“Second quarter results were outstanding, as we delivered record quarterly revenues, operating margin and earnings per share – revenues grew 16 percent to $279 million, the operating margin of 11.9 percent was up 260 basis points, and earnings per share of $0.77 increased 54 percent,” said Joseph F. Puishys, Apogee chief executive officer. “The strength we are seeing in our non-residential construction end markets is evident in the results from our architectural segments. All three architectural segments grew revenues and operating income, with operating margins all increasing more than 200 basis points.
“We continue to see strong non-residential construction market conditions and order activity, and have extensive visibility to future work, giving us confidence in our outlook for fiscal 2017 and beyond,” he said. “Backlog grew both sequentially and year on year in our architectural glass and framing systems segments combined. The decline in the consolidated backlog resulted from the inconsistent timing of committed architectural services segment projects progressing to signed contracts in the quarter. This business continues to have an impressive pipeline of active bids. As we’ve stated for some time, the architectural services projects business has uneven quarter-to-quarter revenues and backlog.
“With our strong operational performance in healthy commercial construction markets, we are once again increasing our earnings per share outlook range for fiscal 2017 to $2.80 to $2.90, up from $2.70 to $2.85,” said Puishys.
FY17 SECOND-QUARTER SEGMENT AND OPERATING RESULTS VS. PRIOR-YEAR PERIOD
• Revenues of $99.2 million were up 7 percent, on U.S. volume growth and improved pricing and mix.
• Operating income grew to $9.6 million, up 43 percent.
◦ Operating margin expanded 240 basis points to 9.7 percent, on improved productivity, and pricing and mix, as well as volume growth.
• Revenues of $77.7 million were up 49 percent, as project timing drove high revenue levels in the quarter.
• Operating income more than tripled to $6.2 million.
◦ Operating margin expanded 530 basis points to 8.0 percent, due to leverage on strong volume at better project margins and good project execution.
Architectural Framing Systems
• Revenues of $92.2 million were up 14 percent, on volume growth in all four businesses, along with improved pricing and mix.
• Operating income grew to $13.0 million, up 34 percent.
◦ Operating margin expanded 210 basis points to 14.1 percent, as a result of improved operational performance, volume growth and lower material costs.
Large-Scale Optical Technologies
• Revenues of $21.3 million were down 5 percent, due to timing of customer orders.
• Operating income of $5.0 million was down 10 percent.
◦ Operating margin was 23.7 percent, compared to 25.1 percent, due to lower volume and new market investments; operational performance remains strong.
• Backlog of $447.7 million was down 13 percent from $511.9 million in the prior-year period, and down 12 percent from the backlog of $509.7 million in the first quarter of fiscal 2017.
◦ Approximately $281 million, or 63 percent, of the backlog is expected to be delivered in the current fiscal year; and approximately $167 million, or 37 percent, in fiscal 2018.
• Cash and short-term investments, including restricted cash, totaled $94.6 million, compared to $90.6 million at the end of fiscal 2016.
• Non-cash working capital was $86.5 million, compared to $68.8 million at the end of fiscal 2016.
• Capital expenditures year to date were $31.5 million, compared to $19.4 million in the prior-year period.
• Debt was $20.4 million, compared to $20.4 million at the end of fiscal 2016. All the debt is long-term, low-interest industrial revenue bonds.
• Depreciation and amortization year to date was $16.0 million.
“For fiscal 2017, we expect continued top- and bottom-line growth, based on our backlog, commitments and bidding activity,” said Puishys. “We are increasing our earnings per share outlook range for the year to $2.80 to $2.90, from $2.70 to $2.85, as a result of solid operational performance and productivity driven by our Lean initiative, as well as continued market strength. We are maintaining our outlook for revenue growth of approximately 10 percent.
“Apogee expects mid-single digit U.S. commercial construction market growth in fiscal 2017, as market activity, the Architecture Billings Index, office employment and office vacancy rates all show positive momentum,” he said. “With our internal market visibility and external metrics moving in the right direction, we see sustained U.S. non-residential market growth at least through fiscal 2020.”
Puishys said that fiscal 2017 capital expenditures are anticipated to be approximately $70 million, increased from the prior outlook of $60 million, as Apogee invests primarily to increase capabilities and productivity. Gross margin is expected to be approximately 26.5 percent and operating margin approximately 11.3 percent.
“Longer term, we are reaffirming that our strategies to grow through new geographies, new products and new markets, along with our backlog, bidding activity and focus on better project selection, productivity and operational improvements, support our fiscal 2018 goals of a 12 to 13 percent operating margin on revenues of $1.2 to $1.3 billion,” Puishys said.
A webcast of the announcement will be archived for replay on the company’s web site. Go to http://www.apog.com and click on investors, then overview and then the webcast link on that page.