First-Quarter Architectural Segment Earnings Decline; Backlog Remains
June 24, 2009
As noted in its fiscal 2010 first-quarter earning, revenues for
Minneapolis-based Apogee Enterprises Inc. were down 24 percent to
$180.9 million. The decline comes as a result of the worsened domestic
market conditions "with continued tight commercial real estate
credit, decreasing employment levels and soft retail markets,"
says Russell Huffer, Apogee chairman and chief executive officer.
"We are managing costs and productivity to achieve solid gross
margins, and are generating cash in this tough environment. However,
the inability to fully leverage fixed costs over lower volume impacted
our architectural and large-scale optical segment operating margins."
In the architectural segment specifically, revenues declined 24
percent, and operating income decreased 28 percent. Backlog remained
relatively flat at $310.0 million, compared to $316.2 million at
the end of fiscal 2009.
"It is positive that we experienced a relatively flat architectural
segment backlog compared to the previous quarter and minimal cancellations,"
says Huffer. "We have reduced costs more than $40 million on
an annual basis since October and headcount continues to decrease.
Although future periods will be impacted by the domestic commercial
construction slowdown, we entered the downturn with a very strong
balance sheet and are generating positive cash flow. Apogee remains
in a strong financial position."
Revenues for the architectural products and services segment saw
a 24 percent drop to $166.7 million. The decline is reported to
be primarily from the architectural glass and installation businesses
due to project delays, the timing of project flow and cancellations
experienced in the second half of last year.
Operating income was down 28 percent to $10.8 million and operating
margin was 6.5 percent, compared to 6.7 percent.
The company reported that "solid execution by the installation
and window businesses of projects bid in stronger markets, along
with productivity improvements and ongoing cost cutting efforts
were more than offset by the impact of lower volume."
Backlog remained flat at $310.0 million, compared to $316.2 million
at the end of fiscal 2009. This is down from $491.0 million in the
prior-year period. The company says that as work on existing backlog
is completed, slower bid-to-award timing is impacting backlog levels,
despite steady bidding activity.
The institutional sector continues to be the largest portion of
the backlog, followed by office projects, with condo and hotel/entertainment
projects a much smaller portion of future work.
Approximately $254 million, or 82 percent, of the backlog is expected
to be delivered in fiscal 2010, and approximately $56 million, or
18 percent, in fiscal 2011.
Overall, first-quarter earnings showed operating income down 30
percent to $11.7 million and operating margin at 6.5 percent, compared
to 7.0 percent last year. Earnings were 27 cents per share versus
36 cents per share last year.
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