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 June 3, 1995 Commission File Number 0-6365
---------------- ----------
APOGEE ENTERPRISES, INC.
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(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
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(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 June 30, 1995
- -------------------------------- ----------------------------
Common Stock, $.33 1/3 Par Value 13,472,311
APOGEE ENTERPRISES, INC.
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED JUNE 3, 1995
Description Page
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PART I
- ------
Item 1. Financial Statements
Consolidated Balance Sheets as of June 3, 1995 and February 25,
1995 3
Consolidated Results of Operations for the Quarters Ended June 3,
1995 and May 28, 1994 4
Consolidated Statements of Cash Flows for the Quarters Ended
June 3, 1995 and May 28, 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7-9
PART II Other Information
- -------
Item 6. Exhibits 10
Exhibit Index 12
Exhibit 11 13
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
June 3, February 25,
1995 1995
-------- ------------
ASSETS
Current assets
Cash and cash equivalents (including restricted funds of
$874 and $885, respectively) $ 15,629 $ 2,894
Receivables, net of allowance for doubtful accounts 162,420 165,099
Inventories 59,982 54,559
Costs and earnings in excess of billings on uncompleted
contracts 18,948 19,606
Deferred tax assets 10,584 10,384
Other current assets 3,040 4,278
-------- --------
Total current assets 270,603 256,820
-------- --------
Property, plant and equipment, net 75,216 75,028
Investments in and advances to
affiliated companies 15,726 15,016
Intangible assets, at cost less
accumulated amortization 8,263 8,383
Deferred tax assets 5,282 5,082
Other assets 1,868 1,599
-------- --------
Total assets $376,958 $361,928
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 51,464 $ 53,793
Accrued expenses 38,713 41,168
Billings in excess of costs and earnings
on uncompleted contracts 19,378 17,717
Accrued income taxes 7,339 10,454
Notes payable 25,450 7,065
Current installments of long-term debt 5,449 5,522
-------- --------
Total current liabilities 147,793 135,719
-------- --------
Long-term debt 79,591 80,566
Other long-term liabilities 20,464 19,587
Minority interest 1,672 1,427
Shareholders' equity
Common stock, $.33/1//3 par value;
authorized 50,000,000 shares; issued
and outstanding 13,472,000 and
13,443,000 shares, respectively 4,491 4,481
Additional paid-in capital 19,649 19,345
Retained earnings 103,298 100,803
-------- --------
Total shareholders' equity 127,438 124,629
-------- --------
Total liabilities and shareholders' equity $376,958 $361,928
======== ========
See accompanying notes to consolidated financial statements.
3
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS OF OPERATIONS
FOR THE QUARTERS ENDED JUNE 3, 1995 AND MAY 28, 1994
(Thousands of Dollars Except Share and Per Share Amounts)
Quarter Ended
-------------------------------
June 3, May 28,
1995 1994
----------- -----------
Net sales $ 219,032 $ 178,927
Cost of sales 187,107 153,539
----------- -----------
Gross profit 31,925 25,388
Selling, general and administrative expenses 24,127 20,670
----------- -----------
Operating income 7,798 4,718
Interest expense, net 1,752 562
----------- -----------
Earnings before income taxes and other
items below 6,046 4,156
Income taxes 2,397 1,733
Equity in net earnings of affiliated companies (77) (177)
Minority interest 245 --
----------- -----------
Net earnings $ 3,481 $ 2,600
=========== ===========
Earnings per share: $.26 $.19
=========== ===========
Weighted average number of
common shares and common share
equivalents outstanding 13,623,000 13,376,000
=========== ===========
Cash dividends per common share $.080 $.075
===== =====
See accompanying notes to consolidated financial statements.
4
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED JUNE 3, 1995 AND MAY 28, 1994
(Thousands of Dollars)
1995 1994
-------- ---------
OPERATING ACTIVITIES
Net earnings $ 3,481 $ 2,600
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation and amortization 4,509 3,667
Provision for losses on accounts receivable 537 753
Noncurrent deferred income tax expense (400) (300)
Minority interest 245 --
Equity in net earnings of affiliated
companies (77) (177)
Other, net (158) 483
Changes in operating assets and liabilities,
net of effect of acquisitions:
Receivables 2,142 (5,011)
Inventories (5,423) 1,197
Costs and earnings in excess of billings on
uncompleted contracts 658 (1,445)
Other current assets 1,238 1,116
Accounts payable and accrued expenses (4,784) (12,259)
Billings in excess of costs and earnings
on uncompleted contracts 1,661 (467)
Accrued and current deferred income taxes (3,115) 1,792
Other long-term liabilities 877 1,213
------- --------
Net cash provided by (used in) operating activities 1,391 (6,838)
------- --------
INVESTING ACTIVITIES
Capital expenditures (4,682) (6,069)
Acquisition of businesses, net of cash acquired - (272)
Investments in and advances to affiliated companies (633) 421
Other, net 94 (164)
------- --------
Net cash used in investing activities (5,221) (6,084)
------- --------
FINANCING ACTIVITIES
Increase in notes payable 18,385 13,050
Payments on long-term debt (1,048) (25)
Proceeds from issuance of common stock 314 20
Dividends paid (1,086) (998)
------- --------
Net cash provided by financing
activities 16,565 12,047
------- --------
Increase (decrease) in cash 12,735 (875)
Cash at beginning of period 2,894 10,824
------- --------
Cash at end of period $15,629 $ 9,949
======= ========
See accompanying notes to consolidated financial statements.
