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Apogee Enterprises: fourth quarter outlook

8 January 1998: The US firm Apogee Enterprises Inc. has said it expects 1997-1998 fourth quarter earnings to be down significantly from last year“s US$ 0.20 per share, mostly due to continued weaknes…

8 January 1998: The US firm Apogee Enterprises Inc. has said it expects 1997-1998 fourth quarter earnings to be down significantly from last year“s US$ 0.20 per share, mostly due to continued weakness in the replacement auto glass market. The company said, however, that it expects its glass technology division to remain strong during the quarter. “Glass Technologies continues to generate outstanding growth, but Apogee“s earnings decreased overall in the third quarter due to disappointments we are addressing in our other two business segments,” said Donald Goldfus, chairman and chief executive. “In Building Products & Services, we are significantly reducing the scope of our curtainwall operations to rebuild profitability; in Auto Glass, while sales growth is outpacing the industry, the current market is soft and is putting continued pressure on margins. In response to this pressure, we will be taking significant steps to reduce our cost structure.” Glass Technologies operating income rose 26% in the third quarter to US$ 8.2 million, as sales increased 23% to US$ 61.4 million. Most of the sales growth was driven by Viracon, the segment“s largest business, which boosted its productivity with higher unit volumes. In addition, Tru Vue turned in a solid quarter, bolstered by sales in advance of the retail holiday season. Viratec had a mixed quarter. The company generated solid orders for its coating of curved glass surfaces for cathode ray tubes, which continued to operate at a modest profit. During the quarter, Viratec also added 50% additional capacity to its cathode ray tube line. However, Viratec“s overall results were diminished by its flat glass coating operation, which experienced an unusual amount of production downtime due to an ongoing capacity expansion. Auto Glass sales rose 14% to US$ 84 million, as the segment“s growth continued to outpace the industry in a seasonally slow quarter. About half of the sales growth was due to the fourth quarter fiscal 1997 acquisition of Portland Glass. However, margin pressures increased industrywide, leading to a 24% decrease in operating income to US$ 3 million. Most of the profit weakness was at the segment“s largest business, Harmon AutoGlass. At the close of the third quarter, Harmon had 327 retail locations in over 40 states. Goldfus noted that he does not expect Auto Glass fourth quarter operating income to match the previous year“s US$ 1.3 million. The fourth quarter is seasonally the weakest for the Auto Glass segment, and an operating loss is possible. He emphasized that the segment is taking decisive steps to reduce its cost structure, particularly in the retail operation. For the nine-month period which ended on 29 November 1997, Apogee“s net earnings were US$ 6 million or US$ 0.21 per share, compared with US$ 20.6 million or US$ 0.74 per share, reflecting Apogee“s 2:1 stock split of 14 February 1997. Excluding the US$ 16 million or US$ 0.56 per share charge in the third quarter related to the curtainwall business, nine-month net earnings were US$ 22 million or US$ 0.77 per share. Operating income was US$ 13.4 million for the nine-month period, compared with US$ 37.4 million a year earlier, as a strong increase at Glass Technologies and a modest rise at Auto Glass was partially offset by an operating loss at Building Products & Services. Consolidated sales increased 5% to US$ 748.8 million for the nine-month period. Double-figure sales increases at Glass Technologies and Auto Glass were offset by a 7% decline at Building Products & Services. Goldfus concluded, “We are in the midst of dramatic changes at Apogee that we believe will create exciting opportunities for our shareholders. With the aggressive expansion of our Glass Technologies businesses and the significantly reduced scope of our curtainwall operations, Apogee will look a lot different in the future, with substantially greater potential for growth in earnings and shareholder value.”

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