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Apogee reports fiscal 2005 4Q and FY earnings

Apogee Enterprises, Inc., which develops and delivers value-added glass products and services for the architectural, large-scale optical and automotive industries, announced fiscal 2005 4Q and full-ye…

Apogee Enterprises, Inc., which develops and delivers value-added glass products and services for the architectural, large-scale optical and automotive industries, announced fiscal 2005 4Q and full-year earnings on 6 April 2005. FY 2005 FULL YEAR HIGHLIGHTS FY 2005 earnings from continuing operations were USD 0.60 per share, up significantly from USD 0.17 per share a year ago, due to improved results in the strategic architectural and picture framing businesses. (All earnings per share figures refer to diluted earnings per share.) Revenues from continuing operations for fiscal 2005 increased 17% to USD 628.8 million. The architectural segment, which successfully implemented strategic initiatives in a strengthening market, was responsible for the growth, Apogee said. FY 2005 4Q HIGHLIGHTS 4Q earnings from continuing operations were USD 0.13 per share, versus a year-earlier loss of USD 0.14 per share. Operating margin was 3.8%. Revenues of USD 174.8 million were up 30% on the prior-year period, with architectural segment growth accounting for most of the improvement. Architectural segment revenues were up 38%, and operating income grew to USD 2.5 million from a loss of USD 4.1 million in the prior-year period. Increased volume led to higher capacity utilization. Large-scale optical segment revenues rose 15%, while operating income up to USD 4.3 million after a slight loss in the prior-year period. Sales of higher value-added picture framing glazing products continue to be strong, the company said. Auto glass segment revenues and earnings were down, as difficult market conditions continued to affect results. On 10 December 2004, Apogee completed the asset purchase of Architectural Wall Solutions, Inc. (AWallS) of Bolingbrook, Illinois, a commercial glass installation business. The acquisition is part of the firm“s strategy to strengthen and grow its architectural businesses. Guidance for fiscal 2006 includes expected earnings of USD 0.68 to USD 0.72 on revenue growth of 6 to 8%. COMMENTARY ON FY 2005 “We are pleased that our 4Q and full year results exceeded our expectations as we successfully implemented our growth strategies, a focus that will continue in fiscal 2006,” said Russell Huffer, Apogee chairman and chief executive officer. “In the 4Q, our architectural segment turned in an especially strong revenue performance in a more stable, but still very competitive commercial construction market. The large-scale optical segment continues to benefit from its success in converting the picture framing market to value-added glass.” “During the quarter, we continued to make progress on our initiatives to increase architectural market share and to improve future performance in this segment,” said Huffer. “Our architectural glass capacity expansion to serve growth in our core, higher-end markets is on schedule for a fiscal 2006 2Q startup. In addition, we completed the acquisition of commercial glass installer AWallS, which is helping us strengthen our installation organization and increase market penetration in the Midwest and Northwest.” 4Q SEGMENT AND OPERATING HIGHLIGHTS ARCHITECTURAL PRODUCTS AND SERVICES Revenues of USD 143.8 million were up 38% over the prior-year period. Revenues were stronger than anticipated due to strength in high-end condos, government and institutional work, along with some improvement in the office market. These projects are also using more value-added hurricane, blast and energy-efficient products, Apogee said. The AWallS acquisition, which was completed during the quarter, added approximately USD 4 million to segment revenues. Operating income was USD 2.5 million, up significantly from a loss of USD 4.1 million a year ago. Improved earnings resulting from higher sales were somewhat offset by a pre-tax charge of USD 0.6 million for disposition of certain fixed assets. Operating margin was 1.8%. Segment backlog was USD 220.1 million, compared to a backlog of USD 224.5 million in the prior-year period and USD 212.5 million at the end of the 3Q. Strong shipments in the quarter reduced the overall backlog. The AWallS acquisition added USD 24.1 million to the 4Q backlog. The prior-year backlog included approximately USD 15 million in fiscal 2004 work that was delayed until the 1Q of fiscal 2005. LARGE-SCALE OPTICAL TECHNOLOGIES Revenues of USD 23.3 million were up 15% over the prior-year period. Sales of higher value-added picture framing products were especially strong, as conversion continued from plain glass to value added, as well as to higher-end, value-added products. This more than offset the continuing move away from certain consumer electronics products and the sale of the matboard product line. Operating income was USD 4.3 million, compared to an operating loss of USD 0.7 million in the prior-year period. The prior year was hit by pre-tax charges of USD 1.7 million resulting from the sale of the matboard product line, completed 31 March 2004, and the integration of the two large-scale optical operations to better serve picture framing markets. Operating margin was 18.6%. AUTOMOTIVE REPLACEMENT GLASS AND SERVICES Revenues of USD 7.7 million were down 24% from the prior-year period. Operating income was USD 0.3 million, compared to USD 1.4 million in the prior-year period. As anticipated, segment results continue to be impacted by difficult market conditions. EQUITY IN AFFILIATES A loss of USD 0.7 million from investment in PPG Auto Glass, LLC, an improvement from a prior-year period loss of USD 2.3 million. Reduced volume and low market pricing continued to affect results. DISCONTINUED OPERATIONS There was no earnings per share impact in the quarter. This compares to a prior-year loss of USD 0.10 per share, related to the operations and associated loss on the sale of Harmon AutoGlass. FINANCIAL CONDITION Long-term debt was USD 35.2 million at the end of the 4Q, down 11% from the end of fiscal 2004. Debt-to-total-capital ratio was reduced to 17% from 19% at the end of the prior year. Non-cash working capital (current assets, excluding cash, less current liabilities) of USD 62.1 million was up slightly from the end of fiscal 2004 as revenues increased. Depreciation and amortization were USD 18.0 million for fiscal year 2005, down 9% compared to the prior year. Capital expenditures for fiscal year 2005 were USD 26.4 million, which includes spending on the firm“s architectural capacity expansion and acquisition. This compares to USD 11.5 million in the prior year.

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