CONFORMED COPY
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended November 30, 1996May 31, 1997 Commission File Number 0-6365
----------------- ---------------------------- ----------
APOGEE ENTERPRISES, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Minnesota 41-0919654
-------------------------------------------------- ---------------------
(State of Incorporation) (IRS Employer ID No.)
7900 Xerxes Avenue South, Suite 1800, Minneapolis, Minnesota 55431
-------------------------------------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number (612) 835-1874
-----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
-------- -----------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.
Class Outstanding at December 31, 1996June 30, 1997
- -------------------------------- ------------------------------------------------------------
Common Stock, $.33-1/3 Par Value 13,712,50027,756,713
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED NOVEMBER 30,MAY 31, 1997
Description Page
----------- ----
PART I
- ------
Item 1. Financial Statement
Consolidated Balance Sheets as of May 31, 1997
and March 1, 1997 3
Consolidated Results of Operations for the
Quarters Ended May 31, 1997 and June 1, 1996
Description Page
----------- ----
PART I
- ------
Item 1. Financial Statements
Consolidated Balance Sheets as of November 30,4
Consolidated Statements of Cash Flows for the
Quarters Ended May 31, 1997 and June 1, 1996
and March 2, 1996 3
Consolidated Results of Operations for the
Three Months and Nine Months Ended
November 30, 1996 and December 2, 1995 4
Consolidated Statements of Cash Flows for
the Nine Months Ended November 30, 1996 and December 2, 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-10
PART II Other Information
- -------
Item 6. Exhibits 11
Exhibits 11
Exhibit Index 13
Exhibit 11 14
Exhibit 27 Financial Data Schedule (EDGAR filing only)
-2-2
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
November 30,May 31, 1997 March 2,
1996 19961, 1997
------------ ---------------------
ASSETS
Current assets
Cash and cash equivalents (including
restricted funds of $61$ 9,722 $ 4,065
$-0- and $885,$208, respectively) $ 4,109 $ 7,389
Receivables, net of allowance for 205,820 204,259
doubtful accounts
198,705 158,368
Inventories 61,584 54,48462,343 58,261
Costs and earnings in excess of
billings on uncompleted 17,288 25,653
contracts
23,072 26,276Refundable income taxes - 1,004
Deferred tax assets 5,253 6,6895,317 4,486
Other current assets 6,115 5,3536,546 7,466
-------- --------
Total current assets 298,838 258,559307,036 305,194
-------- --------
Property, plant and equipment, net 110,947 78,485121,824 118,799
Marketable securities - insurance subsidiary 17,172 12,231available for 26,496 19,656
sale
Investments in and advances to affiliated companies - 15,821
Investments 868 612838 738
Intangible assets, at cost less 52,113 52,431
accumulated amortization 24,077 10,332
Deferred tax assets 8,220 6,9701,997 1,090
Other assets 2,344 3,1262,998 3,036
-------- --------
Total assets $462,466 $386,136$513,302 $500,964
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 63,04666,842 $ 57,67873,325
Accrued expenses 83,577 52,43058,122 61,435
Billings in excess of costs and
earnings on uncompleted 40,003 40,154
contracts 42,517 19,470
Accrued income taxes 10,840 7,6349,063 -
Current installments of long-term debt 5,254 5,2651,707 1,707
-------- --------
Total current liabilities 205,234 142,477175,737 176,621
-------- --------
Long-term debt 72,413 79,102140,379 127,640
Other long-term liabilities 28,010 24,180
Minority interest - 1,45621,670 24,554
Shareholders' equity
Common stock, $.33-1/$.33 1/3 par value;
authorized 50,000,000
shares; issued and outstanding 13,683,0009,277 9,294
27,830,412 and 13,517,00027,882,000
shares, respectively 4,561 4,506
Additional paid-in capital 23,671 20,44536,907 34,686
Retained earnings 129,662 113,970
Unamortized deferred130,184 129,424
Cumulative translation adjustment and (852) (1,255)
unearned compensation (1,500) -
Unrealized gain on marketable securities 45 -
Foreign currency translation 370 -
-------- --------
Total shareholders' equity 156,809 138,921175,516 172,149
-------- --------
Total liabilities and shareholders' $513,302 $500,964
equity $462,466 $386,136
======== ========
See accompanying notes to consolidated financial statements.