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
June 3, 1995 and February 25, 1995, and the results of operations and cash
flows for the fourteen weeks ended June 3, 1995 and the thirteen weeks ended
May 28, 1994. 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
financial statements and notes.
The results of operations for the fourteen-week and thirteen-week periods
ended June 3, 1995 and May 28, 1994, respectively, 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.
2. Inventories
-----------
Inventories consist of the following:
June 3, February 25,
1995 1995
------- ------------
Raw materials and supplies $17,846 $14,802
In process 3,981 3,232
Finished goods 38,155 36,525
------- -------
$59,982 $54,559
======= =======
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SALES AND EARNINGS
- ------------------
First quarter earnings rose 34% to $3.5 million, or 26 cents per share, from
$2.6 million, or 19 cents per share, a year ago. Sales, for the same period,
increased 22% to $219.0 million from $178.9 million a year ago. The first
quarter had 14 weeks instead of the customary 13 weeks, accounting for about
one-third of the sales increase.
Both of the Company's segments reported very good sales growth. Operating
results were mixed and discussed below. The following table presents sales and
operating income data for the Company's two segments and on a consolidated basis
for the first quarter, when compared to the corresponding period a year ago.
Quarter Ended
June 3, May 28, Percentage
1995 1994 Change
======================== =============
SALES
Building products & Services $146,531 $114,245 28%
Automotive glass 72,501 64,682 12%
------------------------- -------------
Total $219,032 $178,927 22%
========================= =============
OPERATING INCOME (LOSS)
Building products & Services $ 2,485 $ 601 313%
Automotive glass 5,573 5,761 (3)%
Corporate and other (260) (1,644) (84)%
------------------------- -------------
Total $ 7,798 $ 4,718 65%
========================= =============
Building Products & Services (BPS)
- ----------------------------------
BPS reported higher revenues for the period, reflecting strong demand at
Viracon, BPS's architectural glass fabricator, and higher international
construction revenues. Record profits at Viracon accounted for the majority of
the segment's profit growth for the quarter. Improved efficiencies led to better
operating results at Wausau Metals, along with slightly improved project margins
and reduced losses at Harmon Contract, also contributed to the operating income
gain.
During June, the Company entered into a letter of intent with Springs
Industries, Inc. to sell BPS's Nanik Window Coverings Group. The closing is
expected to take place during the second quarter. Nanik accounted for about 3.6%
of Apogee's fiscal 1995 consolidated net sales. The segment also announced a
long-term investment in TerraSun, a corporation using new glass fabrication
coating technologies to collect, convert and deliver solar energy. Through this
investment, BPS hopes to develop more efficient and lower cost solar energy
systems.
On June 3, 1995, Apogee's consolidated backlog was $349.5 million, down 10% from
$386.2 million a year ago. The lower backlog was expected, given the focus at
the Company's Building Products & Services segment on project screening and
profitability.
The segment believes industry conditions are slowly improving in domestic
nonresidential construction markets. With the continued strong demand for
fabricated architectural glass products, BPS expects to report favorable
comparative sales and operating results for the remainder of the year.
7
Automotive Glass ( AG)
- ----------------------
Despite soft demand for replacement automotive glass and growing competition,
the Automotive Glass (AG) segment experienced a 12% sales gain, about two-thirds
of which was attributable to the quarter's extra week over the year ago period.
In addition, AG benefitted from some market penetration and a greater number of
locations. The costs of long-term business initiatives, including both marketing
efforts and information systems development, offset the benefit of the sales
gains, resulting in a small operating income decline. The anticipated demand
slow-down was somewhat offset by improved production efficiencies realized by
AG's automotive glass fabricator, Curvlite.
