Services have been recast to reflect the move of the Sotawall
business into the segment, which was effective at the beginning of
this fiscal year.
Architectural Glass
Architectural Glass revenue grew 10 percent to $81.5 million,
compared to $74.3 million in the prior-year quarter, primarily
driven by improved pricing and mix. Operating income increased to
$7.5 million, compared to an operating loss of $(1.3) million in
last year’s third quarter, which included $3.5 million of
restructuring costs. Excluding the restructuring costs, adjusted
operating income2 in the prior year was $2.2 million. The increased
income in this year’s third quarter was driven by improved pricing,
mix, and productivity gains, which combined to offset the impact of
inflation.
Large-Scale Optical
Large-Scale Optical revenue was $26.7 million, compared to $27.4
million in last year’s third quarter, primarily reflecting lower
volume. Operating income was $7.1 million, up from $6.0 million in
last year’s third quarter, primarily reflecting lower operating
costs.
Financial Condition
In the third quarter, net cash provided by operating activities
was $53.8 million, compared to $31.4 million in last year’s third
quarter. Fiscal year to date, net cash provided by operating
activities was $51.1 million, compared to $86.3 million in the
prior-year period. The lower year-to-date cash flow primarily
reflects increased working capital related to revenue growth and
inflation. Fiscal year to date, capital expenditures were $18.1
million, compared to $13.1 million in the same period last year.
Fiscal year to date, the company has returned $88.7 million of cash
to shareholders through share repurchases and dividend payments, up
from $44.2 million in the same period last year.
Quarter-end total debt was $203.7 million, compared to $163.0
million at the end of last year’s third quarter. Cash and cash
equivalents were $21.7 million, compared to $37.6 million at the
end of the third quarter of fiscal 2022.
Outlook
Based on year-to-date results and increasing confidence in its
outlook, the company is narrowing its guidance for full year
adjusted earnings to a range of $3.90 to $4.05 per diluted share,
from the previously announced range of $3.75 to $4.05. The company
now expects full year revenue growth of approximately 10 percent,
primarily driven by growth in Architectural Framing Systems, and
full-year capital expenditures of approximately $40 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 provide a
business update. This call will be webcast and is available in the
Investor Relations section of the company’s website, along with
presentation slides, 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) is a leading provider of
architectural products and services for enclosing buildings, and
high-performance glass and acrylic products used for preservation,
energy conservation, and enhanced viewing. Headquartered in
Minneapolis, MN, our portfolio of industry-leading products and
services includes high-performance architectural glass, windows,
curtainwall, storefront and entrance systems, integrated project
management and installation services, 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 in recent reporting periods include: impairment
charges, restructuring costs, acquired project-related charges,
gains or losses from significant asset sales, income tax deductions
for worthless stock losses, and COVID-19 related expenditures.
- 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. However, free cash
flow does not fully reflect the company’s ability to freely deploy
generated cash, as it does not reflect, for example, required
payments on indebtedness and other fixed obligations.
- Net debt is a non-GAAP measure defined as total debt (current
debt plus long-term debt) on our consolidated balance sheet, less
cash and cash equivalents. The company considers this measure
helpful to evaluate our capital structure and financial leverage,
and our ability to fund investing and financing activities.
- Adjusted EBITDA represents net income before interest, taxes,
depreciation, amortization and certain non-cash, non-recurring and
other adjustment items. We believe this metric provides useful
information to investors and analysts about the Company's
performance because it eliminates the effects of certain items that
are unusual in nature or whose fluctuation from period to period do
not necessarily correspond to changes in the operations of the
company.
A reconciliation of non-GAAP guidance on Adjusted EPS to GAAP
guidance is not available on a forward-looking basis without
unreasonable effort due to the uncertainty of the magnitude and
timing of future adjustments. These adjustments may include, among
others, the impact of such items as impairment charges,
restructuring costs, acquired project-related charges, and gains or
losses from significant asset sales. Accordingly, the company is
unable to provide a reconciliation of Adjusted EPS to the most
directly comparable GAAP financial measure or address the probable
significance of the unavailable information, which could be
material to the company's future financial results computed in
accordance with GAAP.
An operational measure that management uses is backlog. Backlog
represents the dollar amount of signed contracts or firm orders,
generally as a result of a competitive bidding process, which is
expected to be recognized as revenue. Backlog is not a term defined
under U.S. GAAP and is not a measure of contract profitability.
Backlog should not be used as the sole indicator of future segment
revenue because we have a substantial number of projects with short
lead times that book-and-bill within the same reporting period and
are not included in backlog.