-3-3
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHSQUARTERS ENDED NOVEMBER 30,May 31, 1997 and JUNE 1, 1996 AND DECEMBER 2, 1995
(Thousands of Dollars Except Share and Per Share Amounts)
Three MonthsQuarter Ended
Nine Months Ended
---------------------------- ----------------------------
November 30, December 2, November 30, December 2,---------------------------
May 31, 1997 June 1, 1996
1995 1996 1995------------- ------------
----------- ------------ -----------
Net sales $ 228,781244,782 $ 215,487 $ 710,543 $ 656,705228,608
Cost of sales 188,664 187,223 591,723 564,692
---------- ---------- ----------- ----------199,101 192,080
------------- ------------
Gross profit 40,117 28,264 118,820 92,01345,681 36,528
Selling, general and administrative 32,353 26,171
expenses
27,634 20,027 81,456 65,280
---------- ---------- ----------- ----------------------- ------------
Operating income 12,483 8,237 37,364 26,73313,328 10,357
Interest expense, net 1,912 1,145 6,168 4,608
Other income, net - - - (161)
---------- ---------- ----------- ----------2,304 2,355
------------- ------------
Earnings before income taxes and 11,024 8,002
other items below
10,571 7,092 31,196 22,286
Income taxes 3,667 2,509 11,250 8,2074,000 2,954
Equity in (net earnings)net loss of affiliated companies - (305)250 60
(156)companies
Minority interest (698) (284) (672) (64)
----------- ---------- ----------- ----------- 12
------------- ------------
Net earnings $ 7,6026,774 $ 5,172 $ 20,558 $ 14,299
========== ========== ========== ==========4,976
============= ============
Earnings per share $ 0.540.24 $ 0.38 $ 1.47 $ 1.05
========== ========== ========== ==========0.18
============= ============
Weighted average number of common
shares and common 28,509,000 27,662,000
share equivalents outstanding
14,027,000 13,599,000 13,955,000 13,620,000
========== ========== ========== ======================= ============
Cash dividends per common share $ .0900.045 $ .085 $ .260 $ .245
========== ========== ========== ==========0.043
============= ============
See accompanying notes to consolidated financial statements.
-4-4
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHSQUARTERS ENDED NOVEMBER 30,MAY 31, 1997 AND JUNE 1, 1996 AND DECEMBER 2, 1995
(Thousands of Dollars)
OPERATING ACTIVITIES1997 1996 1995
-------- --------
OPERATING ACTIVITIES
Net earnings $ 20,5586,774 $ 14,2994,976
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization 17,395 12,6155,766 6,135
Provision for losses on accounts 408 485
receivable 1,492 421
Deferred income tax 486 (1,800)
Gain on sale of Nanik Window Covering Group(benefit) (1,738) 281
expense
Minority interest - (4,709)13
Equity in loss (net earnings)net earnings of 250 60
affiliated companies
60 (156)
Minority interest (672) (64)
Other, net 1,071 (1,172)1,742 (403)
Changes in operating assets and
liabilities, net of effect of
acquisitions:acquisitions
Receivables (36,936) (8,336)(1,342) (6,090)
Inventories (4,563) (3,223)(3,970) (4,039)
Costs and earnings in excess of
billings on uncompleted 8,443 3,856
contracts 3,204 (7,144)
Other current assets (356) 1,506933 (860)
Accounts payable and accrued (10,145) 19,173
expenses (1) 28,615 4,018
Billings in excess of costs and
earnings on uncompleted (151) 5,871
contracts 23,047 1,273
Accrued income taxes 2,897 (552)9,967 1,948
Other long-term liabilities 3,830 709(4,297) (2,056)
-------- --------
Net cash provided by 12,640 29,350
operating activities 60,128 7,685 -------- --------
INVESTING ACTIVITIES
Capital expenditures (22,512) (16,677)(8,356) (6,743)
Acquisition of businesses, net of cash (500) (21,186)
acquired (1)
(28,969) (446)Increase in marketable securities (6,821) (761)
Investments in and advances to (350) -
affiliated companies - (1,318)
Increase in marketable securities (4,896) -
Proceeds from sale of Nanik Window Coverings Group - 18,250
Proceeds from sale of property and 77 1,826
equipment 1,889 313
Other, net (649) (65)(62) (483)
-------- --------
Net cash (used in) provided byused in investing (16,012) (27,347)
activities (55,137) 57
-------- --------
FINANCING ACTIVITIES
Increase in notes payable - 5,485
Payments on long-term debt (6,700) (5,280)(518) (688)