The segment opened 9 retail stores, while closing 3 locations, bringing the
total number of retail stores to 262 in 36 states. AG also has 53 wholesale
depots in 28 states. Expansion opportunities continue to be explored.
AG expects to produce a solid operating profit for the year. However, weak
demand for automotive replacement glass and softening prices, along with the
added costs of its selling and administrative initiatives, may cause the segment
to report lower operating earnings than a year ago.
Viratec Thin Films
- ------------------
Viratec Thin Films (Viratec), a 50% owned joint venture and leading supplier of
coated glass for computer anti-glare screens, reported higher sales and
operating income than the year-ago quarter, when temporary production
bottlenecks limited results.
Consolidated
- ------------
The following table compares quarterly results with year-ago results, as
a percentage of sales, for each caption.
Percentage of Sales
-------------------------
1996 1995
------ ------
Net sales 100.0 100.0
Cost of sales 85.4 85.8
Gross profit 14.6 14.2
Selling, general and
administrative expenses 11.0 11.6
----- -----
Operating income 3.6 2.6
Interest expense, net 0.8 0.3
----- -----
Earnings before taxes 2.8 2.3
Income taxes 1.1 1.0
Equity in net (earnings) of
affiliated companies -- (0.1)
Minority interest 0.1 --
----- -----
Net earnings 1.6 1.5
===== =====
Effective tax rate 39.6% 41.7%
On a consolidated basis, cost of sales, as a percentage of net sales, fell
slightly due to solid pricing at Viracon and better pricing at Harmon Contract.
Selling, general and administrative (SG & A) expenses decreased as a percentage
of sales due to greater sales volume. However, in absolute dollars, SG & A
increased about 17% as expenses relating to that higher activity also
increased--commissions, marketing expenses, bonuses and profit sharing expense.
Net interest expense increased as borrowing levels grew with working capital
requirements.
The effective income tax rate dropped as improved earnings in all of the
Company's businesses helped the overall rate fall slightly.
8
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At quarter end, the Company's working capital and current ratio were essentially
unchanged from the beginning of the quarter. However, current bank debt
increased $18 million, while cash and cash equivalents increased $12.7 million
and inventories increased $5.4 million. This substitution was caused primarily
by higher overseas cash holdings and cash held by the Company's newly-formed
insurance captive, and larger inventories at the Company's manufacturing
facilities.
Bank borrowings stood at $95.5 million at June 3, 1995. Apogee's long-term debt
was 35% of total capitalization. The Company believes that it has adequate
credit facilities to meet its liquidity requirements.
Additions to property, plant and equipment totaled approximately $4.7 million.
Major items included expenditures for data management, information processing
and technical systems throughout the Company.
9
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) The Company did not file any reports on Form 8-K during the quarter for
which this report is filed.
10
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: July 17, 1995 /s/ Donald W. Goldfus
------------------- -----------------------------
Donald W. Goldfus
Chairman of the Board and
Chief Executive Officer
Date: July 17, 1995 /s/ Terry L.. Hall
------------------- -----------------------------
Terry L. Hall
Vice President Finance and
Chief Financial Officer
11
EXHIBIT INDEX
Exhibit Page
- ------- ----
Exhibit 11 Statement of Determination of Common Shares
and Common Share Equivalents 13
Exhibit 27 Financial Data Schedule (EDGAR filing only) 14
EXHIBIT 11
STATEMENT OF DETERMINATION OF COMMON SHARES AND COMMON SHARE EQUIVALENTS
------------------------------------------------------------------------
Average No. of Common Shares
& Common Share Equivalents
Assumed to be Outstanding
During the Quarter Ended:
----------------------------
June 3, May 28,
1995 1994
---------- -----------
Weighted average number of
common shares outstanding (a) 13,459,895 13,313,043
Common share equivalents
resulting from the assumed
exercise of stock options (b) 162,915 62,694
---------- ----------
Total primary common shares
and common share equivalents 13,622,810 13,375,737
========== ==========
(a) Beginning balance of common stock adjusted for changes in amount
outstanding, weighted by the elapsed portion of the period during
which the shares were outstanding.
(b) Common share equivalents computed by the "treasury" method. Share
amounts represent the dilutive effect of outstanding stock options
which have an option value below the average market value for the
current period.
5
1,000
3-MOS
MAR-02-1996
FEB-26-1995
JUN-03-1995
15,629
0
171,117
8,697
59,982
270,603
165,849
90,633
376,958
147,793
0
4,491
0
0
122,947
376,958
219,032
219,032
187,107
24,127
0
0
1,752
6,046
2,397
3,649
0
0
0
3,481
0.26
0.26
