Volume 51, Issue 2 - February 2016

FinancialFlash

Architectural Glass Operating Profit Increases for Apogee Enterprises

Apogee Enterprises announced that its fiscal 2016 third-quarter results saw a record operating margin of 11.7 percent and a record backlog of $545 million. Revenues for its architectural glass segment, which includes fabricator Viracon, were $85.5 million, down 5 percent compared to last year. Operating income grew to $8.4 million, up 44 percent from $5.8 million. “Operating margin [was] 9.8 percent, compared to 6.5 percent, due to improved pricing, mix and productivity,” according to a release from the company.

Company-wide, revenues were $238.3 million, down 2 percent but
flat in constant currency. Its operating income of $27.9 million was up 35
percent.

“Our businesses operated well, and all four segments expanded operating margins—by triple-digit basis points in the architectural segments—as well as backlog,” says Joseph F. Puishys, Apogee CEO.

“We continue to make strong gains in manufacturing operational excellence, leveraging our lean initiative.”
The company’s fiscal 2016 year-to-date operating margin was 9.5 percent, up from the prior year. Year-to-date revenues are up 5 percent, and Puishys says the company has had double-digit growth in its U.S. architectural
businesses.

“We look for a strong finish to fiscal 2016—we anticipate a double-digit
operating margin with revenue growth in the fourth quarter, positioning us to achieve the goal we set three years ago of $1 billion in revenues at 10 percent operating margin,” he says.

Revenues in the architectural services segment, which includes Harmon, were $61.2 million, up 9 percent.

“Operating income grew to $3.7 million with good operational performance and improving project margins,” according to the release. “This compares to $0.3 million last year when operating results were negatively impacted by a few projects in the period.”

Revenues were $76.4 million in the architectural framing systems segment, down 5 percent, “primarily due to currency exchange and lower volume at the Canadian storefront business,” according to the report. That segment includes Wausau Window and Wall Systems, Tubelite, Canadian-based storefront and curtainwall company Alumicor, and paint and anodizing finisher Linetec. Operating income grew to $9.2 million, up 22 percent from $7.6 million in that segment.

“Our achievement of record backlog in the quarter underscores our robust bidding activity,” says Puishys. “This high level of backlog, combined with commitments, bidding and award activity, support our longer-term outlook for revenues of $1.3 billion at an operating margin of at least 12 percent in fiscal 2018.”

He anticipates capital expenditures for the year at $40 million to $45 million as Apogee invests to increase capabilities, capacity and productivity. The gross margin is expected to be at least 24.5 percent.

“I am pleased that our strategies to grow through new geographies, new products and new markets, along with our focus on better project selection, productivity and operational improvements, are delivering positive results,” says Puishys.

Apogee Business Segment Information
(unaudited)(dollar amounts in thousands)
  13 weeks ended 11/28/15 13 weeks ended 11/29/14 % Change
Sales $85,461 $90,268 -5%
Architectural Glass 61,244 56,178 9%
Architectural Services 76,419 80,411 -5%
Operating Income      
Architectural Glass $8,383 $5,836 44%
Architectural Services 3,702 323 1046%
Architetural Framing 9,244 7,596 22%


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