Proceeds from issuance of long-term debt 13,257 4,600
Repurchase and retirement of common (5,289) -
stock
Proceeds from issuance of common stock 3,380 1,015
Purchase and retirement of common stock (1,396) (240)2,825 2,506
Dividends paid (3,555) (3,304)(1,246) (1,158)
-------- --------
Net cash (used in)provided by 9,029 5,260
financing activities
(8,271) (2,324)
-------- --------
(Decrease)/increaseIncrease in cash (3,280) 5,4185,657 7,263
Cash and cash equivalents at beginning of period 4,065 7,389 2,894
-------- --------
Cash and cash equivalents at end of period $ 4,1099,722 $ 8,31214,652
======== ========
(1) TheIn 1996, the estimated cost as of November 30, 1996, for the Marcon and Viratec acquisition,
subsequently determined in January 1997, was included in investing
activities isand was offset by an increase in accrued expenses included in operating
activities.
See accompanying notes to consolidated financial statements.
-5-5
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation
---------------------------
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as
of November 30, 1996May 31, 1997 and March 2, 1996,1, 1997, and the results of operations for the
three months and nine months ended November 30, 1996 and December 2, 1995
and cash
flows for each of the nine monthsthirteen week periods ended November 30, 1996May 31, 1997 and December 2,
1995.June 1,
1996. Certain prior year amounts have been reclassified to conform to the
current period presentation.
The financial statements and notes are presented as permitted by Form 10-Q
and do not contain certain information included in the Company's annual
consolidated financial statements and notes.
The results of operations for the nine-month periodthirteen week periods ended November 30,May 31, 1997
and June 1, 1996 are not necessarily indicative of the results to be
expected for the full year.
Accounting period
-----------------
The Company's fiscal year ends on the Saturday closest to February 28. Each
interim quarter ends on the Saturday closest to the end of the months of
May, August and November.
The first quarter2. Earnings per share
Share and per share amounts have been restated to reflect the two-for-one
stock split, effected in the form of fiscal 1997 consisted of 13
weeks, while the first quarter of fiscal 1996 had 14 weeks. Consequently,
fiscal 1997 is a 52 week year while fiscal 1996 is a 52 week year.
2.100% stock dividend, issued in
February 1997.
3. Inventories
Inventories consist of the following:
November 30,May 31, 1997 March 2,
1996 19961, 1997
------------ ---------------------
Raw materials and supplies $13,154 $10,402$19,274 $14,760
In process 5,243 3,9644,106 3,863
Finished goods 43,187 40,118
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$61,584 $54,484
======= =======38,963 39,638
------------ -------------
$62,343 $58,261
============ =============
3. Subsequent events
On January 13, 1997, the Company and Marvin Lumber and Cedar Company
announced that they agreed to a comprehensive settlement of all claims with
respect to the Marcon Coatings and Viratec Thin Films transaction.
-6-6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SALES AND EARNINGS
- ------------------
NetSales and Earnings
First quarter earnings for the third quarter rose 47 percent36% to $7.6$6.8 million, or 5424 cents per share, from
$5.2$5.0 million, or 3818 cents per share, a year earlier.ago. Last year's per share figure
reflects the two-for-one stock split, effected in the form of a 100% stock
dividend, issued to shareholders in February, 1997. Sales for
the period rose 6 percent to $228.8 million, up from $215.5were $244.8 million,
a year ago.
Year-to-date net earnings and sales have risen by 44 percent and 8 percent,
respectively. Earnings per share grew to $1.47, compared to $1.057% increase over the $228.6 million reported a year ago.
The following table presents the percentage change in sales and operating income data for the Company's
three segments and on a consolidated basis for three and nine
monthsthe first quarter, when compared
to the corresponding periodsperiod a year ago. Operating results are discussed below.
