Apogee Enterprises, Inc., a leader in the design and development of value-added glass and metal products and services for enclosing commercial buildings, framing and displays, has announced its fiscal 2019 first-quarter results.
Revenues of USD 336.5 million were up 24% over the prior year period, driven by acquisition-related and organic growth in Architectural Framing Systems and growth in Architectural Services and in Large-Scale Optical Technologies. This was partially offset by an expected timing-related decline in Architectural Glass. As anticipated, on an organic basis, excluding the EFCO acquisition, revenues were comparable year-over-year.
Operating income was USD 22.0 million, down from USD 24.1 million a year ago, as a result of the timing-related decline in sales and operating leverage in Architectural Glass, partly offset by higher contribution from Architectural Services. Adjusted operating income was USD 24.9 million, compared to USD 26.8 million in the prior year. Earnings per diluted share were USD 0.54, versus USD 0.56 in the prior year period. Adjusted EPS was USD 0.62, consistent with the prior year. Free cash flow was USD 16.0 million in the quarter.
“In the first quarter, we executed our plan for a solid start to fiscal 2019: revenues rose significantly, backlogs continued to grow across the business, we saw on-going productivity gains and excellent cash conversion. We also continued to make progress positioning the company for long-term, stable earnings and cash flow growth, regardless of the economic cycle,” said Joe Puishys, Apogee’s chief executive officer.
“Robust 60% year-over-year top-line growth in the company’s largest segment, Architectural Framing Systems, as well as substantial increases in Architectural Services demonstrate how we are executing our plan to build a larger, more stable and more diversified - by geography, project size and market segment - revenue base. On this strong foundation, we continued making investments and process improvements to increase efficiencies in project selection, manufacturing and delivery to raise long-term operating margins and drive earnings. We’re especially focused on the opportunity to leverage the best practices, technology and scale of our legacy businesses to raise long-term operating margins in recent acquisitions to those same levels of profitability. In fact, we’re seeing quarter-over-quarter improvements in margins at EFCO, and remain on track to achieve our synergy goals by fiscal 2020.”
Puishys concluded, “Based on the first quarter’s positive performance, sustained backlog growth and order activity, and a good outlook for the North American construction industry, we are raising our fiscal 2019 earnings guidance ranges by 5 cents per share, and can affirm our fiscal 2019 goals for revenue growth. We also remain confident in our outlook for continuing top- and bottom-line growth into fiscal 2020 and beyond.”
The Architectural Framing Systems segment continued to be the company’s key engine for growth, diversification and long-term earnings growth. In spite of the expected, year-over-year margin impact of the EFCO acquisition, solid progress was achieved toward higher profitability for the year and long-term, with strong margin expansion in legacy businesses and quarter-over-quarter gains in productivity, on-time deliveries and synergies at EFCO.
Revenues of USD 179.0 million were up 62% from a year ago, reflecting sales from EFCO (acquired in the prior-year second quarter) and robust growth in the company’s legacy businesses. This was partly offset by a decline in Sotawall revenues due to project timing, as expected, and a difficult comparison to a strong fiscal 2018 first quarter. Segment revenue growth reflected an expanding geographic presence in North America, as well as new products. Revenues rose 3% organically, excluding the EFCO acquisition, versus prior year.
Operating income was USD 12.3 million, compared to USD 12.0 million in the prior year; adjusted operating income was USD 15.2 million, compared to USD 14.0 million. Operating margin was 6.9%, compared to 10.8% in the prior year, as anticipated due to the inclusion of lower margin EFCO sales. Lower Sotawall sales also impacted margins, due to the businesses’ operating leverage, though this was offset by significant, sustainable margin improvements in the segment’s remaining legacy businesses.
Segment backlog increased to USD 427.0 million, from USD 405.7 million a quarter ago and USD 255.1 million a year ago, and the project pipeline and bidding continue to be solid.
