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. Thats what
Im preparing for. So said Russ Huffer, chief executive
officer of Minneapolis-based Apogee Enterprises Inc., during this
mornings 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
"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
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
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
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,"
HERE to read Apogee's full fiscal third quarter 2009 financial
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