Apogee enterprises reports record fiscal 2023 second quarter results
Minneapolis--(business wire)--apogee enterprises, inc. (nasdaq: apog) today announced its fiscal 2023 second quarter results. second-quarter revenue grew 14.2 percent to a record $372.1 million, compared to $325.8 million in the second quarter of fiscal year 2022, led by growth in architectural framing systems and architectural services. earnings per diluted share increased to $1.68, compared to a net loss of $(0.08) per diluted share in the prior-year quarter. earnings in the quarter benefited from a $13.7 million income tax deduction for a worthless stock loss related to the sotawall business. earnings in the prior-year quarter included $20.8 million of pre-tax restructuring costs. adjusted earnings, which exclude the impact of the tax deduction and restructuring costs, increased to a record $1.06 per diluted share, compared to $0.53 in the second quarter of fiscal 2022.1 “this was another strong quarter for apogee, with improving execution driving record results,” said ty r. silberhorn, chief executive officer. “we’re now a year into implementing apogee’s new enterprise strategy and we are continuing to build momentum in the company’s transformation. while a lot of work remains to reach our goals, i am proud of the progress our team has made in just twelve months since we launched our new strategy.” mr. silberhorn continued, “our effort to become the economic leader in our target markets is taking hold. we are improving execution and driving productivity gains across the company. we’re building a more competitive cost structure and strengthening our ability to deliver differentiated products and services that provide more value for customers. these actions have driven significant margin expansion and positioned us for continued profitable growth as we move forward.” segment results architectural framing systems architectural framing systems second-quarter revenue grew 26 percent, to $172.9 million, from $137.0 million in the prior-year period, primarily driven by inflation-related pricing actions and a more favorable sales mix. second quarter operating income increased to $20.5 million, compared to $8.4 million in last year’s second quarter, which included $2.0 million of restructuring costs. excluding the restructuring costs, adjusted operating income2 in the prior year was $10.4 million. the increased income in this year’s second quarter was driven by improved pricing and mix, and the benefits from restructuring actions completed last year, which combined to offset the impact of inflation. segment backlog at the end of the quarter was $286 million, compared to $310 million at the end of the first quarter. framing systems’ prior year results have been recast to reflect the move of the sotawall business to the architectural services segment, which was effective at the beginning of this fiscal year. architectural services architectural services revenue grew 11 percent to $106.7 million, up from $96.4 million in the prior-year quarter, driven by increased volume from executing projects in backlog. operating income was $5.5 million, compared to $7.1 million in the prior-year period, reflecting increased costs for investments to support future growth, partially offset by the higher volume. segment backlog increased to $785 million, up from $681 million at the end of the first quarter, driven by significant new project wins in the transportation and healthcare markets. prior-year results for architectural services have been recast to reflect the move of the sotawall business into the segment, which was effective at the beginning of this fiscal year. architectural glass architectural glass revenue in the second quarter was $77.4 million, compared to $79.4 million in the prior-year quarter, primarily reflecting lower volume, partially offset by improved pricing. operating income increased to $6.5 million, compared to an operating loss of $(17.0) million in last year’s second quarter, which included $17.4 million of restructuring costs. excluding the restructuring costs, adjusted operating income in the prior year was $0.4 million. the increased income in this year’s second quarter was driven by improved pricing, productivity gains, and the positive impact of restructuring actions completed last year, which combined to offset the impact of inflation. large-scale optical large-scale optical revenue grew 7 percent to $25.2 million, compared to $23.5 million in the second quarter last year, primarily driven by higher volume. operating income was $6.0 million, up from $5.5 million in last year’s second quarter, primarily reflecting higher volume and improved pricing, partially offset by cost inflation. financial condition in the second quarter, net cash provided by operating activities was $27.8 million, compared to $48.0 million in last year’s second quarter. fiscal year to date, net cash used by operating activities