Apogee Enterprises, Inc. provided an update on its business operations and actions the company has taken to align costs with market conditions.
“As the situation surrounding the COVID-19 outbreak continues to evolve, we remain focused on three imperatives: maintaining the health and safety of our employees; continuing to meet our customers’ needs; and ensuring the long-term health of our business,” said Joseph F. Puishys, Apogee’s Chief Executive Officer. “I’d like to recognize the entire Apogee team for their tremendous efforts during this challenging time. We have quickly adapted our operations to ensure a healthy working environment, while supporting our customers with the products and services they need to keep critical infrastructure projects on schedule.”
Mr. Puishys continued, “While most of our facilities remain fully operational, parts of our company are experiencing various levels of negative impact from the COVID-19 situation, especially the continued closure of our Large-Scale Optical segment. As a result, we have taken a number of preemptive measures to align our company’s costs with the current market environment. We are doing so in a way that minimizes workforce reductions and maintains the capabilities and capacity we’ll need as markets recover.”
Business Update
At this time, most of the Large Scale Optical (LSO) segment’s customers are closed to comply with various state and local government directives. While warehousing and shipping functions continue to operate, the company now expects the segment’s two primary manufacturing locations will remain closed through the end of June, then gradually ramp-up in the second quarter as customers reopen for business, before resuming normal operations in the second half of the fiscal year. In light of significantly reduced near-term customer demand, the LSO segment is expected to report an operating loss in the first half of the fiscal year and then return to strong levels of financial performance when customers fully reopen.
The company’s three Architectural segments continue to operate and serve customers, while taking the necessary precautions to ensure workforce health and safety and comply with local regulations. In the Architectural Services segment, projects are generally progressing as planned and orders remain strong, with backlog expected to increase in the first quarter. Architectural Framing Systems and Architectural Glass have seen some projects delayed or temporarily halted, particularly in regions with more COVID-19 related restrictions such as New York, Pennsylvania, California, and Quebec, where job sites and customers are closed.
Actions to Align Costs with Market Conditions
Given the current economic and operational uncertainty, the company has taken several significant proactive measures to manage its cost structure and cash flow, while minimizing job losses and preserving the capabilities required to meet demand as customers restart and the market recovers. To-date these actions include:
- 25 percent reductions to the CEO’s salary and Board of Director fees
- 15 to 20 percent salary reductions for other business leaders
- 10 percent reduction in hours for much of the salaried workforce
- Suspension of company matching contributions for 401k retirement plans
- Suspending merit pay increases for salaried and office employees
- Company-wide freeze on new salaried hires
- Furloughs or reduced hours for many manufacturing employees
- Restricting capital expenditures to essential maintenance and safety related projects
- Suspending share repurchases
These actions are expected to reduce fiscal 2021 costs by approximately 20 million USD, beginning immediately and will be fully implemented by the end of May. While these actions are planned to be temporary, they are expected to remain in effect for the next six months, to be reevaluated as the economic situation becomes clearer. With these cost actions, combined with the company’s previously announced cost reduction plans, the company expects to realize approximately 40 million USD of total savings in fiscal 2021.
Mr. Puishys concluded, “Looking ahead, I remain confident that Apogee will emerge from the COVID-19 situation poised for future success. With our diverse portfolio of market-leading brands, innovative product offerings, deep customer relationships, and network of facilities located near key North American markets, we are well positioned to resume growth when the environment normalizes. We will continue to monitor the situation closely and will provide further updates when we have greater visibility into our expected financial performance for the rest of the fiscal year.”