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------- -------------------
NOV. 30, DEC. 2, % NOV. 30, DEC. 2, %Quarter Ended
------------------------
May 31, June 1, Percentage Change
1997 1996 1995 Change 1996
1995 Change
=========================== ===========================
SALES========== =========== ===================
Sales
Glass technologies $ 52,045 $ 44,269 18
Auto glass 90,257 78,418 15
Building products & services 107,347 116,353 (8)% 338,549 343,398 (1)%104,723 109,190 (4)
Eliminations (2,243) (3,269) (31)
---------- ----------
Total $ 244,782 $ 228,608 7
========== ==========
Operating Income (Loss)
Glass technologies 50,133 39,797 26 % 143,876 113,429 27 %$ 5,277 $ 4,023 31
Auto glass 73,553 62,774 17 % 236,400 210,306 12 %
Eliminations (2,252) (3,437) (34)% (8,282) (10,428) (21)%
--------------------------- --------------------------
Total 228,781 215,487 6 % 710,543 656,705 8 %
=========================== ==========================
OPERATING INCOME6,345 6,205 2
Building products & services 677 (1,044) N/M 3,363 (3,347) N/M
Glass technologies 6,535 5,598 17 % 14,462 12,565 15 %
Auto glass 3,891 3,343 16 % 18,865 17,006 11 %1,734 $ 561 209
Corporate and other 1,380 340 N/M 674 509 (32)%
--------------------------- --------------------------(28) (432) (94)
---------- ----------
Total 12,483 8,237 52 % 37,364 26,733 40 %
=========================== ==========================$ 13,328 $ 10,357 29
========== ==========
Glass Technologies (GT)
Apogee's Glass Technologies segment reported another quarter of improved sales
and operating earnings in the first quarter. Sales increased by 18%, while
earnings jumped 31%. Both improvements were primarily due to the development of
significantly higher sales for Viratec Thin Films' coating of curved glass
surfaces of cathode ray tubes (CaRT). CaRT sales more than doubled for the
quarter and allowed the unit to report a small operating profit for that
business. Viratec's flat glass coating business had a double-digit sales gain
and solid earnings for the period.
Quarterly earnings at Viracon, the segment's largest business, were flat due
partly to an unusually large number of customer shipments delayed to following
quarters, as sales rose by just 4%. Customer demand for Viracon's products
remains strong and the shipments delayed in the first quarter should boost
future results. The segment's Tru Vue unit also improved its sales and earnings
in its seasonally soft first quarter.
The Glass Technologies segment expects to experience positive quarterly earnings
comparisons for the remainder of the year as Viracon anticipates continued
strong demand for fabricated architectural glass products and Viratec is
experiencing strong order rates for its coated glass products.
Auto Glass (AG)
AG reported 15% sales growth in the first quarter, with just over half of the
increase due to the Portland Glass units acquired in the fourth quarter of
fiscal 1997. However, operating income rose only 2% to $6.3 million as retail
margins were affected by competitive industry conditions and the costs of long-
term business initiatives, including both marketing efforts and information
systems development. The segment's Glass Depot and Curvlite units produced good
sales and earnings for the period.
7
At the close of the first quarter, Harmon had 323 retail locations in over 40
states. The segment also had 66 wholesale depots and 8 Midas Muffler franchises.
The segment continues to explore opportunities to expand the reach of its
businesses.
Although AG expects to produce solid operating results for the year, the
uncertainty of industry unit sales and pricing continues to make it difficult to
project operating earnings for the remainder of the fiscal 1998.
Building Products & Services (BPS)
- ----------------------------------
BPS reported its fourth consecutiveanother quarter of operating income, versus an
operating lossimproved year-over-year results. As expected,
net sales decreased four percent to $104.7 million, representing just 43% of
consolidated net sales. This decline reflected lower revenues at the segment's
New Construction unit, partly offset by the Detention/Security unit's 28% sales
increase. US and Asian New Construction revenues fell by 28% and 27%,
respectively, while revenues in the same periodEurope rose by 13%.
Operating earnings more than tripled to $1.7 million, up from $561,000 a year
ago. The segment'sDetention/Security group leveraged its sales improvement into a solid
profit versus a small loss in the comparable quarter a year ago. Domestic New
Construction operations reported a nominal profit compared to a loss in last
year's first quarter. International curtainwall operations experienced a $1.4
million operating profit wasloss, primarily due to the solid operatingpoor results of the Detention/Security, Full Service andat our French unit. The
Wausau Architectural Products group contributed a slightly improved profit for
the period.