is $2.6 million, compared to $54.9 million provided by operating activities in the prior-year period. the lower cash flow primarily reflects increased working capital related to revenue growth and inflation. capital expenditures through the first half of the fiscal year were $9.3 million, compared to $10.1 million in the same period last year. fiscal year to date, the company has returned $83.9 million of cash to shareholders through share repurchases and dividend payments, up from $32.5 million in the first half of fiscal 2022. quarter-end total debt was $251 million, compared to $163 million at the end of last year’s second quarter. cash and cash equivalents were $22.1 million, compared to $61.8 million at the end of the second quarter of fiscal 2022. outlook based on second-quarter results and increasing confidence in its outlook, the company is raising its guidance for full-year adjusted earnings to a range of $3.75 to $4.05 per diluted share, up from the previously announced range of $3.50 to $3.90. the company expects full year revenue growth of 8 to 10 percent, primarily driven by growth in architectural framing systems. the company now expects full-year capital expenditures of approximately $40 million. conference call information the company will host a conference call today at 8:00 a.m. central time to discuss its financial results and provide a business update. this call will be webcast and is 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 will be archived for replay on the company’s website. about apogee enterprises apogee enterprises, inc. (nasdaq: apog) is a leading provider of architectural products and services for enclosing buildings, and high-performance glass and acrylic products used for preservation, energy conservation, and enhanced viewing. headquartered in minneapolis, mn, our portfolio of industry-leading products and services includes high-performance architectural glass, windows, curtainwall, storefront and entrance systems, integrated project management and installation services, as well as value-added glass and acrylic for custom picture framing and displays. for more information, visit www.apog.com. use of non-gaap financial measures this release and other financial communications may contain the following non-gaap measures: adjusted operating income, adjusted operating margin, adjusted net earnings and adjusted earnings per diluted share (“adjusted earnings per share” or “adjusted eps”) are used by the company to provide meaningful supplemental information about its operating performance by excluding amounts that are not considered part of core operating results to enhance comparability of results from period to period. examples of items excluded to arrive at this adjusted measure in recent reporting periods include: impairment charges, restructuring costs, acquired project-related charges, gains or losses from significant asset sales, income tax deductions for worthless stock losses, and covid-19 related expenditures. free cash flow is defined as net cash provided by operating activities, minus capital expenditures. the company considers this measure an indication of its financial strength. however, free cash flow does not fully reflect the company’s ability to freely deploy generated cash, as it does not reflect, for example, required payments on indebtedness and other fixed obligations. net debt is a non-gaap measure defined as total debt (current debt plus long-term debt) on our consolidated balance sheet, less cash and cash equivalents. the company considers this measure helpful to evaluate our capital structure and financial leverage, and our ability to fund investing and financing activities. adjusted ebitda represents net income before interest, taxes, depreciation, amortization and certain non-cash, non-recurring and other adjustment items. we believe this metric provides useful information to investors and analysts about the company's performance because it eliminates the effects of certain items that are unusual in nature or whose fluctuation from period to period do not necessarily correspond to changes in the operations of the company. a reconciliation of non-gaap guidance on adjusted eps to gaap guidance is not available on a forward-looking basis without unreasonable effort due to the uncertainty of the magnitude and timing of future adjustments. these adjustments may include, among others, the impact of such items as impairment charges, restructuring costs, acquired project-related charges, and gains or losses from significant asset sales. accordingly, the company is unable to provide a reconciliation of adjusted eps to the most directly comparable gaap financial measure or address the probable significance of the unavailable information, which could be material to the company's future financial results computed in accordance with gaap. an operational measure that management uses is backlog. backlog represents the