Management uses 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. 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. The words “believe,” “expect,” “anticipate,” “intend,”
“estimate,” “forecast,” “project,” “should” and similar expressions
are intended to identify “forward-looking statements”. 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 results, performance, financial condition, prospects and
opportunities of the company , including the following: (A)
uncertainty regarding the potential impacts and duration of the
COVID-19 pandemic; (B) U.S. and global economic conditions,
including the cyclical nature of the North American and Latin
American commercial construction industries and the potential
impact of an economic downturn or recession; (C) fluctuations in
foreign currency exchange rates; (D) actions of new and existing
competitors; (E) ability to effectively utilize and increase
production capacity; (F) departure of key personnel and ability to
source sufficient labor; (G) product performance, reliability and
quality issues; (H) project management and installation issues that
could affect the profitability of individual contracts; (I) changes
in consumer and customer preference, or architectural trends and
building codes; (J) dependence on a relatively small number of
customers in one operating segment; (K) revenue and operating
results that could differ from market expectations; (L)
self-insurance risk related to a material product liability or
other events for which the company is liable; (M) dependence on
information technology systems and information security threats;
(N) cost of compliance with and changes in environmental
regulations; (O) supply chain disruptions, including fluctuations
in the availability and cost of materials used in our products and
the impact of trade policies and regulations; (P) integration of
acquisitions and management of acquired contracts; (Q) impairment
of goodwill or indefinite-lived intangible assets; (R) our ability
to execute our strategy to become the economic leader in our target
markets and build an operating model to enable profitable growth;
(S) increases in costs related to employee health care benefits;
(T) risks that anticipated results from business restructuring
initiatives will not be achieved, implementation of cost-saving and
business restructuring initiatives may take more time or cost more
than expected, the anticipated cost savings may be materially less
than anticipated, and the restructuring may result in disruption in
delivery of services to our customers; (U) U.S. and global
instability and uncertainty arising from events outside of our
control; and (V) the impact of cost inflation and rising interest
rates. 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, performance,
prospects, or opportunities. 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
February 26, 2022 and in subsequent filings with the U.S.
Securities and Exchange Commission.
1Adjusted earnings and adjusted earnings per share are non-GAAP
financial measures. See Use and Reconciliation of Non-GAAP
Financial Measures later in this press release for more information
and a reconciliation to the most directly comparable GAAP
measures.
2Adjusted operating income is a non-GAAP financial
measure. See Use and Reconciliation of Non-GAAP Financial
Measures later in this press release for more information and a
reconciliation to the most directly comparable GAAP measures.
Apogee Enterprises,
Inc.
Consolidated Condensed
Statements of Income
(Unaudited)
Three Months Ended
Nine Months Ended
(In thousands, except per share
amounts)
November 26, 2022
November 27, 2021
% Change
November 26, 2022
November 27, 2021
% Change
Net sales
$
367,847
$
334,217
10
%
$
1,096,591
$
986,020
11
%
Cost of sales
281,239
269,537
4
%
839,430
805,627
4
%
Gross profit
86,608
64,680
34
%
257,161
180,393
43
%
Selling, general and administrative
expenses
51,847
46,970
10
%
157,112
149,709
5
%
Operating income
34,761
17,710
96
%
100,049
30,684
226
%
Interest expense, net
2,590
528
391
%
5,494
2,838
94
%
Other expense, net
552
3,057
(82
) %
2,035
3,266
(38
) %
Earnings before income taxes
31,619
14,125
124
%
92,520
24,580
276
%
Income tax expense
7,854
3,068
156
%
8,635
4,821
79
%
Net earnings
$
23,765
$
11,057
115
%
$
83,885
$
19,759
325
%
Earnings per share - basic
$
1.09
$
0.44
148
%
$
3.81
$
0.79
382
%
Earnings per share - diluted
$
1.07
$
0.44
143
%
$
3.74
$
0.78
379
%
Weighted average basic shares
outstanding
21,870
24,957
(12
) %
22,043
25,166
(12
) %
Weighted average diluted shares
outstanding
22,278
25,309
(12
) %
22,456
25,459
(12
) %
Cash dividends per common share
$
0.2200
$
0.2000
10
%
$
0.6600
$
0.6000
10
%
Business Segment
Information
(Unaudited)
Three Months Ended
Nine Months Ended
(In thousands)
November 26, 2022
November 27, 2021
% Change
November 26, 2022
November 27, 2021
% Change
Net sales
Architectural Framing Systems
$
165,013
$
141,462
17
%
$
501,172
$
415,203
21
%
Architectural Services
102,031
105,404
(3
) %
312,151
292,506
7
%
Architectural Glass
81,541
74,289
10
%
235,158
236,693
(1
) %
Large-Scale Optical
26,660
27,351
(3
) %
76,988
75,122
2
%
Intersegment eliminations
(7,398
)
(14,289
)
(48
) %
(28,878
)
(33,504
)
(14
) %
Net sales
$
367,847
$
334,217
10
%
$
1,096,591
$
986,020
11
%
Operating income (loss)
Architectural Framing Systems
$
22,089
$
12,085
83
%
$
66,266
$
28,837
130
%
Architectural Services
6,032
7,807
(23
) %
14,449
19,172
(25
) %
Architectural Glass
7,461
(1,277
)
684
%
19,087
(16,143
)
218
%
Large-Scale Optical
7,109
5,996
19
%
19,598
17,326
13
%
Corporate and other
(7,930
)
(6,901
)
15
%
(19,351
)
(18,508
)
5
%
Operating income
$
34,761
$
17,710
96
%
$
100,049
$
30,684
226
%
Apogee Enterprises,
Inc.