The New Construction business units which produced nearly halfcontinued to be the primary focus of management
efforts to improve profitability. During the segment's third quarter, sales. The segment's resultsadministrative and
engineering staffing levels were offset by a $2 million
loss suffered by BPS'sreduced to more appropriately match the unit's
current backlog and anticipated revenue base. New Construction also took steps
to begin closure of its Asian contract offices. Management is exploring various
strategic alternatives for its New Construction unit, asparticularly for its
European operation. Although European operations reported
disappointing resultsare likely to continue to
experience losses in the third quarter. Lower revenues were also experienced
bynext few quarters, the New Construction unitCompany believes that earnings
from the segment's other businesses will more than offset such losses and resulted in a decrease when comparedthe
segment will continue to show steady, if modest, earnings improvement.
Backlog
At May 31, 1997, Apogee's consolidated backlog was $373 million, up 4% from
fiscal year end, but down 14% from a year ago. The backlogs of the Building
Products & Services segment's operations, which represent over 80% of Apogee's
consolidated backlog, were down slightly from March 1, 1997, but were 25% lower
revenues forthan twelve months earlier. Asian and European New Construction backlogs were
expected and reflectboth down by over 50% year-to year, while the strict bidding disciplines instituted during fiscal 1995. BPS believes the same
disciplines and project management which has produced four consecutive quartersUS backlog was essentially
unchanged from a year ago. Glass Technologies' Viracon operation reported a
higher backlog of earnings improvement should enable it to report favorable comparisons through
fiscal year end.
Glass Technologies (GT)
- -----------------------
As a result of the litigation and court proceedings described in the next
paragraph, Marcon Coatings (Marcon)sales for its architectural glass products and Viratec Thin
Films (Viratec) were
consolidated in Apogee's financial statements beginning with this fiscal year,
and are reflected in the GT segment. Through fiscal 1996, Marcon and Viratec
were accounted by the equity method, with the 50% equity in Marcon's and
Viratec's net earnings included in "Equity in net earnings of affiliated
companies" in Apogee's Consolidated Results of Operations.
In November 1995, Apogee's 50% joint venture partner (JV Partner) in
Marcon/Viratec commenced litigation against Apogee, alleging claims for damages
and seekingFilms' backlog more than doubled, partly due to have the Minnesota State Court (Court)higher order Apogee to sell its
50% interest to the JV Partner. Apogee filed counterclaims seeking to have the
JV Partner's 50% interest sold to Apogee. In March 1996, the Court ordered the
JV partner to sell shares representing its 50% interest in Marcon/Viratec to
Apogee upon payment by Apogee of fair value for those shares as determined by
the Court.
On January 13, 1997, the parties announced that they agreed to a comprehensive
settlement of all claims with respect to the Marcon/Viratec matter described
above. Apogee agreed to pay $41 million, in cash, to the JV Partner on or before
-7-
January 27, 1997, in exchangelevels for the JV Partner's 50% interest, and the parties
agreed irrevocably to release each other from all outstanding claims, other than
certain trade accounts payable.
GT demonstrated significant growth in operating income and sales for the third
quarter when compared to a year ago. Driven by solid bookings at Viracon, GT's
high-performance architectural glass fabricator, and the inclusion of Viratec
sales, the segment reported another quarter of revenue growth. Strong demand for
Viracon's architectural products and producing at near full capacity levels led
to double-digit operating income growth for the quarter. Viracon increased
production capacity by 20% this summer and plans to meet the continued demand
for its products by expanding its existing production an additional 20% by March
1997 and also anticipates a new plant opening in the spring of 1998.
Viratec's flat glass business operated at capacity levels and plans to expand
its product lines in fiscal 1998. The unit's direct coating business continued
to experience soft product demand which led to low operating earnings for the
unit. The segment's custom picture framing glass unit, Tru Vue, reported another
quarter of operating growth.
GT anticipates strong product demand to lead to further profit growth for its
Viracon and Tru Vue units through fiscal year end, while Viratec expects to face
continued insufficient product demand at least through early 1997.