Revenues and margins were down in the Architectural Glass segment, largely as expected, due to the timing of project work. Order activity grew substantially during the quarter, and the company continues to expect higher year-over-year revenue and operating income for the remainder of the year, beginning in the second quarter.
Revenues of USD 76.9 million were down 21% from a year ago, with soft volumes early in the quarter based on the timing for customer orders.
Operating income was USD 1.6 million and operating margin was 2.1%, declining from USD 9.3 million and 9.5%, respectively, in the prior year. This was a result of lower volumes.
The Architectural Services segment achieved substantial revenue growth and margin expansion. Based on a solid backlog, the outlook for the remainder of fiscal 2019 remains positive.
Revenues of USD 70.7 million were up 41% versus the prior year, as the business executed on the substantial backlog booked over the past year, as expected, and against easier prior year comparisons.
Operating income was USD 5.2 million and operating margin was 7.3%, up significantly from USD 0.8 million and 1.6%, respectively, in the prior year period, due to volume leverage and strong operating performance.
Segment backlog increased to USD 439.1 million, from USD 426.3 million a quarter ago and USD 292.9 million a year ago.
The Large-Scale Optical Technologies segment showed solid growth and higher operating margins, with a positive outlook for the remainder of the year that is in line with the company’s plan.
Revenues of USD 20.8 million were up 12% versus the prior-year period, on strong core picture framing demand, product mix and growth in new markets.
Operating income was USD 5.0 million, up 23% from a year ago. Operating margin rose to 24.0% from 21.8% a year ago, driven by volume leverage and favorable product mix.
Year-to-date capital expenditures, primarily to improve productivity and capabilities, were USD 9.3 million. Free cash flow in the first quarter was USD 16.0 million, versus a free cash use of USD 5.5 million in the prior year period, primarily reflecting strong working capital management and lower capital expenditures. During the quarter, the company paid a dividend of USD 4.4 million. Total debt at the end of the first quarter was USD 214.5 million.
The company’s updated outlook for fiscal 2019 includes:
* Revenue growth of approximately 10%.
* Operating margin of 8.9 to 9.4%.
* Adjusted operating margin of 9.2 to 9.7%.
* Earnings of USD 3.35 to USD 3.55 per diluted share, up from USD 3.30 to USD 3.50 previously.
* Adjusted EPS of USD 3.48 to USD 3.68, up from USD 3.43 to USD 3.63 previously.
* Adjusted fiscal 2019 earnings guidance excludes the after-tax impact of amortization of short-lived acquired intangibles associated with the acquired backlog of Sotawall and EFCO of USD 3.8 million (USD 0.13 per diluted share).
* Capital expenditures of USD 60 to USD 65 million.
* Tax rate of approximately 24%.
Apogee Enterprises, Inc., headquartered in Minneapolis, is a leader in the design and development of value-added glass and metal products and services for enclosing commercial buildings, framing and displays. The company is organized in four segments, with three of the segments serving the commercial construction market:
Architectural Glass segment consists of Viracon, the leading fabricator of coated, high-performance architectural glass for global markets.
Architectural Framing Systems segment businesses design, engineer, fabricate and finish the aluminium frames for window, curtainwall and storefront systems that comprise the outside skin of buildings. Businesses in this segment are: Wausau, a manufacturer of custom aluminium window systems and curtainwall; Sotawall, a manufacturer of unitized curtainwall systems; EFCO, a manufacturer of aluminium window, curtainwall, storefront and entrance systems; Tubelite, a manufacturer of aluminium storefront, entrance and curtainwall products; Alumicor, a manufacturer of aluminium storefront, entrance, curtainwall and window products for Canadian markets; and Linetec, a paint and anodizing finisher of window frames and PVC shutters.
Architectural Services segment consists of Harmon, one of the largest U.S. full-service building glass installation companies.
Large-Scale Optical segment, which leverages the same coating technologies used in the company’s Architectural Glass segment, consists of Tru Vue, a value-added glass and acrylic manufacturer primarily for framing and display applications.