Apogee Reports 7 Percent Increase in Revenue in Fiscal 2012 First Quarter
June 23, 2011
Officials at Apogee Enterprises Inc. in Minneapolis announced the company’s fiscal 2012 first-quarter results, June 22. Overall, the company’s revenues increased 7 percent to $153.3 million. Operating loss was $3.4 million, compared to a loss of $6.1 million in the prior year period. Per share loss was 8 cents, compared to a loss of 13 cents. Architectural segment revenues increased 7 percent, with an operating loss of $7.1 million. Cash and short-term investments totaled $43.0 million, compared to $60.6 million at the end of the fiscal 2011.
“We are beginning to see signs of improvements from the bottom of the commercial construction cycle,” said Russ Huffer, Apogee’s chief executive officer. “Among the first quarter signals pointing to architectural segment improvement were the sequential backlog growth, as well as the revenue growth in our domestic architectural businesses. Within the architectural segment, there were modest improvements on several fronts: in architectural glass pricing, order activity, window business margins and market share gains. These improvements were offset by softer installation margins as we had expected.”
From an operation standpoint, all businesses performed well in the quarter, even though the architectural businesses continued to face low-capacity utilization due to the difficult commercial construction market, Huffer said. “Our balance sheet at the end of the first quarter remained solid with cash and short-term investments at $43 million. The positive movement we’re seeing had allowed us to somewhat increase our outlook for fiscal 2012 to a slight profit of 10 percent-plus revenue growth.”
Turning to the quarterly results, Apogee’s losses continued in the first quarter, Huffer said. “We lost 8 cents per share compared to a loss of 13 cents per share last year.” Revenues for the architectural segment increased 7 percent. The architectural segment operating loss of $7.1 million resulted from low pricing on architectural glass projects and lower margin installation work, he said. “Both bid through the bottom of the commercial construction cycle, as well as low architectural glass capacity utilization. Compared to the prior year, our architectural segment loss eased somewhat as the impact from revenue growth in our window and storefront businesses was somewhat offset by lower margin work in installation.” Architectural segment sales for the same period last year were $126.4 million.
“I’m encouraged that the architectural glass pricing increases we implemented last year are starting to flow through and operational improvement initiatives are having an impact on quality and our cost structure,” Huffer said. “This business is running well and is looking at increasing level of potential projects for later this year and in fiscal 2013.”
In the newest part of the company’s architectural glass business, the Brazilian acquisition accounted for 5 percentage points of the 7 percent revenue growth for the architectural segment, but had a minimal impact on operating income, Huffer said. “The integration is proceeding smoothly, and I’m pleased with the projects we’re winning in Brazil, for commercial construction markets are stronger than here in the U.S.”
In the first quarter, Apogee’s architectural segment backlog grew to $247 million from $237 million in the fiscal 2011 fourth quarter, and $215 million a year ago. “We’re encouraged that our backlog again increased,” Huffer said. “We feel good about the improved trend.
The operating margin of 25.7 percent resulted from the ongoing [demand] of value-added products, the volume increase in strong operational performance. This compares to an operating margin of 20.2 percent in the prior year period.”
Going forward, “I believe we’re finally seeing the beginning of an upturn for our architectural segment, even though the stronger economy and more jobs are needed to bring ongoing steady growth to our commercial construction market,” Huffer said. For fiscal 2012, Apogee’s outlook has improved slightly, as the company has become more confident that architectural glass price increases should flow as the year progresses, and anticipates stronger volume for its architectural glass and storefront businesses, with both market improvement and share gain. “We now expect revenue growth to exceed 10 percent, and we expect to be slightly profitable for the year,” Huffer said. “This outlook in part depends on our ability to fill in open fourth quarter capacity in our architectural segment. Roughly, half of our full year revenue growth comes from inclusion of the Brazilian architectural glass business.”
Officials expect that the actions they took in Apogee’s architectural businesses, ranging from price increases and productivity improvement, to project selection changes, will contribute to improved fiscal 2012 results, Huffer said. “Somewhat offsetting improvements will be lower margins in the installation business as it executes project bids as the cycle troughs. We also expect to generate positive cash flow from our operations in fiscal 2012.”
The McGraw-Hill forecast for non-residential construction, as well as the AIA’s ABI indicate that the domestic market should start improving later in calendar 2011, Huffer said. “Today this is translating into stronger architectural bidding activity, which is driven by institutional work. We’re starting to see early signs of improvements in other markets, including the private sector, with the majority of work currently being bid scheduled for fiscal 2013. As domestic commercial construction markets recover, we believe we’re well-positioned financially and anticipate renewed interest in value-added energy-efficient products which will benefit Apogee’s business.”
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