Auto Glass (AG)
- ---------------
AG recorded substantial operating income and revenue gains in the third quarter
compared to a year ago. Same-store sales were up 7% compared to the same period
a year ago. The gains were due to a combination of increased unit demand for
automotive replacement glass and a firming in prices at both its automotive
replacement glass manufacturing business and its distribution and installation
units. The segment continues to invest in information technology to provide
leading-edge claims processing systems to its insurance company customers while
creating operating efficiencies for all of its businesses.
On January 3, 1997, AG's Harmon AutoGlass (Harmon) unit acquired Portland Glass
in a stock-for-stock transaction. Portland Glass is a large regional auto glass
retailer with 46 auto glass shops in the Northeast. The transaction will add
four states to Harmon's geographic coverage.
As the segment heads into its seasonally slowest sales period, it anticipates
lower earning levels than experienced in the first three quarters of the fiscal
year.
Backlog
- -------
Apogee's consolidated backlog stood at $362 million on November 30, 1996, down
17% from the $438 million reported at the end of last year's third quarter.
Disciplined project selection has contributed to the lower order rate, though
BPS's New Construction unit was awarded $50 million in new U.S. projects during
the quarter.
-8-CaRT
business.
8
Consolidated
- ------------
The following table compares quarterly results with year agoyear-ago results, as a
percentage of sales, for each caption.
Three Months Nine Months
Ended Ended
------------------------- -----------------------
Nov. 30, Dec. 2, Nov. 30, Dec. 2,
1996 1995 1996 1995
------------ ----------- ----------- ----------Percentage of Sales
--------------------
1998 1997
--------- ---------
Net sales 100.0 100.0
100.0 100.0
Cost of sales 82.5 86.9 83.3 86.0
------------ ----------- ----------- ----------81.3 84.1
--------- ---------
Gross profit 17.5 13.1 16.7 14.018.7 15.9
Selling, general and administrative
expenses 12.1 9.3 11.5 9.9
------------ ----------- ----------- ----------13.2 11.4
--------- ---------
Operating income 5.5 3.8 5.3 4.15.4 4.5
Interest expense, net 0.8 0.5 0.9 0.7
Other income, net - - - -
------------ ----------- ----------- ----------1.0
--------- ---------
Earnings before income taxes and other items below 4.6 3.3 4.4 3.44.5 3.5
Income taxes 1.6 1.2 1.6 1.21.3
Equity in (net earnings)net loss of affiliated
companies - (0.1) -0.1 -
Minority interest (0.3) (0.1) (0.1) - ------------ ----------- ----------- -----------
--------- ---------
Net earnings 3.3 2.4 2.92.8 2.2
============ =========== =========== ==========
Income========= =========
Effective tax rate 35% 35% 36% 37%
============ =========== =========== ==========36.3% 36.9%
For the three months ended November 30, 1996, gross profit,On a consolidated basis, cost of sales, as a percentage of net sales, improved overfell to
its lowest figure this decade. This reflected productivity gains at BPS's
Detention unit, all of GT's operating units, particularly Viratec, and the year-ago figures due to firm marginsAG's
Curvlite unit, as well as the change in sales mix reflecting lower New
Construction revenues. These factors were partly offset by higher material costs
experienced at
GTby the AG segment's Retail and a shift in revenue mix at AG.Distribution operations.
Selling, general and administrative (SG&A) expenses (SG &A) rose reflecting theby $6.2 million, or
24%. The increase included higher salaries, commissions and profit sharingbonus expenses, relating to higherthe
latter two items associated with increased sales activity and earnings growthprofitability, as well as
severance costs associated with certain management changes and higherthe reduction of
administrative and engineering staffing levels at BPS. Apogee expects that SG &
A costs related to information systems upgrades and conversions throughoutfor the Company.
Year-to-date netremainder of the year will exceed last year's levels, but by
lower amounts than experienced in the first quarter. Net interest expense rose despitewas
essentially unchanged from last year. Slightly lower interest rates offset the
increase in interest-bearing liabilities.
The effective income tax rate was slightly lower than a decline in borrowing levels.
The increase reflectsyear ago. Among other
items, Apogee's tax rate continued to reflect the accrualbenefit of interest connected with the Viratecsignificant export
sales and Marcon matter discussed on previous pages.favorable international tax activity.