Consolidated Condensed Balance
Sheets
(Unaudited)
(In thousands)
November 26, 2022
February 26, 2022
Assets
Cash and cash equivalents
$
21,746
$
37,583
Restricted cash
3,718
—
Current assets
371,226
300,309
Net property, plant and equipment
231,173
249,995
Other assets
290,583
299,976
Total assets
$
918,446
$
887,863
Liabilities and shareholders'
equity
Current liabilities
232,037
231,946
Current debt
—
1,000
Long-term debt
203,735
162,000
Other liabilities
105,036
106,718
Shareholders' equity
377,638
386,199
Total liabilities and shareholders'
equity
$
918,446
$
887,863
Apogee Enterprises,
Inc.
Consolidated Condensed
Statement of Cash Flows
(Unaudited)
Nine Months Ended
(In thousands)
November 26, 2022
November 27, 2021
Net earnings
$
83,885
$
19,759
Depreciation and amortization
31,925
38,353
Share-based compensation
5,961
4,807
Asset impairment on property, plant, and
equipment
—
16,638
Gain on disposal of assets
(1,484
)
(1,250
)
Other, net
14,832
6,899
Changes in operating assets and
liabilities:
Receivables
(58,202
)
6,443
Inventories
(5,822
)
(2,657
)
Costs and earnings on contracts in excess
of billings
(2,599
)
1,168
Accounts payable and accrued expenses
(11,985
)
5,440
Billings in excess of costs and earnings
on uncompleted contracts
20,884
(4,474
)
Refundable and accrued income taxes
(14,391
)
5,255
Operating lease liability
(9,168
)
(9,387
)
Other, net
(2,724
)
(703
)
Net cash provided by operating
activities
51,112
86,291
Capital expenditures
(18,119
)
(13,070
)
Proceeds from sales of property, plant and
equipment
5,212
1,347
Other, net
923
76
Net cash used by investing activities
(11,984
)
(11,647
)
Borrowings on line of credit
430,879
—
Repayment on debt
(151,000
)
(2,000
)
Payments on line of credit
(239,000
)
—
Payments on debt issuance costs
(790
)
—
Proceeds from exercise of stock
options
—
4,115
Repurchase and retirement of common
stock
(74,312
)
(29,164
)
Dividends paid
(14,415
)
(15,050
)
Other, net
(2,959
)
(1,895
)
Net cash used by financing activities
(51,597
)
(43,994
)
(Decrease) increase in cash, cash
equivalents and restricted cash
(12,469
)
30,650
Effect of exchange rates on cash
350
345
Cash, cash equivalents and restricted cash
at beginning of year
37,583
47,277
Cash, cash equivalents and restricted cash
at end of period
$
25,464
$
78,272
Apogee Enterprises,
Inc.
Reconciliation of Non-GAAP
Financial Measures
Adjusted Net Earnings and
Adjusted Earnings per Diluted Common Share
Unaudited
Three Months Ended
Nine Months Ended
(In thousands)
November 26, 2022
November 27, 2021
November 26, 2022
November 27, 2021
Net earnings
$
23,765
$
11,057
$
83,885
$
19,759
Worthless stock deduction(1)
—
—
(13,702
)
—
Restructuring costs(2)
—
3,419
—
24,233
Impairment of equity investment(3)
—
3,000
—
3,000
Income tax impact on above
adjustments(4)
—
(1,605
)
—
(6,808
)
Adjusted net earnings
$
23,765
$
15,871
$
70,183
$
40,184
Three Months Ended
Nine Months Ended
November 26, 2022
November 27, 2021
November 26, 2022
November 27, 2021
Earnings per diluted common share
$
1.07
$
0.44
$
3.74
$
0.78
Worthless stock deduction(1)
—
—
(0.61
)
—
Restructuring costs(2)
—
0.14
—
0.95
Impairment of equity investment(3)
—
0.12
—
0.12
Income tax impact on above
adjustments(4)
—
(0.06
)
—
(0.27
)
Adjusted earnings per diluted common
share
$
1.07
$
0.63
$
3.13
$
1.58
Shares outstanding for EPS
22,278
25,309
22,456
25,459
Per share amounts are computed
independently for each of the items presented so the sum of the
items may not equal the total amount
(1)
Adjustment related to income tax benefit
from worthless stock loss deduction related to the Sotawall
business.
