Apogee CEO Sees Opportunity in Retrofit and
December 17, 2009
While Apogee Enterprises has reported a 28-percent drop in revenues
to $158.2 million for its architectural segment, Russ Huffer, chairman
and chief executive officer, is optimistic and confident that the
company will continue to be able to work through a weak market.
The company released its fiscal 2010 third quarter earnings yesterday
and hosted a conference call today to discuss the results.
Company-wide, revenues were down 25 percent to $179.8 million and
operating income was down 35 percent to $16.1 million.
Earnings from continuing operations were 39 cents per share, versus
63 per share. In the Architectural segment revenues, Huffer reported
that the backlog is at $246.4 million, compared to $295.0 million
at the end of the second quarter and $373.2 million in the prior-year
"While our markets are down significantly, we're seeing success
in winning institutional projects, including stimulus work, and
our share of large projects that are going forward, as well as smaller
domestic projects, international work and installation projects
in new geographies," said Huffer during the call.
He explained that much of the backlog for the architectural segment--60
to 65 percent--has shifted to institutional work. Office work is
about 20-25 percent of the backlog; hotel and entertainment about
5-10 percent; and condos are around 0-5 percent. Approximately $95
million, or 39 percent, of the backlog is expected to be delivered
in fiscal 2010, and approximately $151 million, or 61 percent, in
fiscal 2011 and 2012.
"Bidding activity remains steady although average project values
have declined, and bid-to-award timing continues to slow as customers
pursue every avenue for cost reduction," Huffer added.
Looking forward, Huffer said they are anticipating a decline of
22-24 percent and expect fiscal 2011 to be tougher than this year.
"Large project work is down more than 60 percent; the architectural
glass segment has been hit hard," Huffer said. "We've
reduced our costs by $55 million, including a head count reduction
of 35 percent." He said that if necessary, future cuts could
still be made. "We want to make sure we're aligned for what's
ahead of us; we just don't have that long-term visibility that we
used to," said Huffer.
However, there were also areas of opportunity discussed during the
call, one of which is the retrofit market. Huffer noted that McGraw
Hill has forecasted a dramatic increase in green retrofit activity.
And while Apogee's retrofit revenues historically have been about
25 percent, this could change.
"If the government were to put retrofit incentives in place
it could grow," said Huffer. "There is no question that
retrofit can significantly change the energy performance of older
The international market is another area of growth. Huffer said
in 2009 their international work was about $20 million; this year
he expects that to be in the mid $30 million range.
"I think we can continue to grow that," Huffer said.
Most of the international work has been in Asia, as well as South
America, some in the Middle East and Europe.
"We have also have continued to look at a locations for an
international factory and have focused on Asia," said Huffer,
explaining that as they continue to focus on new markets and growth
opportunities, the company "will be well positioned for when
the commercial market improves."
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