Apogee Enterprises, Inc. announced results for the third quarter of fiscal 2021. Third-quarter revenue was 313.6 million USD, compared to 337.9 million USD in the third quarter of fiscal year 2020, reflecting market-related volume declines in Architectural Framing Systems and Architectural Glass, partially offset by growth in Architectural Services and Large-Scale Optical. Earnings were 1.42 USD per diluted share, compared to 0.57 USD per diluted share in the prior-year period, which included a pre-tax gain of 19.3 million USD on the sale of a building and 1.4 million USD of pre-tax costs related to COVID. Excluding these items, adjusted earnings increased to 0.90 USD per diluted share , from 0.57 USD in the prior year.
- Earnings increase to 1.42 USD per diluted share; adjusted earnings grow to 0.90 USD per diluted share
- Revenue declines 7 percent to 314 million USD, with continued end-market headwinds
- On-track to achieve cost savings target of over 40 million USD in fiscal 2021; taking action to drive additional savings in fiscal 2022
- Strong cash flow, with 35 million USD of cash from operations in the quarter
Commentary
“We delivered another strong quarter, with adjusted earnings growth and improved cash flow, despite continued challenges from COVID and soft conditions in our architectural end markets,” said Joseph F. Puishys, Chief Executive Officer. “We focused aggressively on managing costs and improving execution across our business and remain on track to achieve our full-year cost reduction goal of over 40 million USD. Architectural Services continued its strong performance, with double-digit revenue and profit growth, and Large-Scale Optical returned to growth, rebounding faster than expected from its shutdown earlier in the year.”
“During the quarter, we took several actions to further strengthen the company’s financial position and drive value,” continued Mr. Puishys. “We completed a sale-leaseback transaction for one of our facilities, generating a significant gain on the sale and 24 million USD in cash. We amended our term loan, extending the maturity by three years, and we resumed repurchases of our stock. We also initiated an effort to reduce our fixed cost base, which should add to the cost savings efforts we already had underway.”
Mr. Puishys concluded, “I want to commend the entire Apogee team for their efforts to manage through the past nine months. Our year-to-date results demonstrate the underlying strength and resilience of our company and our ability to produce solid results, even with difficult market conditions. Looking ahead, we will remain focused on managing what we can control, taking care of our employees and customers, while we execute strategic initiatives intended to position the company for long-term growth and improved profitability.”
Segment Results
Architectural Framing Systems
Architectural Framing Systems third-quarter revenue was 136.7 million USD, compared to 165.5 million USD in the prior-year period, primarily reflecting COVID and market-related project delays, and lower volume for short lead-time products. Operating income in the quarter increased to 7.2 million USD, with operating margin of 5.3 percent, from 6.3 million USD and 3.8 percent respectively in the prior-year quarter, primarily driven by cost reductions, which offset the impact of lower revenue. Segment backlog increased to 408 million USD, compared to 404 million USD at the end of the second quarter.
Architectural Glass
Architectural Glass revenue in the third quarter was 84.8 million USD, compared to 89.4 million USD in the prior-year quarter, primarily reflecting COVID and market-related project delays. The segment had operating income of 10.8 million USD and operating margin of 12.8 percent, compared to operating income of 4.0 million USD and margin of 4.6 percent in last year’s third quarter. Third quarter results included 7.4 million USD of operating income related to a New Markets Tax Credit transaction.
Architectural Services
Architectural Services revenue grew 11 percent to 76.7 million USD, from 69.0 million USD in the prior-year quarter, driven by increased volume from executing projects in backlog. Third-quarter operating income increased to 8.6 million USD with operating margin of 11.2 percent, up from 6.5 million USD and 9.5 percent respectively in the prior-year period, primarily driven by strong project execution. Segment backlog stood at 597 million USD, compared to 665 million USD at the end of the last quarter, and 607 million a year ago .
Large-Scale Optical
Large-Scale Optical revenue was 25.3 million USD, up from 24.4 million USD in the third quarter last year, driven by increased volume. Segment revenue grew sequentially by 50 percent compared to the second quarter, as customer demand increased significantly following the segment’s COVID-related shutdown earlier in the year. Segment operating income was 26.1 million USD with operating margin of 103.4 percent, which included a 19.3 million USD gain on the sale-leaseback of a building. Excluding this gain, adjusted operating income was 6.8 million USD, in-line with the prior-year quarter, with adjusted operating margin of 26.8 percent, compared to 27.7 percent last year.
Financial Condition
Fiscal year-to-date, net cash provided by operating activities is 121 million USD, more than double the 53.6 million USD for the same period last year, primarily driven by strong working capital management. Capital expenditures through the first nine months of the fiscal year were 17.1 million USD, down from 41.2 million USD in the prior-year period, as the company focused only on high return and essential capital projects. During the quarter, the company repurchased 621,000 shares of stock for 16.0 million USD. Fiscal year-to-date, the company has returned 35 million USD to shareholders through dividend payments and share repurchases.
As previously disclosed, the company amended its credit agreement during the quarter to extend the maturity of its unsecured 150 million USD term loan for three years to June 2024. This extension is expected to benefit annual interest expense by 0.5 million USD. Total debt at the end of the third quarter was 168 million USD with no outstanding borrowings on the company’s 235 million USD revolving credit facility.
Outlook
The company is not providing detailed financial guidance due to continued uncertainty driven by the impact of COVID and end-market conditions. The company expects that continued project delays and soft market conditions will negatively impact revenue in the fourth quarter.
Conference Call Information
The company hosted a conference call December 18 at 8:00 a.m. Central Time to discuss its financial results and provide a business update. This call was webcasted and is now available in the Investor Relations section of the company’s website, along with presentation slides, at https://www.apog.com/events-and-presentations. The webcast also is archived for replay on the company’s website.