Subscribe to USGNN!

USGNN Original StoryApogee Chief Predicts Two Years Til Full Turnaround

How long will it last? “We probably have 24 months before we get back to some normalized level of activity. That’s what I’m preparing for.” So said Russ Huffer, chief executive officer of Minneapolis-based Apogee Enterprises Inc., during this morning’s third quarter 2009 earnings conference call.

Although the company expects to end fiscal 2009 (which extends from March 1, 2008-March 1, 2009) with record revenues and earnings, the architectural segment is expected to be lower in fiscal 2010 (beginning March 1, 2009), compared to 2009, due to slower commercial construction; lower capacity utilization; and some impact from pricing pressures.

"We currently expect 2010 revenues to be down at least 10 percent," Huffer said.

To manage through the downturn, Huffer said the company already has "implemented and continue[s] to evaluate further cost cutting initiatives, ranging from reduction of headcount and discretionary spending to productivity improvements."

Among items being looked at in the future to keep business strong are green building initiatives. "Green building is a growing trend that's here to stay," Huffer commented.

He pointed to new energy-efficient products from its Viracon division and Wausau Window and Wall System's new green facility (CLICK HERE to read related article) as examples of movement in that direction.

Huffer also noted that the company will focus more heavily on institutional building, which is forecasted to remain strong, at least compared to new construction in the office building sector.

Huffer commented that president-elect Obama's planned stimulus package would support both of these trends, energy efficiency and the further development of institutional building.

"I'm very encouraged to see the new stimulus bill by the new administration funding these institutional projects that are ready to go … and we are ready to go," Huffer said. "We are concentrating our resources more on bidding institutional work."

In comparing the forecast downturn for 2009 and, potentially, 2010, the Apogee representatives drew comparisons to similar periods in recent years. In comparing the year ahead to a downturn in the late 1990s, Huffer said, "There was a rapid downturn there as well, but the rapid downturn followed too much construction of office put in place and that's different this time." He added, "We believe the market did not yet overbuild and so therefore, when the market turns this time, we should have our normal lag time to the economy so it should be a normal turn time for us to come back versus the last time, which took several years …"

He also pointed out that this time around high performance glass is much more widely in the commercial construction marketplace than it was in the 1990s.

"I think the real plus will be as we come out of this, we'll come out much sooner and stronger and better," Huffer said.

Jim Porter, chief financial officer, commented, "Back in fiscal '04 we were very heavily concentrated in the office sector in the nonresidential marketplace." He added, "In today's environment as we talk about our backlog we're more balanced across the sectors."

Porter also pointed to problem projects, while Huffer noted that during the 2004 downturn the installation division "took projects in locations where work was very tight … projects we probably shouldn't have taken." He explained, "When we began preparing for this downturn we began training people to travel to avoid exactly that situation."

While that may have only referred to travelling nationally, the conference call also touched on the company's aim of growing its international glass sales to offset lower domestic sales.

"We won't be doing installation, we'll be selling to an installer," Huffer explained.

CLICK HERE to read Apogee's full fiscal third quarter 2009 financial report.

Need more info and analysis about the issues?
CLICK HERE to subscribe to USGlass magazine.