(2)
Adjustment related to previously announced
decision to exit certain operations in the Architectural Glass
segment and reorganize operations within the Architectural Framing
Systems segment, including $15.4 million of asset impairment
charges, $4.3 million of employee termination costs and $1.1
million of other costs associated with these restructuring
plans.
(3)
Adjustment for impairment of minority
equity investment is a result of the assignment for the benefit of
creditors of all of the assets of a company in which Apogee holds a
minority interest. The impairment represents a write-down of
Apogee’s entire investment in the company.
(4)
Income tax impact calculated using an
estimated statutory tax rate of 25%, which reflects the estimated
blended statutory tax rate for the jurisdiction in which the charge
or income occurred.
Adjusted Operating Income and
Adjusted Operating Margin
(Unaudited)
Three Months Ended November
26, 2022
Framing Systems Segment
Glass Segment
Corporate
Consolidated
(In thousands)
Operating income
Operating margin
Operating income
Operating margin
Operating
loss
Operating income
Operating margin
Operating income (loss)
$
22,089
13.4
%
$
7,461
9.1
%
$
(7,930
)
$
34,761
9.4
%
Three Months Ended November
27, 2021
Framing Systems Segment
Glass Segment
Corporate
Consolidated
(In thousands)
Operating income
Operating margin
Operating (loss) income
Operating margin
Operating (loss) income
Operating (loss) income
Operating margin
Operating income (loss)
$
12,085
8.5
%
$
(1,277
)
(1.7
) %
$
(6,901
)
$
17,710
5.3
%
Restructuring costs (1)
(44
)
—
3,518
4.7
(55
)
3,419
1.0
Adjusted operating income (loss)
$
12,041
8.5
%
$
2,241
3.0
%
$
(6,956
)
$
21,129
6.3
%
(1) Adjustment related to previously
announced decision to exit certain operations in the Architectural
Glass segment and reorganize operations within the Architectural
Framing Systems segment, including $1.3 million of asset impairment
charges, $1.4 million of employee termination costs and $0.7
million of other costs associated with these restructuring
plans.
Nine Months Ended November 26,
2022
Framing Systems Segment
Glass Segment
Corporate
Consolidated
(In thousands)
Operating income
Operating margin
Operating income
Operating margin
Operating
loss
Operating income
Operating margin
Operating income (loss)
$
66,266
13.2
%
$
19,087
8.1
%
$
(19,351
)
$
100,049
9.1
%
Nine Months Ended November 27,
2021
Framing Systems Segment
Glass Segment
Corporate
Consolidated
(In thousands)
Operating income
Operating margin
Operating (loss) income
Operating margin
Operating (loss) income
Operating income
Operating margin
Operating income (loss)
$
28,837
6.9
%
$
(16,143
)
(6.8
) %
$
(18,508
)
$
30,684
3.1
%
Restructuring costs (1)
2,004
0.5
20,909
8.8
1,320
24,233
2.5
Adjusted operating income (loss)
$
30,841
7.4
%
$
4,766
2.0
%
$
(17,188
)
$
54,917
5.6
%
(1) Adjustment related to previously
announced decision to exit certain operations in the Architectural
Glass segment and reorganize operations within the Architectural
Framing Systems segment, including $16.7 million of asset
impairment charges, $5.8 million of employee termination costs and
$1.7 million of other costs associated with these restructuring
plans.
Adjusted EBITDA
Reconciliation
(Unaudited)
Three Months Ended
Nine Months Ended
(In thousands)
November 26, 2022
November 27, 2021
November 26, 2022
November 27, 2021
Net earnings
$
23,765
$
11,057
83,885
19,759
Income tax expense
7,854
3,068
8,635
4,821
Interest expense, net
2,590
528
2,904
2,838
Depreciation and amortization
10,477
12,545
31,925
38,353
EBITDA
44,686
27,198
127,349
65,771
Restructuring(1)
—
3,419
—
24,233
Impairment of equity investment(2)
—
3,000
—
3,000
Adjusted EBITDA
$
44,686
$
33,617
$
127,349
$
93,004
(1)
Adjustment related to previously announced
decision to exit certain operations in the Architectural Glass
segment and reorganize operations within the Architectural Framing
Systems segment, including $15.4 million of asset impairment
charges, $4.3 million of employee termination costs and $1.1
million of other costs associated with these restructuring
plans.
(2)
Adjustment for impairment of minority
equity investment is a result of the assignment for the benefit of
creditors of all of the assets of a company in which Apogee holds a
minority interest. The impairment represents a write-down of
Apogee’s entire investment in the company.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221222005056/en/
Jeff Huebschen Vice President, Investor Relations &
Communications 952.487.7538 ir@apog.com
Apogee Enterprises (NASDAQ:APOG)
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