dollar amount of signed contracts or firm orders, generally as a result of a competitive bidding process, which is expected to be recognized as revenue. backlog is not a term defined under u.s. gaap and is not a measure of contract profitability. backlog should not be used as the sole indicator of future segment revenue because we have a substantial number of projects with short lead times that book-and-bill within the same reporting period and are not included in backlog. management uses non-gaap measures to evaluate the company’s historical and prospective financial performance, measure operational profitability on a consistent basis, and provide enhanced transparency to the investment community. non-gaap measures should be viewed in addition to, and not as a substitute for, the reported financial results of the company prepared in accordance with gaap. other companies may calculate these measures differently, limiting the usefulness of the measures for comparison with other companies. forward-looking statements this press release contains “forward-looking statements” within the meaning of the private securities litigation reform act of 1995. the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “should” and similar expressions are intended to identify “forward-looking statements”. these statements reflect apogee management’s expectations or beliefs as of the date of this release. the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. all forward-looking statements are qualified by factors that may affect the results, performance, financial condition, prospects and opportunities of the company , including the following: (a) uncertainty regarding the potential impacts and duration of the covid-19 pandemic; (b) u.s. and global economic conditions, including the cyclical nature of the north american and latin american commercial construction industries and the potential impact of an economic downturn or recession; (c) fluctuations in foreign currency exchange rates; (d) actions of new and existing competitors; (e) ability to effectively utilize and increase production capacity; (f) departure of key personnel and ability to source sufficient labor; (g) product performance, reliability and quality issues; (h) project management and installation issues that could affect the profitability of individual contracts; (i) changes in consumer and customer preference, or architectural trends and building codes; (j) dependence on a relatively small number of customers in certain business segments; (k) revenue and operating results that could differ from market expectations; (l) self-insurance risk related to a material product liability or other events for which the company is liable; (m) dependence on information technology systems and information security threats; (n) cost of compliance with and changes in environmental regulations; (o) supply chain disruptions, including fluctuations in the availability and cost of materials used in our products and the impact of trade policies and regulations; (p) integration of acquisitions and management of acquired contracts; (q) impairment of goodwill or indefinite-lived intangible assets; (r) our ability to execute our strategy to become the economic leader in our target markets and build an operating model to enable profitable growth; (s) increases in costs related to employee health care benefits; (t) risks that anticipated results from business restructuring initiatives will not be achieved, implementation of cost-saving and business restructuring initiatives may take more time or cost more than expected, the anticipated cost savings may be materially less than anticipated, and the restructuring may result in disruption in delivery of services to our customers; (u) u.s. and global instability and uncertainty arising from events outside of our control; and (v) the impact of cost inflation and rising interest rates. . the company cautions investors that actual future results could differ materially from those described in the forward-looking statements and that other factors may in the future prove to be important in affecting the company’s results, performance, prospects, or opportunities. new factors emerge from time to time and it is not possible for management to predict all such factors, nor can it assess the impact of each factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. more information concerning potential factors that could affect future financial results is included in the company’s annual report on form 10-k for the fiscal year ended february 26, 2022 and in subsequent filings with the u.s. securities and exchange commission. _________________________________ 1 adjusted earnings and adjusted earnings per share are non-gaap financial measures. see use and reconciliation of non-gaap financial measures later in this press release for more information and a reconciliation to the most directly comparable gaap measures. 