Liquidity and Capital Resources
- -------------------------------
The November 30, 1996 balance sheet andAt quarter end, the statement of cash flows for the nine
months ended reflect theCompany's working capital needs associated with the higher sales
levelswas marginally above that reported
at March 1, 1997. An $8.4 million reduction in costs and the consolidation of the Viratec and Marcon and the related
acquisition costs. Accounts receivable and Billingsearnings in excess of
costsbillings on uncompleted contracts was partly offset by small increases in
receivables and earnings increased from the beginning of the year due to higher business
activity and some project payment delays experienced at BPS. Inventory levels
were also affected by the higher sales level and rose duringinventories, resulting in a $5.7 million increase in cash for
the quarter.
Bank borrowings stood at $137.8 million at May 31, 1997, $13.3 million higher
than at March 1, 1997. The Company plansadditional borrowings were required to fundcover the $41 million purchasegap
by which capital spending, the buyback of Viratec320,000 common shares pursuant to the
Company's previously announced share repurchase program and Marcon, as noted
in previous discussion, by useworking capital
requirements exceeded net earnings and noncash charges. At May 31, 1997, long-
term debt stood at 42% of its currently available credit facilities.total capitalization.
Additions to property, plant and equipment totaled $22.5 million for the first
nine months of the fiscal year.approximately $8.4 million.
Major components of these additionsitems included expenditures for GT's capacity expansiondata management, information processing
and information and communications
systems throughout the Company.
During the quarter, the Company raised its quarterly cash dividend 6%, to 9.0
cents per share.manufacturing capacity. The AG segment also completed one acquisition of
retail auto glass replacement stores for $500,000.
9
Cautionary Statements
- ---------------------
A number of factors should be considered in conjunction with any discussion of
operations or results by the Company or its representatives and any forward-
looking discussion, as well as comments contained in press releases,
presentations to securities analysts or investors, or other communications by
the Company.
These factors are set forth in the cautionary statements filed as Exhibit 99 to
the Company's Form 10-K for the fiscal year ended March 2, 1996
and include, without limitation, cautionary statements
regarding (i)changes in economic and market conditions, factors related to
competitive pricing, commercial building market conditions, management of
growth, the integration of acquisitions, the realization of expected economies
gained through expansion and information systems technology, industry
conditions, including that the industries in which the business segments compete
are cyclical in nature and sensitive to changes in general economic conditions,
(ii) the
-9-
competitive environment in which the Company's business segments operate,
including that the industries are highly competitive and fairly mature, and (iii) the
Company's international operations which are subject to the general risks of
doing business abroad and of entering new markets. The Company wishes to caution
investors and other to review the statements set forth in Exhibit 99 and that
other factors may prove to be important in affecting the Company's business or
results of operations. These cautionary statements should be considered in
connection with this Form 10-Q, including the forward looking statements
contained in the Management's discussion and analysis of the Company's three
business segments. These cautionary statements are intended to take advantage of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995.
-10-10
PART II
OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
Exhibit 11. Statement of Determination of Common Shares and
Common Share Equivalents.
Exhibit 27. Financial Data Schedule (EDGAR filing only).
(b) Registrant filed a Current ReportThe Company did not file any reports on Form 8-K dated November 8, 1996,
updating information onduring the litigation matter discussed on pages 7 and 8.quarter for
which this report is filed.
11
CONFORMED COPY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APOGEE ENTERPRISES, INC.
Date: January 14,July 15, 1997 /s/Donald W. Goldfus
---------------- --------------------
Donald W. Goldfus
Chairman of the Board,
Chief Executive Officer and President
Date: July 15, 1997 /s/Terry L. Hall
-------------------------- ------------------------------------------------ ----------------
Terry L. Hall
Vice President of Finance and
Chief Financial Officer
Date: January 14, 1997 Percy C. Tomlinson Jr.
-------------------------- ----------------------------------
Percy C. Tomlinson Jr.
Treasurer and Secretary12
EXHIBITEXHIBITS INDEX
Exhibit Page
- ------- ----
Exhibit 11 Statement of Determination of Common Shares
and Common Share Equivalents 1314
Exhibit 27 Financial Data Schedule (EDGAR filing only)
14
13