Apogee Reports Operating Loss and Increased Debt But Remains Positive for Future
December 16, 2010
Revenues were down 18 percent to $147.2 million for Apogee Enterprises Inc. according to its fiscal 2011 third-quarter results, announced yesterday. Operating loss was $1.8 million, compared to earnings of $16.1 million in the third quarter last year. Loss from continuing operations was $0.08 per share, versus earnings of $0.39 per share revenues. Architectural segment revenues (which includes Viracon and Harmon) declined 21 percent, with an operating loss of $8.4 million.
Long-term debt increased to $21.6 million, up from $8.4 million at the end of fiscal 2010. This includes $20.4 million in long-term, low-interest industrial revenue and recovery zone facility bonds. Cash and short-term investments totaled $46.4 million after the use of approximately $22 million for the architectural glass acquisition of Glassec. This compares to $69.4 million at the end of the second quarter and $102.6 million at the end of fiscal 2010.
A Look at the Numbers
For the Architectural Products and Services Segment specifically:
- Revenues of $125.7 million were down 21 percent.
- Operating loss was $8.4 million, compared to income of $9.6 million. Low pricing in the architectural glass business as well as low volume in the segment resulted in the operating loss, according to a press release from Apogee.
- Backlog ended at $165.7 million, compared to $193.0 million at the end of the second quarter and $246.4 million in the prior-year period. Bidding activity, which continues to be driven by institutional work (government, education and health care projects), remains solid; however, the timing of bid to award and contract signing remains slow. Approximately $87 million, or 52 percent, of the backlog is expected to be delivered in fiscal 2011, and approximately $68 million, or 41 percent, in fiscal 2012.
“Despite a difficult quarter, we have maintained a strong balance sheet, with more than $45 million in cash and short-term investments after funding the acquisition,” says Russell Huffer, Apogee chairman and chief executive officer.
“Third-quarter architectural segment revenues declined year over year but improved slightly from the second quarter as overall non-residential construction markets remain stagnant; we incurred architectural segment operating losses primarily due to low architectural glass pricing and low volume in the segment,” he adds. “Our third-quarter reported architectural backlog declined compared to the second quarter; however, the total of our backlog along with the dollar value of awarded projects awaiting final signed contracts was comparable to the second quarter level.
He also remains positive for the future despite the losses, and despite challenging times that lie ahead.
“We estimate that companywide revenues for fiscal 2011 will be down approximately 17 percent, with fourth-quarter revenues comparable to the prior-year period,” Huffer says. “We anticipate a loss for the fourth quarter and the full year, as expected earnings in our large-scale optical segment will be unable to offset architectural segment losses. We expect fourth-quarter cash flow from operations will be flat to slightly positive, despite a challenging quarter where we anticipate tough pricing in architectural glass on volumes expected to be down from the third quarter.”
But the company expects things to turn around in 2012.
“Looking to fiscal 2012, we are expecting to be profitable for the year as architectural glass price increases should begin to flow through early in the year,” says Huffer. “We don’t anticipate much help from our markets, which are not expected to show significant improvement until later in calendar 2011, given that Apogee is a very late-cycle company that lags commercial construction markets by several months.
“We continue to book new orders for fiscal 2012 and beyond,” Huffer says. “Even though our reported backlog declined in the third quarter, the total of our backlog along with the dollar value of awarded projects awaiting final signed contracts before being added to backlog held steady compared to the second quarter.
“We believe we have the financial strength to weather the weak market conditions,” he adds.