2 adjusted operating income is a non-gaap financial measure. see use and reconciliation of non-gaap financial measures later in this press release for more information and a reconciliation to the most directly comparable gaap measures. apogee enterprises, inc. consolidated condensed statements of income (unaudited) three months ended six months ended (in thousands, except per share amounts) august 27, 2022 august 28, 2021 % change august 27, 2022 august 28, 2021 % change net sales $ 372,109 $ 325,797 14 % $ 728,744 $ 651,803 12 % cost of sales 287,173 277,795 3 % 558,191 536,091 4 % gross profit 84,936 48,002 77 % 170,553 115,712 47 % selling, general and administrative expenses 52,864 51,070 4 % 105,265 102,739 2 % operating income (loss) 32,072 (3,068 ) (1,145 )% 65,288 12,973 403 % interest expense, net 1,698 1,072 58 % 2,904 2,310 26 % other expense (income), net 173 (105 ) (265 )% 1,483 209 610 % earnings (loss) before income taxes 30,201 (4,035 ) (848 )% 60,901 10,454 483 % income tax (benefit) expense (7,188 ) (1,919 ) 275 % 781 1,753 (55 )% net earnings (loss) $ 37,389 $ (2,116 ) (1,867 )% $ 60,120 $ 8,701 591 % earnings (loss) per share - basic $ 1.71 $ (0.08 ) (2,238 )% $ 2.72 $ 0.34 700 % earnings (loss) per share - diluted $ 1.68 $ (0.08 ) (2,200 )% $ 2.66 $ 0.34 682 % weighted average basic shares outstanding 21,860 25,140 (13 )% 22,129 25,271 (12 )% weighted average diluted shares outstanding 22,245 25,140 (12 )% 22,563 25,637 (12 )% cash dividends per common share $ 0.2200 $ 0.2000 10 % $ 0.4400 $ 0.4000 10 % business segment information (unaudited) three months ended six months ended (in thousands) august 27, 2022 august 28, 2021 % change august 27, 2022 august 28, 2021 % change net sales architectural framing systems $ 172,867 $ 136,973 26 % $ 336,159 $ 273,741 23 % architectural services 106,732 96,370 11 % 210,120 187,102 12 % architectural glass 77,352 79,373 (3 )% 153,617 162,404 (5 )% large-scale optical 25,166 23,543 7 % 50,328 47,771 5 % intersegment eliminations (10,008 ) (10,462 ) (4 )% (21,480 ) (19,215 ) 12 % net sales $ 372,109 $ 325,797 14 % $ 728,744 $ 651,803 12 % operating income (loss) architectural framing systems $ 20,512 $ 8,381 145 % $ 44,177 $ 16,752 164 % architectural services 5,490 7,139 (23 )% 8,417 11,365 (26 )% architectural glass 6,457 (16,995 ) (138 )% 11,626 (14,867 ) (178 )% large-scale optical 5,991 5,483 9 % 12,489 11,330 10 % corporate and other (6,378 ) (7,076 ) (10 )% (11,421 ) (11,607 ) (2 )% operating income (loss) $ 32,072 $ (3,068 ) (1,145 )% $ 65,288 $ 12,973 403 % apogee enterprises, inc. consolidated condensed balance sheets (unaudited) (in thousands) august 27, 2022 february 26, 2022 assets cash and cash equivalents $ 22,065 $ 37,583 restricted cash 8,684 — current assets 393,469 300,309 net property, plant and equipment 232,766 249,995 other assets 291,990 299,976 total assets $ 948,974 $ 887,863 liabilities and shareholders' equity current liabilities 233,383 231,946 current debt — 1,000 long-term debt 250,834 162,000 other liabilities 108,017 106,718 shareholders' equity 356,740 386,199 total liabilities and shareholders' equity $ 948,974 $ 887,863 apogee enterprises, inc. consolidated condensed statement of cash flows (unaudited) six months ended (in thousands) august 27, 2022 august 28, 2021 net earnings $ 60,120 $ 8,701 depreciation and amortization 21,448 25,808 share-based compensation 3,394 3,261 asset impairment on property, plant, and equipment — 15,403 gain on disposal of assets (695 ) (1,355 ) other, net 14,538 2,234 changes in operating assets and liabilities: receivables (65,760 ) 15,520 inventories (17,636 ) (3,607 ) costs and earnings on contracts in excess of billings 840 3,212 accounts payable and accrued expenses (8,226 ) (10,895 ) billings in excess of costs and earnings on uncompleted contracts 21,051 (2,144 ) refundable and accrued income taxes (20,486 ) 1,981 operating lease liability (6,684 ) (6,240 ) other, net (4,547 ) 3,028 net cash (used) provided by operating activities (2,643 ) 54,907 capital expenditures (9,255 ) (10,121 ) proceeds from sales of property, plant and equipment 4,122 1,292 other, net 450 66 net cash used by investing activities (4,683 ) (8,763 ) borrowings on line of credit 409,880 — repayment on debt (151,000 ) (2,000 ) payments on line of credit (171,000 ) — payments on debt issuance costs (687 ) — proceeds from exercise of stock options — 4,115 repurchase and retirement of common stock (74,312 ) (22,419 ) dividends paid (9,602 ) (10,060 ) other, net (2,815 ) (1,853 ) net cash provided (used) by financing activities 464 (32,217 ) (decrease) increase in cash, cash equivalents and restricted cash (6,862 ) 13,927 effect of exchange rates on cash 28 617 cash, cash equivalents and restricted cash at beginning of year 37,583 47,277 cash, cash equivalents and restricted cash at end of period $ 30,749 $ 61,821 apogee enterprises, inc. reconciliation of non-gaap financial measures adjusted net earnings and adjusted earnings per diluted common share unaudited three months ended six months ended (in thousands) august 27, 2022 august 28, 2021 august 27, 2022 august 28, 2021 net earnings (loss) $ 37,389 $ (2,116 ) $ 60,120 $ 8,701 worthless stock deduction(1) (13,702 ) — (13,702 ) — restructuring costs(2) — 20,814 — 20,814 income tax impact on above adjustments(3) — (5,203 ) — (5,203 ) adjusted net earnings $ 23,687 $ 13,495 $ 46,418 $ 24,312 three months ended six months ended august 27, 2022 august 28, 2021 august 27, 2022 august 28, 2021 earnings (loss) per diluted common share $ 1.68 $ (0.08 ) $ 2.66 $ 0.34 worthless stock deduction(1) (0.62 ) — (0.61 ) — restructuring costs(2) — 0.82 — 0.81 income tax impact on above adjustments(3) — (0.20 ) — (0.20 ) adjusted earnings per diluted common share $ 1.06 $ 0.53 $ 2.06 $ 0.95 shares outstanding for eps 22,245 25,140 22,563 25,637 per share amounts are computed independently for each of the items presented so the sum of the items may not equal the total amount (1) adjustment related to income tax benefit from worthless stock loss deduction related to the sotawall business. (2) adjustment related to previously announced decision to exit certain operations in the architectural glass segment and reorganize operations within the architectural framing systems segment, including $15.4 million of asset impairment charges, $4.3 million of employee termination costs and $1.1 million of other costs associated with these restructuring plans. (3) income tax impact calculated using an estimated statutory tax rate of 25%, which reflects the estimated blended statutory tax rate for the jurisdiction in which the charge or income occurred. adjusted operating income and adjusted operating margin (unaudited) three months ended august 27, 2022 framing systems segment glass segment corporate consolidated (in thousands) operating income operating margin operating income operating margin operating loss operating income operating margin operating income (loss) $ 20,512 11.9 % $ 6,457 8.3 % $ (6,378 ) $ 32,072 8.6 % three months ended august 28, 2021 framing systems segment glass segment corporate consolidated (in thousands) operating income operating margin operating (loss) income operating margin operating (loss) income operating (loss) income operating margin operating income (loss) $ 8,381 6.1 % $ (16,995 ) (21.4 )% $ (7,076 ) $ (3,068 ) (0.9 )% restructuring costs (1) 2,048 1.5 17,391 21.9 1,375 20,814 6.3 adjusted operating income (loss) $ 10,429 7.6 % $ 396 0.5 % $ (5,701 ) $ 17,746 5.4 % (1) adjustment related to previously announced decision to exit certain operations in the architectural glass segment and reorganize operations within the architectural framing systems segment, including $15.4 million of asset impairment charges, $4.3 million of employee termination costs and $1.1 million of other costs associated with these restructuring plans. six months ended august 27, 2022 framing systems segment glass segment corporate consolidated (in thousands) operating income operating margin operating income operating margin operating loss operating income operating margin operating income (loss) $ 44,177 13.1 % $ 11,626 7.6 % $ (11,421 ) $ 65,288 9.0 % six months ended august 28, 2021 framing systems segment glass segment corporate consolidated (in thousands) operating income operating margin operating (loss) income operating margin operating (loss) income operating income operating margin operating income (loss) $ 16,752 6.1 % $ (14,867 ) (9.2 )% $ (11,607 ) $ 12,973 2.0 % restructuring costs (1) 2,048 0.8 17,391 10.7 1,375 20,814 3.2 adjusted operating income (loss) $ 18,800 6.9 % $ 2,524 1.6 % $ (10,232 ) $ 33,787 5.2 % (1) adjustment related to previously announced decision to exit certain operations in the architectural glass segment and reorganize operations within the architectural framing systems segment, including $15.4 million of asset impairment charges, $4.3 million of employee termination costs and $1.1 million of other costs associated with these restructuring plans. adjusted ebitda reconciliation (unaudited) three months ended six months ended (in thousands) august 27, 2022 august 28, 2021 august 27, 2022 august 28, 2021 net earnings (loss) $ 37,389 $ (2,116 ) 60,120 8,701 income tax (benefit) expense (7,188 ) (1,919 ) 781 1,753 interest expense, net 1,698 1,072 2,904 2,310 depreciation and amortization 10,599 12,828 21,448 25,808 ebitda 42,498 9,865 85,253 38,572 restructuring(1) — 20,814 — 20,814 adjusted ebitda $ 42,498 $ 30,679 $ 85,253 $ 59,386 (1) adjustment related to previously announced decision to exit certain operations in the architectural glass segment and reorganize operations within the architectural framing systems segment, including $15.4 million of asset impairment charges, $4.3 million of employee termination costs and $1.1 million of other costs associated with these restructuring plans.
